The S&P 500 (SPY) and Nasdaq (QQQ) marched higher on Wednesday after inflation continued to soar. Markets viewed the inflation increase as less than expected. With the view that inflation resumed its downward trendline, markets are too greedy to expect a September interest rate cut.
A decrease in interest rates would only increase inflation rates again. In April, inflation increased by 3.4% year-on-year. By comparison, the Fed Fund’s rate of 5.33% should slow the economy enough. Conversely, lowering interest rates might increase inflation back to 5.0%.
Stock markets anticipate a surge in residential construction activity. PulteGroup (PHM) added 5.42% in the week and is up by 18.26% YTD. S&P 500 gained 11.46% YTD.
PHM stock is a top stock. Additionally, D.R. Horton (DHI) is a strong buy. The stock gained 6.47% yesterday.
Lower rates increase the value of AI-related stocks. Super Micro Computer (SMCI) gained 15.81% on Wednesday. It is on pace to re-take the $1,000 - $1,200 level.
In the capital markets segment, consider MarketAxess Holdings (MKTX). MKTX added 6.11% as investors bet on increased electronic trading for fixed-income securities.
The firm posted earnings of $1.92 a share after revenue grew by 3.5% Y/Y to $210.3 million in Q1.
MKTX’s peers include Morningstar (MORN) and Donnelley Financial Solutions (DFIN).
