Bulls came out of the gate swinging on Wednesday and they did not relent all the way into the closing bell, states Jon Markman, editor of Strategic Advantage.
The benchmark S&P 500 (SPX) finished at 4,587, a gain of almost 1.5%. The close above the pivot level at 4,530 puts bears in a bad position. There is critical resistance for the benchmark at 4,612.
A move beyond that point should lead to move short covering, and perhaps a test of the old highs at 4,800. Don’t be fooled, that rally could happen.
Much of the January decline was predicated on worries about a Russian invasion of Ukraine and fears the Federal Reserve may raise short-term interest rates in 2022 as many as five times.
Both of those bets now seem poor at best. Key support for the S&P 500 has moved up to 4,530. The first overhead resistance level is 4,612.
The Nasdaq (IXIC) climbed 2.1% to 14,490.37 and the Dow rose 0.9% to 35,768.06.
Communication services, real estate, and technology shares led the way, with all market sectors in the green.
Breadth slightly favored advancers three-one, and there were 181 new highs vs 131 new lows. Big caps on the new high list included Berkshire Hathaway (BRK), AbbVie (ABBV), Wells Fargo (WFC), Morgan Stanley (MS), and Charles Schwab (SCHW).
The 10-year US Treasury yield declined one basis point to 1.95%. West Texas Intermediate crude oil rose 0.7% to $90.02 a barrel. Oil prices surged after US commercial crude inventories declined unexpectedly for the second consecutive week.
The consumer prices report for January is scheduled to be released at 8:30 am ET Thursday. The Consumer Price Index is expected to rise 0.4% for the month after a revised 0.6% increase in December.
Forecasters in the survey expect a 0.5% increase in core CPI excluding the volatile food and energy components after a 0.6% increase in December, with energy, food, vehicle, and housing prices expected to advance. The omicron variant was expected to provide some offset by cooling prices in travel-related sectors.
Cleveland Federal Reserve President Loretta Mester said Wednesday the "extraordinarily accommodative" monetary policy set earlier in the pandemic is no longer required amid high inflation levels and strong labor markets. The pace of future interest rate hikes should be based on the economy's progress, Mester said.
The Federal Open Market Committee should use rate increases and balance sheet reductions to relieve inflationary pressures in 2022, Atlanta Fed President Raphael Bostic told CNBC Wednesday. Bostic added he is "hopeful" inflation will slow in the spring and summer.
The US Federal Reserve's rate-setting panel is widely expected to raise the Fed's benchmark interest rate at the conclusion of its March 15-16 meeting.
In company news, CVS Health (CVS) maintained its full-year profit guidance after reporting higher fourth-quarter earnings that topped estimates. Shares slumped 5.5%, the worst performance in the S&P 500.