To The Moon

U.S. stocks closed lower Friday, with the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all snapping five straight weeks of gains. Is the party going to be over soon? Time will tell but first, go enjoy your long weekend! 🥳

The sign is here 🚨

Wall Street paused for a breather Friday following a stronger-than-anticipated producer inflation report that once again caught investors off guard, echoing the heat of a similarly strong consumer inflation report earlier in the week.

The Producer Price Index (PPI) for January 2024 saw a 0.3% month-over-month increase, surpassing the projected 0.1% surge, while the Consumer Price Index (CPI) surged by 3.1% year-on-year, exceeding the forecasted 2.9%, highlighting the ongoing intensity of the inflation battle.

“The January inflation data vindicates the Fed’s wait-and-see approach,” Bank of America economist Stephen Juneau said in a note.

As a result, traders trimmed their expectations for Fed rate cuts, delaying the anticipated start to this summer. Yields surged higher, with the policy-sensitive two-year note yield climbing by over 10 basis points to reach 4.67%.

Buy call #1

Buy call #2

Sell put

The market's stability despite this week's "nerve-racking inflation data" and "hawkish" commentary from Federal Reserve officials is "remarkable," said Mark Hackett, Nationwide's chief of investment research, by phone Friday. "At some point, we're going to get a reminder that it's not this easy."

The stock market appears resilient in the face of hotter-than-anticipated inflation readings this week because of "continued strong earnings" as companies roll out their fourth-quarter results, said David Waddell, chief executive and chief investment strategist at Waddell & Associates, in a phone interview Friday. Fourth-quarter earnings have come in "a lot better than expected," he said.

And although U.S. inflation in January, as measured by the consumer-price index and producer-price index, was stronger than Wall Street expected, Waddell noted that "the trend is lower."

Stocks stumbled Friday as Treasury yields rose on the PPI inflation report. The rate on the 10-year Treasury note BX:TMUBMUSD10Y increased more than 5 basis points to 4.294%, according to Dow Jones Market Data.

Sell covered calls #1

Sell covered calls #2

Chipmaker Nvidia Corp. (NVDA), which is in the Magnificent Seven group of megacap stocks, will report its quarterly earnings next week on Feb. 21. The company's shares ended 0.1% lower Friday as the the S&P 500's tech sector
broadly fell.

Shares of Super Micro Computer Inc. SMCI tumbled 20%, as the largest component of the small-cap Russell 2000 helped drag the index lower. The stock remains up more than 182% year to date.

The S&P 500 remains up 4.9% so far this year despite slipping Friday.

Weekly options trades summary 

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