Stock Market’s Tug-of-War: Bulls Charge Despite CPI Concerns

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They always pack a lot into shortened holiday weeks, and based on how things went last week, the week ahead should be a doozy. After a week of drops and pops, the ES ended up 1% on the week and 3% YTD, ran the stops I talked about, and closed out the week with a $1.7 billion buy imbalance, finishing on the highs of the day—despite a hot CPI number and uncertainty over Trump's tariffs and whether they will push prices higher.

So far, the old saying "As January goes, so goes the year" is holding up, but we're only a month and a half into 2025. Even though I’m a die-hard bull, I have my doubts.

What I do know is that inflation is rising, and interest rates are not coming down. In fact, I’m more concerned about something no one wants to talk about—rate hikes. If inflation keeps rising, it becomes more of a possibility. In fact, several economists are now saying there’s a 25% chance of a rate hike. Clearly, companies in the S&P are concerned about tariffs. According to LSEG data, since the beginning of the year, nearly 430 companies in the S&P 500 have either mentioned tariffs or responded to a question about tariffs on earnings calls or at investor events.

With nearly three-fourths of the index companies having reported, S&P 500 earnings are on track to have climbed 15.2% from the year-earlier period, its strongest pace in three years. It’s hard to deny that the markets have been going up, and my number one rule is: the trend is your friend.

All eyes will be on Walmart’s earnings this week, and next week, Home Depot and Target report, which should give us a clearer picture of consumer spending. There are also 8 economic reports and the January Fed minutes on Wednesday.

It’s Sunday night and the ES and NQ are trading higher, which isn’t surprising given the markets being closed for Presidents’ Day and the lower volumes.