Tuesday's gains came despite a downside catalyst for the market in the form of a profit warning from Target, which appeared to weigh on stocks at the open.
"Another day of 'negative news' from Target … that the market is shaking off. We think this is part of the summer 'chop' scenario where we have to evaluate news vs. the market reaction to that news, and we get to see how much is priced in for the near term," BTIG's Jonathan Krinsky wrote in a note to clients.
"We think there is likely a decent amount priced in which keeps things from falling apart, but at the same time the news is still poor with the Fed also firmly in the picture, which keeps a lid on things," he said.
Some good news on the Federal Reserve front could come on Friday, when fresh inflation data may give investors a better sense of the central bank's playbook for the rest of the year.
"We get CPI on Friday, and if there is a positive surprise, or a 'buy the news', then it's likely to be the growth/long-duration side of things that benefits the most, which gets back to our thinking that we see near-term momentum reversals in the factor/sector side of things," Krinsky wrote.
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