By: Quincy Krosby, PhD, Chief Global Strategist, LPL Financial & Joshua Cline, Associate Analyst, LPL Financial

On October 12, 2022, there were very few comments suggesting that a new bull market was in the throes of being born as the S&P 500 opened at 3,590.83 and closed at 3,577.03.

After all, inflation was still running hot even though the Federal Reserve (Fed) began its rate-hiking campaign on March 16, 2022, by raising rates by 25 basis points (0.25%) and moving to a 50-basis-point hike on May 5, 2022, as it tried to quell inflationary pressures. By mid-June, a series of 75-basis-point hikes were introduced as the Consumer Price Index (CPI) peaked in June at 9.1%.

The October 13 rally that ended the bear market at a low of 3,577.03 began with the S&P 500 selling off in the morning only to rally dramatically higher into the market close. The CPI report earlier in the day showed headline inflation at 8.2% on a year-over-year basis, but Core CPI ─ not including food and fuel prices ─ beat the consensus estimate at 6.6%. The S&P 500 closed at 3,669.91 and the bull market had commenced.

The explanations for the market reversal that day traversed from excessive short covering to the deep pessimism embedded in the market psyche that allowed investors and traders alike to witness a modicum of improvement in the CPI report.

Read the full commentary here: weekly-market-commentary-10.07.2024