While the growing list of market concerns including macro variables such as slowing growth from China due to Covid lockdowns along with the dollar increasing and others, attention remains focused on inflation and what response to expect from the Federal Reserve. The Consumer Price Index reported Wednesday at 8.3% year-over-year for all items, remains uncomfortably high. In anticipation, the S&P 500 Index, made a reversal on Tuesday expecting "sell the rumor and buy the news" event on Wednesday, but instead it continued declining. Then by Thursday it made a new 52-week intraday low before finally rebounding on Friday. For the week:

S&P 500 Index (SPX) 4023.89 dropped 99.45 points or -2.41% including an impressive bounce on Friday that recouped 93.91 points or +2.39%. While oversold bounces often occur after reversals on Thursday it came up a bit short after making a new low but ending down 5.10 points after reaching an intraday low of 3858.97. However, it advanced rapidly in the last hour on increased volume. For astute trades it may have been enough since it opened 33.82 points higher on Friday then continued higher. While some portion of the advance likely included a good bit of short covering, especially in the Consumer Discretionary and Information Technology sectors the bounce sets up a counter-trend rally that could continue for several days or even more.

The options market confirmed by bounce as implied volatility, IVX declined modestly ending at 26.00% vs. 26.03% on May 6, but down substantially from mid-week shown in the chart that includes historical volatility (realized) volatility.

The fear of inflation coexists with the fear of rising interest rates necessary to bring it under control. The yield on 10-Year Treasury Note, one of the closely watched rate measures declined 8 bps on Wednesday after the CPI report and 19 basis points for the week ending at 2.93%. It's interesting rates were already declining before the release of the CPI report. Closes back below 3.00% certainly helped the attempted reversal on Thursday and Friday's bounce.

On a more cautionary note,

Market Breadth as measured by our preferred gauge, the NYSE ratio adjusted Summation Index that considers the number of issues traded, and reported by McClellan Financial Publications continued lower again last week declining 261.54 points or -43.96%, closing the week at -856.49, well below the 50-day Moving Average at -435.99. The only lower close occurred on March 24, 2020 at -1256.95 during the Covid panic. The number of issues advancing less those declining can measure the strength of the counter-trend bounce that likely began Friday.