Wednesday markets shook off the negativity of delayed interest rate cuts. In December 2023, retail sales remained resilient. Retail sales increased by 0.6%. The chances of a rate cut in March fell from a 71% chance last month to only 57% as of yesterday.
Expect morning markets to start weakly only to rally steadily throughout the day. Active traders may take advantage of the intra-day volatility of the SPY exchange-traded fund. Market volatility is weak, so the VXX ETF is not a good trading instrument.
Astute investors who anticipated market pundits guessing on the rate cut already took profits earlier this year. The increasing frequency of news headlines clawing back on the lower rate story will hurt the most popular stocks. Those include Tesla (TSLA), Intel (INTC), Ford (F), Amazon (AMZN), Pfizer (PFE), and Bank of America (BAC).
Interest-sensitive sectors will have trouble bouncing back. The retail estate sector lost around 2.3% yesterday. High interest rates for long periods will raise mortgage rates. This hurts home demand and sales volumes.
Strong consumer retail sales amid inflation and low savings would suggest an increase in debt. Banks like Citigroup (C) benefit from collecting fees. Still, lenders like Affirm (AFRM), Upstart (UPST), and Rocket (RKT) may have customers with weak credit quality.