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The stock market is having a big day Wednesday, with the S&P 500 climbing over 1.6% during the first hour trading.
But there’s bullishness across the board with the Dow up over 600 points, and the Nasdaq is rising by 2.2%.
This positive momentum comes on the heels of some welcome news on inflation. Today’s Consumer Price Index (CPI) report indicated that inflation trends may have slowed, leading to a drop in Treasury yields.
The CPI for December showed a 2.9% annual increase, which was in line with expectations. But the real standout was the core CPI, which excludes more volatile food and energy prices.
It rose by 3.2%, just below the expected 3.3% that was expected, which is welcome news indeed for the market.
This moderation in inflation is what people have been waiting for, and it ups the potential for Fed rate cuts sooner than later, which could help keep the bull market running.
If the trend continues, it could mark a turning point for the economy and the stock market as a whole.
What’s Fueling the GE Rally
General Electric (GE) has been catching everyone’s attention lately with its strong performance and improving fundamentals. The stock is benefiting from nice growth in its aerospace segment, which continues to capitalize on the recovery in air travel.
GE’s recent restructuring efforts have also given it a tailwind, with analysts also citing better-than-expected earnings and improving margins.
At the same time, our Newton Indicator just flashed a buy signal, flipping from yellow to green:
Weak Buyer Numbers, Rising Costs Hit EBAY
On the bearish side, eBay (EBAY) is facing mounting challenges.
The company, part of the Consumer Discretionary sector, is grappling with slowing e-commerce growth as post-pandemic shopping trends continue to go back to normal.
Recent quarterly results fell short of expectations, with a noticeable decline in active buyer numbers and gross merchandise volume (GMV). This means weaker consumer engagement on the platform.
Adding to concerns, competitive pressures from newer online marketplaces have intensified, eroding eBay’s market share. Analysts also have concerns about rising costs associated with maintaining the platform and marketing efforts, which are squeezing margins.
While still green on our Newton Indicator, the stock’s price has been plummeting. It is now almost back to the same level it was when it was last in the red, and a sell signal could be imminent.
For investors, this might be a good time to:
- Take Profits: If you’re long on EBAY, now may be a good time to exit.
- Consider Shorts: For those who think today’s rally will fizzle out — which it has in shares of EBAY, which fell to flat from up 1.7% — and there’s an upcoming market downturn, EBAY could offer a nice short position if the red sell signal is confirmed.
Finally, with inflation showing signs of easing, the outlook appears a bit brighter.
However, it’s important to stay tuned, as things can and will shift quickly depending on earnings and Fed actions.
The market is responding positively, but there’s still plenty to consider in the coming months.
Graham Lindman
Graham Lindman Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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