Inside Markets

Yesterday was the fourth straight session of outsized gains for the RTY largely driven by short-covering.

The RTY is extending gains beyond range resistance at ~2140 as today’s better-than-feared retail sales report keeps the soft-landing narrative intact.

The Russell 2000 (RTY) is up +6.4% (intraday) since Thursday’s dovish CPI print vs. down 0.4% for the S&P 500 (SPX).

The rotation into cyclical equity groups continues for a second day with the Russell 2000 (RTY) trading just above long-term range resistance at ~2140.

While it’s not our expectation, it is important to recognize that upcoming catalysts have the potential to broaden out the equity rally.

Consensus is looking for headline June CPI to rise 0.1% taking the YoY rate to +3.1%, which was last seen in January.

Last week’s macro data saw the prevailing market narrative shift from Goldilocks to soft landing.

An apparent loss in US economic growth momentum is taking bond yields lower and driving further rotation into defensive secular growth stocks at the expense of cyclically exposed equity groups.

The US Economic Surprise Index (ESI) has dropped to -47.5 after today’s data. The US economy is clearly showing signs of slowing with markets focused on the potential upside from the start of a Fed easing cycle.

Equity market pullbacks amid subdued realized volatility (VIX