This trend is the friend of all bulls...

Inflation moved the S&P 500 (SPY) this week as the December Consumer Price Index (CPI) report was released on Thursday. Let's break it down in today's issue. I think the results might surprise you.

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(Please enjoy this updated version of my weekly commentary originally published on January 12, 2023 in the POWR Stocks Under $10 newsletter).

Reflecting on last week's Consumer Price Index (CPI) report, here are the two most interesting data points I saw:

House prices rose only 0.8% from last month. Housing accounts for about a third of the CPI. Gains in this line have stabilized and no longer lead to large jumps in inflation. Used car prices fell 2.5% last month and 8.8% over the past year. While used-car prices make up a much smaller share of the CPI — just 3.6% — Fed officials blamed the spike in used-car prices on inflation when it hit. started rising in 2020. I'd bet Fed economists are still watching the data and happy with this drop.

This month's report also marked the third consecutive downward trend in consumer inflation.

I'm not going to declare that we won the war. If you've read these issues over the past few months, you know I think there's still more room for cons than for pros, but I will say publicly that things are headed in the right direction.

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The fact that we now have three consecutive months of reports all pointing in the same direction is very positive.

Furthermore, the fact that the labor market has somehow remained healthy gives me a glimmer of hope that the elusive “soft landing” may indeed occur.

I found the details encouraging. And based on the rally that took place afterward, it seemed other traders agreed.

About an hour after the report was released, the stock market (SPY) opened. The shares fell slightly at the open, but rallied and ended the day higher.

It may actually be bullish...

There is so much more to say about the Fed and inflation and what it all means for the future.

A number of analysts are concerned about what things will look like later in the year if inflation plateaus, potentially forcing the Fed to keep rates high.

I believe Powell when he says there will be no rate cut in 2023, but I also know that Fed members make their decisions based on data.

It all really depends on whether the trend stays in place.

Conclusion

Equities are still up for the year, and the latest inflation data points mark a bullish trend. Is it too good to be true? We'll find out in early February when the Fed meets again.

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All the best!

Meredith MargraveChief Growth Strategist, StockNews Editor, POWR Stocks Under $10 Newsletter

SPY shares closed at $398.50 on Friday, up $1.54 (+0.39%). Year-to-date, SPY has gained 4.20%, versus a % rise in the benchmark S&P 500 over the same period.

Meredith Margrave has been a renowned financial expert and market commentator for two decades. She is currently editor-in-chief of