Equity markets went wild on Wednesday as investors cheered the economic data and then realized its true meaning. The surprise decline in producer-level inflation is good news for those concerned about inflation, but the retail sales figure suggests the damage is already done to the economy. Retail sales are up YOY but fell more than 1.0% monthly as higher prices and rising interest rates cut into consumer spending. The takeaway from the data is that S&P 500 pricing power may be headed out the window as input costs fall and demand for finished goods declines.

The data that investors truly need to watch is the consensus figures for S&P 500 earnings. The consensus figures are in decline for the 1st half of 2023 and are a dead weight for the market to bear. Now that index price action has reconfirmed resistance at the 4,000 level and the top of a downward-sloping channel, it looks like January will end with the market flat to down which is not a good sign for the rest of the year will bring.