I hope you were wearing your seatbelt, because that week was one for the books.

The reaction to Thursday’s CPI report alone was worthy of its own lengthy analysis. A decline in used car prices and a deceleration in the price of medical care services helped drive core CPI down to 6.3%, 0.3% lower than last month’s 40-year high. The updated inflation data reinforced a growing consensus that the Fed will deliver a 50 basis point hike at next month’s policy meeting, a decrease from the 0.75% increase we’ve gotten after each of the last four.

Interest rates cratered on the news, dropping almost 30 bps on Thursday alone and 40 bps for the week. Round numbers can act as psychological areas that offer support or resistance, and for rates, those levels have often been the site of significant reversals. After the drop last week, 10-year Treasury yields are back below 4%.

Lower rates, of course, are a tailwind for equity valuations, especially for companies with high expected earnings growth rates. That helped Growth stocks have their best week relative to Value in 4 months. The new relative lows we were seeing to start the month are now starting to look more like a failed breakdown. From failed moves often come fast ones in the opposite direction, so it wouldn’t be surprising to see the ratio revert back to the mean, near the 2021 lows.

The Nasdaq Composite, filled with growth-oriented tech stocks, jumped 8%, it’s best week since March. The index is now back above 11000, which marked the 131.8% retracement from the COVID decline.

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