What’s in Today’s Report:
- Bull Case vs. the Bear Case Part II (Tactical Ideas and My Opinion)
Futures are little changed as global inflation and regional bank liquidity stress both remain elevated.
The Fed’s balance sheet shrank slightly as discount window borrowing dropped –22 bln. while BTFP lending increased 10.7 bln. as bank liquidity stress didn’t get much worse, but it didn’t get much better, either.
On inflation, EU HICP fell to 6.9% from 8.5% y/y, but core HICP rose to 5.7% from 5.6%, reflecting still sticky inflation.
For the final day of the first quarter focus will be on inflation and specifically the Core PCE Price Index (E: 0.4%, 4.7%) and investors need to see that number at or below expectations to further the “Fed Pivot” idea that’s supporting stocks. We also get Consumer Sentiment (E: 63.4) and the five-year inflation expectations and there’s one Fed speaker Williams (3:05 p.m. ET). As mentioned, if the data and Williams support the “Fed Pivot” idea, stocks can extend the rally. If they refute that idea, stocks could give back some of the recent gains.