The Rally Is Broadening

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What’s in Today’s Report:

  • The Rally Is Broadening
  • SPY vs. RSP Comparison – Bar Chart

Equity futures are higher this morning as traders position into a fairly busy morning of U.S. economic data while Chinese authorities intervened in the currency market to support the yuan which is helping general investor sentiment.

Economically, the German GfK Consumer Climate index was slightly better than feared at -27.4 vs. (E) -27.9 but the release is not materially impacting markets this morning.

Today, focus will be on economic data early with several key reports due to be released including: Durable Goods Orders (E: 1.3%), Case-Shiller Home Price Index (E: 0.2%), and Consumer Confidence (E: 106.7).

There are no Fed officials scheduled to speak today but there is a 5-Yr Treasury Note auction at 1:00 p.m. ET. With the elevated level of market anxiety surrounding Friday’s Core PCE release (when markets will be closed) any surprises via strong or weak demand in the auction could move yields and impact equities.

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Updated Risk/Reward Outlook

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What’s in Today’s Report:

  • Updated Risk/Reward Outlook

Futures are modestly lower following a quiet weekend of news as investors digest last week’s Fed decision, AI news and economic data.

Atlanta Fed President Bostic stated over the weekend he only expected one rate cut in 2024, pushing back slightly on the 2024 dot (which showed three cuts).

Oil rose above $81/bbl on rising geo-political tensions as Russia attacked Ukrainian energy infrastructure.

Today there are two notable economic reports, Chicago Fed (E: -0.50) and New Home Sales (E: 675k) but they’d have to be big surprises (positively or negatively) to move markets.  There are also two Fed speakers, Bostic (8:25 a.m.) and Cook (10:30 a.m.) and if they both push back on the idea of three cuts in 2024 that would slightly weigh on stocks.

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The Fed’s “Dovish Upgrade” Dilemma

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What’s in Today’s Report:

  • The Fed’s “Dovish Upgrade” Dilemma
  • Economic Data Takeaways – Goldilocks Narrative at Risk
  • Chart – Existing Home Sales Unexpectedly Surge

Futures are tentatively higher this morning as mostly favorable economic data overnight is helping offset a sharp drop in the yuan and subsequent volatility in Chinese markets.

Economically, Japanese Core CPI cooled down to 3.2% y/y vs. (E) 3.3% while the German Ifo Survey came in stronger than expected at 87.8 vs. (E) 86.0. U.K Retail Sales, meanwhile, were flat vs. (E) -0.5% in February after a 3.6% rise in January.

There are no notable economic reports today, but Fed Chair Powell will provide opening remarks and participate in the “Fed Listens” event that begins at 9:00 a.m. ET covering the economy’s transition to the post-pandemic environment. The Fed’s Jefferson and Bowman will also partake in the live discussion.

Bottom line, focus will return to the Fed today, and anything officials say that challenges the idea of three rate cuts in 2024, amid a stronger economy will likely spur some profit taking after this week’s robust post-Fed decision rally.

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What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets: Still All About Growth
  • Fed Statement and SEP Takeaways
  • Lesser Followed, But Still Important Data Eases Stagflation Threat
  • EIA Data Takeaways and Oil Update

Futures are rallying to new highs after the SNB unexpectedly cut rates overnight, the first major central bank to do so, while MU is up 18% pre-market on solid AI driven earnings which is bolstering big tech shares.

The March Eurozone Composite PMI rose to 49.9 vs. (E) 49.6 due to a 0.9-point rise in the Services index while the Manufacturing index unexpectedly fell 0.8 points to 45.7 pointing to an imbalanced EU economy that is at risk of slowing down meaningfully.

Looking into today session, there is a lot of domestic economic data to watch with Jobless Claims (E: 209K), the Philadelphia Fed Business Survey (E: -5.0), the PMI Composite Flash (E: 51.5), and the Existing Home Sales report (E: 3.92 million) all due to be released.

Additionally, traders will be focused on the BoE Decision and meeting minutes (8:00 a.m. ET) before the bell and then later the Fed’s Vice Chair, Michael Barr is schedule to speak at a  University of Michigan round table event (12:00 p.m. ET).

Bottom line, after the Fed yesterday, investors will want to see data hold up well but not be so “hot” that it dents the case for three rate cuts before yearend. Data that comes in “too hot” or “too cold” will be a negative for stocks as the Fed has a very narrow path to achieving a soft landing here.

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What Is the Bitcoin “Halving?”

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What’s in Today’s Report:

  • What Is the Bitcoin “Halving?”
  • Manheim Used Vehicle Index Continues to Decline – Chart

Stock futures are little changed this morning as yields drift sideways and the dollar firms ahead of the Fed decision.

European markets were led lower by luxury brand names after soft earnings from Gucci’s parent company (Kering SA) offset favorable inflation data out of the UK.

Economically, the PBOC left the Loan Prime Rate at 3.45% which is seen as accommodative while U.K. CPI favorably fell from 5.1% to 4.5% vs. (E) 4.6% in February.

There are no notable economic reports today which will leave investor focus pretty much exclusively on the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET.

If the Fed is hawkish and signals a higher-for-longer policy stance (more so than is already priced in), expect some volatility in the wake of the decision while a dovish decision projecting confidence in a soft landing could see the 2024 rally extend to new highs.

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Fed Preview

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What’s in Today’s Report:

  • FOMC Preview: Hawkish-If vs. Dovish-If
  • 10-Yr Treasury Note Yield Hits 2024 High: Chart

U.S. equity futures are giving back some of yesterday’s tech-led rally as there was a modest “sell the news” reaction to NVDA’s new AI chip (Blackwell) release while central bank decisions overnight favored policy doves.

Overnight, the BOJ delivered a dovish hike and the RBA signaled an end to rate hikes which sent both currencies lower and bolstered the dollar as this week’s Fed decision comes into focus.

Today, there is just one economic report to watch: Housing Starts (E: 1.449 million) and the Treasury will hold a 20-Yr Bond auction at 1:00 p.m. ET. Neither should meaningfully move markets ahead of the Fed, but if the housing data is hot or there is weak demand for the Bonds (sending yields higher) we could see a hawkish/risk-off move in markets today.

The March FOMC meeting begins today and barring any material “tape bombs” the markets should fall into a familiar positioning churn ahead of tomorrow’s policy announcement and Powell’s press conference.

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It’s All About Growth

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What’s in Today’s Report:

  • Cut Through the Noise: It’s All About Growth
  • Weekly Market Preview – Fed Decision and Forecasts in Focus
  • Weekly Economic Cheat Sheet: Stagflation Concerns on the Rise

Futures are higher to start the week with mega-cap tech leading gains after Bloomberg reported that AAPL is in talks with GOOGL to license the Gemini AI engine for the iPhone while economic data was largely market-friendly overnight.

Economically, Chinese Retail Sales rose 5.5% vs. (E) 5.2% and Industrial Output jumped 7.0% vs. (E) 5.0% to start 2024, easing some growth concerns surrounding the world’s second largest economy, however property sector woes persist.

In Europe, Core HICP (their CPI equivalent) fell 0.2% to 3.1% in February which was inline with estimates but helped reaffirm the disinflation trend remains in place in early 2024.

Today there is just one economic report to watch: the March Housing Market Index (E: 48), but with the Fed meeting looming, it is unlikely to have a material impact on the market.

Finally, there are 3-Month and 6-Month Treasury Bill auctions at 11:30 a.m. ET and while these are typically non-events, they could impact yields with the Fed meeting looming. Any additional hawkish money flows would likely pressure equities ahead of this week’s FOMC decision.

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Why Yesterday’s Data Was Worse Than the Market Reaction

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What’s in Today’s Report:

  • Why Yesterday’s Data Was Worse Than the Market Reaction

Futures are seeing a mild bounce despite mixed inflation data and disappointing tech earnings overnight.

The global decline in inflation was again challenged overnight as French HICP was slightly hotter than expected.

ADBE posted solid earnings but underwhelming guidance and the stock is down 12% pre-market, weighing on the tech sector.

Today focus will remain on economic data and if there are more hints of “stagflation” (underwhelming growth and solid price pressures) expect declines from stocks.  Key reports today include, in order of importance: Empire State Manufacturing Index (E: -8.0), 1-Yr/5 yr Inflation Expectations (E: 3.0%/2.9%), Industrial Production (E: 0.0%) and Consumer Sentiment (E: 77.3).

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Market Multiple Table: March Update

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What’s in Today’s Report:

  • Market Multiple Table – March Update
  • CPI Takeaways – Minimal Impact on Fed Rate Expectations

U.S. equity futures are flat as investors digest yesterday’s tech-led rally to fresh record highs in the S&P 500.

Overseas, Chinese developer Country Garden Holdings missed a yuan-denominated bond payment overnight which weighed on Asian markets.

Economically, U.K. monthly GDP and Industrial Production both largely met estimates, but Eurozone Industrial Production badly missed, falling -6.7% vs. (E) -2.7% in January.

Looking into today’s session, there are no economic reports or Fed speakers on the calendar which will leave traders focused on AI-focused names to see if the tech sector can lead stocks to new highs.

The one notable catalyst on the schedule today is a 30-Yr Treasury Bond auction at 1:00 p.m. ET. A weak outcome could send yields higher which would act as a renewed headwind on stocks while a pullback in yields would be welcomed.

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CPI Preview: Good, Bad, Ugly

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What’s in Today’s Report:

  • Bottom Line – Growth Concerns, Not Fears
  • CPI Preview: Good, Bad, Ugly
  • VIX Chart – A Key Level to Watch Today.

Futures are cautiously higher thanks to market-friendly economic data overnight as traders await the U.S. CPI report.

Economically, German CPI met estimates in February (+0.4% m/m) while the U.K. jobs report showed an uptick in unemployment and easing wage pressures which is incrementally helping ease higher-for-longer policy rate fears.

Domestically, the NFIB Small Business Optimism Index was slightly disappointing as the headline edged down to 89.4 vs. (E: 89.9) but markets are largely overlooking the pre-market release ahead of the CPI data.

Today, all eyes will be on the 8:30 a.m. (ET) release of the February CPI report (E: 0.4% m/m, 3.1% y/y), Core CPI (E: 0.3% m/m, 3.7% y/y). The release has the potential to materially move markets as options data shows traders are bracing for a 1%+ move in either direction today (and it could be even more if the data surprises meaningfully either way).

Beyond the pre-market inflation data, there are no Fed officials scheduled to speak which will likely leave markets digesting the CPI release for much of the morning. In the early afternoon, there is a 10-Treasury Note auction at 1:00 p.m. ET, and the outcome of that auction could move yields and ultimately impact stocks into the close.

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