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Three Technical “Cs” for a Lasting Market Bottom

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What’s in Today’s Report:

  • Three Technical “Cs” for a Lasting Market Bottom

Futures are sharply lower on continued momentum from Thursday’s late day drop and following hot German inflation data and strong UK retail sales.

German CPI didn’t decline as much as hoped, falling –1.0% vs. (E) -1.6% and rising 17.8% vs. (E) 16.0%.  UK Retail Sales were also better than expected (0.5% vs. (E) -0.3% and the two reports are combining with yesterday’s hot US PPI to push rate hike expectations higher.

Today focus will remain on data and Fed speak.  The two notable economic reports are Import & Export Prices (E: -0.1%, -0.2%) and Leading Indicators (E: -0.3%).  The first deals with inflation and the second deals with growth, and if inflation is hot and growth is cool, expect more selling pressure.

There are also two Fed speakers today, Barkin (8:30 a.m. ET) and Bowman (8:45 a.m. ET) and we should expect them to sound hawkish (as most Fed speakers have been this week).

Why the Fed Decision Was More Bullish Than It Seemed

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What’s in Today’s Report:

  • Why the FOMC Decision Was More Bullish Than It Seemed
  • Economic Data Update:  Is the Recovery Starting to Stall?
  • EIA and Oil Update

Futures are moderately higher as markets digest a “more positive than it appeared” FOMC decision on Wednesday, along with growing expectations for a stimulus bill.

Regarding stimulus, expectations for the total size of the bill have grown from $700 billion-ish to $900 billion-ish, and passage is now expected before next week.

The Dollar Index dropped sharply and fell below 0.90 for the first time since ‘18, and that’s helping futures rally.  The dollar decline is the result of the FOMC decision yesterday.

Stimulus headlines will dominate trading today as markets expect a deal in the next few days, and anything that further confirms that will be a tailwind on stocks.

Stimulus aside, though, there are also important economic reports today.  The key number is Jobless Claims (E: 806K), followed by Philadelphia Fed Manufacturing Index (E: 21.2).  Both numbers need to show stability and push back on the growing narrative that the economic recovery is losing momentum.  We also get Housing Starts (E: 1.53M but that shouldn’t move markets.