๐ S&P 500. A key point between Bull Extension and Bear Reversal
The S&P 500 Index ( SPY) Wednesday closed down -0.22%, the Dow Jones Industrials Index
DIA closed up +0.10%, and the Nasdaq 100 Index (QQQ) closed down -0.83%.
Stocks Wednesday saw downward pressure from the +4.1 bp rise in the 10-year T-note and a sell-off of more than -2% in key chip stocks.
However, the Dow Jones Industrials saw support from blue chips such as 3M
(MMM), with a gain of +5.42%, and gains of more than +1% in Travelers (TRV), Chevron (CVX), Caterpillar (CAT), Home Depot (HD), NIKE (NKE), Goldman Sachs (GS), and Coca Cola (KO).
Stocks on Wednesday gave back some ground after Tuesdayโs +1.5% rally in the Nasdaq 100 index that was sparked by optimism that the U.S. Feb CPI report was not as bad as feared and the Feb core CPI dipped to a 2-3/4 year low of +3.8% y/y. However, the Feb headline CPI of +3.2% y/y was slightly above expectations of +3.1% and was 0.2 points above last Juneโs 2-3/4 year low of +3.0%. Both CPI measures remain well above the Fedโs +2% inflation target.
Fed Breadcrumbs
Fed Chair Powell said last week that the Fed is โnot farโ from having enough confidence to cut interest rates. However, the markets are discounting the odds at virtually zero that the Fed will cut interest rates at its meeting next week since inflation is still too far above target. The odds for a rate cut are much better for the June meeting.
The markets are discounting the chances for a -25 bp rate cut at 1% for next weekโs March 19-20 FOMC meeting, 13% for the following meeting on April 30-May 1, and 73% for the meeting after that on June 11-12.
Economic Reports
In some positive news for the housing market, the MBA mortgage applications index rose +7.1% in the week ended March 8, after rising +9.7% in the previous week. Mortgage purchases rose +4.7%, and refinancings rose +12.2%. The MBAโs average 30-year fixed mortgage rate in the latest week fell to a 5-week low of 6.84% from 7.02% in the previous week. The mortgage rate is currently only 13 bp above the 10-month low of 6.71% posted in December.
On the U.S. economic report front, the markets are awaiting Thursdayโs U.S. retail sales and PPI reports. Feb retail sales are expected to show an increase of +0.8% m/m, reversing Janโs -0.8% decline. Feb retail sales ex-autos are expected to rise +0.5% m/m, reversing most of Janโs -0.6% decline. The Feb final-demand PPI is expected to rise to +1.2% y/y from Janโs +0.9%, but the core PPI is expected to ease to +1.9% y/y from Janโs +2.0%.
Interest Rates
June 10-year T-notes (ZNM24) Wednesday closed down -7.5 ticks. The 10-year T-note yield rose by +4.1 bp to 4.192%, up from last Fridayโs 5-week low of 4.034%. T-note prices saw weakness on (1) carry-over bearishness from Tuesdayโs stronger-than-expected CPI report, and (2) Wednesdayโs slight rise in the 10-year breakeven inflation expectations rate to 2.31%.
T-note prices also saw supply overhang with the Treasury in the market again Wednesday, along with strong corporate bond issuance. The Treasury Wednesday sold $25 billion of 30-year T-bonds, after selling $54 billion of 3-year T-notes on Monday and $42 billion of 10-year T-notes on Tuesday.
Inflation Fears
Oil prices rose about 3% to a four-month high on Thursday (March 14) on a surprise withdrawal in US crude inventories reported on Wednesday (March 13), a bigger-than-expected drop in US petrol stocks and potential supply disruptions after recent terrorist Ukrainian attacks on Russian refineries.
Putin says Ukraine trying to disrupt Russia's presidential election.
Brent crude oil futures rose to nearly $85 per barrel - the highest mark since November, 2023. In technical terms, crude oil futures are on positive path in 2024 with near 9% YTD return, attempt to hold firmly above weekly SMA(52), while the epic triangle' breakthrough can be nearby.
High Risk - High Reward
S&P500 index (SPY) is on positive path in 2024 with +9.28% YTD return in this time. This is a 3rd highest YTD return by this time of year, next to 2012 and 2019 returns by mid-March.
Technical graph for S&P500 indicates that we are near upper line of upside channel, thanks to recent Santa rally and slight signs of US Govt Treasuries buyout in Q4 2023.
Following this path, there can a possible Bull extension, as Reversed Head-and-Shoulders Price Pattern can be in further development.
On the other hand, inflation fears can extend also, just to erase all the Bullish gain in 2024.
DIA closed up +0.10%, and the Nasdaq 100 Index (QQQ) closed down -0.83%.
Stocks Wednesday saw downward pressure from the +4.1 bp rise in the 10-year T-note and a sell-off of more than -2% in key chip stocks.
However, the Dow Jones Industrials saw support from blue chips such as 3M
(MMM), with a gain of +5.42%, and gains of more than +1% in Travelers (TRV), Chevron (CVX), Caterpillar (CAT), Home Depot (HD), NIKE (NKE), Goldman Sachs (GS), and Coca Cola (KO).
Stocks on Wednesday gave back some ground after Tuesdayโs +1.5% rally in the Nasdaq 100 index that was sparked by optimism that the U.S. Feb CPI report was not as bad as feared and the Feb core CPI dipped to a 2-3/4 year low of +3.8% y/y. However, the Feb headline CPI of +3.2% y/y was slightly above expectations of +3.1% and was 0.2 points above last Juneโs 2-3/4 year low of +3.0%. Both CPI measures remain well above the Fedโs +2% inflation target.
Fed Breadcrumbs
Fed Chair Powell said last week that the Fed is โnot farโ from having enough confidence to cut interest rates. However, the markets are discounting the odds at virtually zero that the Fed will cut interest rates at its meeting next week since inflation is still too far above target. The odds for a rate cut are much better for the June meeting.
The markets are discounting the chances for a -25 bp rate cut at 1% for next weekโs March 19-20 FOMC meeting, 13% for the following meeting on April 30-May 1, and 73% for the meeting after that on June 11-12.
Economic Reports
In some positive news for the housing market, the MBA mortgage applications index rose +7.1% in the week ended March 8, after rising +9.7% in the previous week. Mortgage purchases rose +4.7%, and refinancings rose +12.2%. The MBAโs average 30-year fixed mortgage rate in the latest week fell to a 5-week low of 6.84% from 7.02% in the previous week. The mortgage rate is currently only 13 bp above the 10-month low of 6.71% posted in December.
On the U.S. economic report front, the markets are awaiting Thursdayโs U.S. retail sales and PPI reports. Feb retail sales are expected to show an increase of +0.8% m/m, reversing Janโs -0.8% decline. Feb retail sales ex-autos are expected to rise +0.5% m/m, reversing most of Janโs -0.6% decline. The Feb final-demand PPI is expected to rise to +1.2% y/y from Janโs +0.9%, but the core PPI is expected to ease to +1.9% y/y from Janโs +2.0%.
Interest Rates
June 10-year T-notes (ZNM24) Wednesday closed down -7.5 ticks. The 10-year T-note yield rose by +4.1 bp to 4.192%, up from last Fridayโs 5-week low of 4.034%. T-note prices saw weakness on (1) carry-over bearishness from Tuesdayโs stronger-than-expected CPI report, and (2) Wednesdayโs slight rise in the 10-year breakeven inflation expectations rate to 2.31%.
T-note prices also saw supply overhang with the Treasury in the market again Wednesday, along with strong corporate bond issuance. The Treasury Wednesday sold $25 billion of 30-year T-bonds, after selling $54 billion of 3-year T-notes on Monday and $42 billion of 10-year T-notes on Tuesday.
Inflation Fears
Oil prices rose about 3% to a four-month high on Thursday (March 14) on a surprise withdrawal in US crude inventories reported on Wednesday (March 13), a bigger-than-expected drop in US petrol stocks and potential supply disruptions after recent terrorist Ukrainian attacks on Russian refineries.
Putin says Ukraine trying to disrupt Russia's presidential election.
Brent crude oil futures rose to nearly $85 per barrel - the highest mark since November, 2023. In technical terms, crude oil futures are on positive path in 2024 with near 9% YTD return, attempt to hold firmly above weekly SMA(52), while the epic triangle' breakthrough can be nearby.
High Risk - High Reward
S&P500 index (SPY) is on positive path in 2024 with +9.28% YTD return in this time. This is a 3rd highest YTD return by this time of year, next to 2012 and 2019 returns by mid-March.
Technical graph for S&P500 indicates that we are near upper line of upside channel, thanks to recent Santa rally and slight signs of US Govt Treasuries buyout in Q4 2023.
Following this path, there can a possible Bull extension, as Reversed Head-and-Shoulders Price Pattern can be in further development.
On the other hand, inflation fears can extend also, just to erase all the Bullish gain in 2024.
