Indices
- Dow 44,403, -141 or -0.32%.
- Nasdaq 19,523, -104 or -0.53%.
- S&P 6,025, -76 or -1.25%.
- MSCI EAFE 2385.34, +5.58 or +0.23%.
- USD10Y 4.487%, -8.2bp or -1.80%.
- WTI Crude $71.06/bbl, -$1.47 or -2.03%.
Opposite Week – Inflation Data Overshadows Tariffs (for now)
Early during Monday’s trading session, the administration announced a 30-day delay in imposing its tariffs on Canada and Mexico to allow for further negotiations. Those tariffs against China were implemented and China immediately retaliated, imposing their own tariffs on U.S. imports. The markets rallied from a large decline on Monday and while they finished in the red, rallied more or less back to even by the end of trading Tuesday despite disappointing results from Alphabet (GOOG) and Advanced Micro Devices (AMD).
In the background of all this self imposed nonsense, the economic data was encouraging despite both positive and disappointing results. After a lengthy slump, it appears that American manufacturing has recovered as both S&P and ISM reports recorded expansionary readings. U.S. Services were also in expansionary territory even if the ISM survey was weaker than expected. Importantly though, the obscure Prices Paid portion of the survey that roiled markets last month was down -6.21% vs last month giving some relief to continued inflation fears.
All of that benign news, suspension of tariffs, good manufacturing and services numbers, lower Prices Paid, was rendered obsolete on Friday when despite a weaker than expected jobs report (disinflationary), the U.S. unemployment rate ticked down a tenth to 4.0% (inflationary), hourly wages rose more than expected both month-over-month and year-over-year (inflationary), Consumer Sentiment fell to a seventh month low (disinflationary) and both one-year and five-year inflation expectations rose to multi-year highs (inflationary). The probability of a rate cut in March was cut in half from 16% to 8% and the probability of the Fed cutting in May fell roughly a third, now standing at 24.6%.
The Upcoming Week: Feb 10 – Feb 14
The economic calendar takes center stage this week as inflation data for both retail and wholesale prices are released on Wednesday and Thursday respectively and U.S. Retail Sales are published Friday. The earnings front is loaded with consumer names McDonalds (MCD), Coke (KO), DoorDash (DASH), Lyft (LYFT), Quick Service Restaurants (QSR) and Airbnb (ABNB) on the docket. Fintech names Robinhood and Coinbase report and finally 00’s stalwart Cisco Sytems (CSCO) will announce their earnings on Wednesday.
Economic Calendar
- Monday – N/A. Earnings: McDonalds (MCD).
- Tuesday – N/A. Earnings: Coca-Cola (KO), DoorDash (DASH), Lyft (LYFT).
- Wednesday – January Consumer Price Index (CPI). Earnings: Quick Service Restaurants (QSR), Cisco (CSCO), Robinhood (HOOD).
- Thursday – Initial Jobless Claims, January Producer Price Index (PPI). Earnings: Airbnb (ABNB), Coinbase (COIN).
- Friday – January U.S. Retail Sales. Earnings: N/A.
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