The S&P 500 came within 11 cents of 5,000 yesterday, marking a remarkable 43% run since the October 2022 lows and 22% return since the October 2023 lows.
The month of February has a mixed track record over the past 10 years, with gains and losses evenly split. Stocks frequently pause at big, round numbers – which conflicts somewhat with the fact that stocks usually melt up into CPI prints.
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No matter how often neo-hawk Fed speakers repeat it, the algos are unconcerned about the “higher rates for longer” warning. Futures are poised to make a new all-time high this morning…
…because VIX has broken down (-11.4% since Monday) and is threatening to break down again.
Algos are also seemingly unconcerned with rising credit card and car loan delinquencies, hot PMI readings and the latest banking crisis.
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Futures are slightly higher on the heels of VIX’s 7% collapse from yesterday’s highs (on a day when stocks were broadly lower.)
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Futures are a little soft this morning in the wake of Jay Powell’s interview on 60 Minutes over the weekend. Notably, he didn’t retract any of the hawkish comments made after the last FOMC meeting.
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Nonfarm payrolls soared by 353,000, more than twice the 175,000 expected. Average hourly wages also beat at +0.6% (+4.5% YoY) versus +0.3% expected. Unemployment remained at 3.7%. Forget about a March rate cut. Bulls will be lucky to get one in May.
The overnight ramp job has completely disappeared, with futures struggling to remain positive. AAPL‘s meltdown hasn’t helped.
Factory orders and Michigan consumer sentiment are due out at 10ET.
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Powell said what many of us have been thinking: There’s no reason to rush into a rate cut. The part he didn’t say (but implied) was that there was a clear risk to cutting rates at this time.
The market, which has been fueled for months by rate cut expectations, was quite disappointed. SPX shed 1.5% and closed at the bottom of the acceleration channel it’s been in since October. It was only a little bit scary.
Futures fell to slightly below our initial downside target before rebounding overnight on the usual algo nonsense.
Does yesterday’s action change the overall picture? Maybe.
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It has been a long time coming, with expectations of a rate cut ranging from “certainly” to “not a chance in hell.”
Futures are taking their cues more from GOOGL and MSFT than the FOMC at the moment.
Will we finally get a real backtest? Our potential downside targets are getting very lonely.
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Futures are off moderately as investors place their bets on tomorrow’s FOMC rate decision. 
This follows yesterday’s pop in prices which was reported as motivated by a better than expected treasury report, but was in reality driven by [drumroll please] more algo funny business in VIX.
In any case, SPX was finally pried off its 2.24 Fib extension just in time for tomorrow’s FOMC decision.
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Futures are flat as we enter a data-laden week accented by Wednesday’s FOMC interest rate decision.
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PCE increased 0.2% MoM and 2.6% YoY in December, in line with most estimates. Core PCE increased 2.9% YoY. This is the smallest gain since Mar 2021. Drilling down, goods rose 1.1% (durable goods 1.5%) in December while services rose 0.3%.
Real PCE rose 3.2% YoY, with the goods category growing 5% and durable goods rising 8.5%.
At 0.7% MoM, personal spending rose substantially more than the 0.4% estimates (and prior.) Spending rose 4.2% YoY, a slight decrease from November’s 4.4%.
December pending home sales far outpaced estimates at +8.3% versus 2.0% and -0.3% prior. The annual increase was much less frothy at 1.3%. The monthly beat was paced by 11.9% and 14.0% gains in the South and West respectively. Sales dropped 3.0% in the Northeast.
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