Retail sales plunged 0.8% in January, far below estimates of -0.2% and last month’s +0.4%. The miss can’t be attributed solely to seasonality, as the Jan 2023 print was a massive +3.7% gain. The annual gain from Jan 2024 was a meager 0.6%.

It has been a tough week for economic data. Inflation higher than expected and retail sales much lower than expected – sounds like a recipe for stagflation. With the UK officially sliding into recession, can the US be far behind?

Futures have given up some of their slight overnight gains.

continued for members…

The green channel is still intact, but it sure feels tenuous. Aside from the usual overnight nonsense in VIX… …which has backtested the red channel bottom but not the red TL from Mar 2023… …the weaker than expected economic data is taking the pressure off interest rates and, hence, the USD. This is helping stocks catch a bid even as the fundamentals would argue that a weaker economy would ding stock valuations. CL and RB both reversed off our targets, and are also helping with the interest rate picture. SPX’s 50SMA is almost up to 4818, the 2022 high and a potential pullback target. This would represent a 4.6% drop from recent highs – so a mild correction. With lots of important economic data coming out tomorrow (PPI, housing starts/permits, Michigan sentiment,  it remains a distinct possibility.

As an aside, our on-again, off-again XLU model is nearing its cycle low, which often corresponds to sharp equity pullbacks.

GLTA