Home › Market News › Retail Sales, PPI, and a Whole Lot of Fed Speakers
The Economic Calendar:
MONDAY: US Holiday: Martin Luther King Jr. Day
TUESDAY: Empire State Manufacturing Index, 3-Month Bill Auction, 6-Month Bill Auction, John Williams Speaks
WEDNESDAY: MBA Mortgage Applications, PPI-Final Demand, Retail Sales, Raphael Bostic Speaks, Industrial Production, James Bullard Speaks, Business Inventories, Housing Market Index, 4-Month Bill Auction, 20-Yr Bond Auction, Beige Book, Treasury International Capital, Lorrie Logan Speaks
THURSDAY: Housing Starts and Permits, Jobless Claims, Philadelphia Fed Manufacturing Index, Susan Collins Speaks, EIA Natural Gas Report, EIA Petroleum Status Report, 4-Week Bill Auction, 8-Week Bill Auction, 10-Yr TIPS Auction, Fed Balance Sheet, John Williams Speaks
FRIDAY: Existing Home Sales, Baker Hughes Rig Count
Futures Expiration and Rolls This Week:
TUESDAY: Crude Oil futures roll from February (G) to March (H)
FRIDAY: Last trading day for February (G) Crude Oil futures
Key Events:
It seems like a lot of speculation is coming back into the market, with names bouncing around like CVNA, BBBY, and AFRM.
The large-cap Russell 1,000 is up about 3% in 2023, and there are already more stocks in the index up 10%+ on the year (175) than there were for all of 2022 on a total return basis (166).
For example, Bed Bath & Beyond (BBBY) shareholders face a growing risk of being wiped out in bankruptcy, but you wouldn’t know that by the stock this week. Bed Bath stock (BBBY) rose 160% last week.
The headline inflation numbers in December spurred optimism that the Federal Reserve will continue to ease the pace of monetary tightening.
The Consumer Price Index (CPI) came in at 6.5%, down from 7.1% in November. On a monthly basis, CPI ticked down -0.1%.
Keep in mind inflation is worse than the government data suggest. This is because this CPI uses a formula that understates the actual rise in prices. Based on the formula used in the 1970s, CPI is closer to double the official numbers.
Listen to what the market says, not what the Fed says.
The Fed’s mouthpiece at the WSJ is Nick Timiraos (aka Nikeleaks). Timiraos came out last week and suggested the Fed will increase rates by only 25bp at the February 1 FOMC meeting.
Fed Governor Harker also thinks a 25bp hike will be appropriate going forward. Harker sees inflation cooling, and we could see core inflation down to 3.5% in 2023.
If we were to handicap the weight of Fedspeak – it would be 75% Chair Powell, 24% Timiraos (Fed mouthpiece), and only 1% other.
The majority of analysts were forecasting a 50 bp hike at the next meeting.
Goldman Sachs says the central bank hiking cycles are likely to pause sometime next year and looks for 10-year U.S. Treasury yields to peak at 4.50% in 1H23 before trending a tad lower into year-end 2023 to 4.30%.
U.S. Treasury yields current yield compared to the last newsletter:
30-Year yield 3.62% vs. 3.68%
10-Year yield 3.51% vs. 3.56%
5-Year yield 3.61% vs. 3.70%
2-Year yield 4.24% vs. 4.25%
2-10 Yield spread -0..73% vs. -0.696%
In 2021, insiders sold record amounts of stock. And while their selling did abate some in 2022, it is important to note that insiders have not stepped in to buy as they have done at important lows in the recent past.
Nejat Seyhun told the Wall Street Journal last week, “The thing that stands out right now is the lack of buying even though prices have come down so much. That’s kind of a warning.”
Just look at what Tesla shares have done in the midst of Elon Musk’s persistent selling to see how this works out.
Despite the recent Bitcoin rally to over $21000, traders are looking for a few risks to clear before feeling confident about their position. Many traders are delaying additional purchases until the following risks clear:
Markets are rebounding in 2023 but traders seem cautious. Expect volatility ahead in 2023.
