Wednesday’s session saw a willingness to buy Tuesday’s dip. It also saw a willingness to do some selling from higher levels reached after Tuesday’s dip was bought. In the end, though, the buy-the-dip trade prevailed and the major indices closed Wednesday’s session higher than where they started.
The successful campaign was a broad market effort, supported by an absence of any newly hawkish-sounding commentary from Fed Chair Powell before the House Financial Services Committee in day one of his semiannual monetary policy testimony.
The Fed Chair effectively reiterated what he said at his press conference following the January 30-31 FOMC meeting. The Fed wants to see more data to gain confidence inflation is moving sustainably toward its 2% target and that it may be appropriate to cut rates later this year if the economy evolves as expected.
He returns to Congress today, appearing before the Senate Banking Committee at 10:00 a.m. ET for the final day of his testimony. His appearance on Capitol Hill is a precursor to the buzz of activity that will be seen in Congress tonight when President Biden delivers the State of the Union Address.
A short time ago, the ECB delivered the news that it had decided to keep the three key ECB interest rates unchanged, as expected. In turn, staff projections featured a downward revision to inflation and growth forecasts, which will likely help feed expectations that the ECB could be inclined to cut rates later this year.
The Treasury market for its part has been cutting rates. The 2-yr note yield is at 4.52%, down ten basis points this month, and the 10-yr note yield is at 4.07%, down 18 basis points this month.
Those moves have helped underpin the stock market’s continuing advance, which is set to continue at today’s open.
Currently, the S&P 500 futures are up 22 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 107 points and are trading 0.6% above fair value, and the Dow Jones Industrial Average futures are up 100 points and are trading 0.3% above fair value.
The requisite stock check shows NVIDIA (NVDA) up another 1.8% and trading over $900 per share. When the year began, NVIDIA was trading just under $500 per share. Its enduring strength has been integral to the market’s enduring bullish sentiment. Modest gains in other mega-cap stocks have helped prop up the futures market.
Also helping has been a round of economic data that was supportive of the soft landing/no landing outlook that is integral for continued earnings growth.
- Initial jobless claims for the week ending March 2 were unchanged at 217,000 (Briefing.com consensus 217,000). Continuing jobless claims for the week ending February 24 increased by 8,000 to 1.906 million.
- The key takeaway from the report is the low glide path initial claims (a leading indicator) continues to follow, which is indicative of a labor market that remains on a relatively encouraging glide path.
- Q4 Productivity growth was left unchanged at 3.2% (Briefing.com consensus 3.1%) while unit labor costs were revised down to 0.4% (Briefing.com consensus 0.6%) from 0.5%.
- The key takeaway from the report was the same as the one for the advance estimate: unit labor costs were tame in the fourth quarter thanks to the solid increase in productivity.
- The January trade deficit widened to $67.4 billion (Briefing.com consensus -$63.3 billion) from a downwardly revised $64.2 billion (from -$62.2 billion) for December. The widening was the result of imports being $3.6 billion more than December imports and exports being only $0.3 billion more than December exports.
- The key takeaway from the report is that the increase in imports and exports, most of which was concentrated in autos and capital goods, is indicative of a pickup in global trade that would be associated with a pickup in economic activity.
The equity futures trade, meanwhile, is indicative of a pickup in buying activity that will set the S&P 500 on course to reclaim all of what it lost on Tuesday.
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Originally Posted March 7, 2024 – Making up quickly for lost ground
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