Markets basically took a breather last week.
The S&P roller coaster last week: down slightly, down slightly, down, up slightly, and down.
Fed minutes: Per normal protocol, minutes from the most recent Fed meeting were released three weeks later. Bottom line the minutes simply confirm the Fed remains in a very accommodative position. From what the Fed has been saying for some time now, here’s what we know: interest rates will remain at basically “zero” for some time. Asset purchases (shazam money) will likely continue at the $120 Billion/month pace the rest of the year. Their 2% inflation target will actually be a moving target. Meaning they will “average” 2%. My take… they know inflation is going to go well above 2% (the PCE is currently at 1.3%) and they will not make any moves to tighten the economy in the near term.
Housing: New home starts were down -6% in January, and -2.3% YOY. Existing home sales were up +0.6% in January, and +23.7% YOY.
Inflation: Last week the CPI (consumer) January YOY number came in at +1.4%. This week the PPI (wholesale) January number YOY moved from +0.8% up to +1.7%.
Jobless claims: The consensus was for 768,000, but the number came in at 861,000.
Retail sales: The numbers were not great for November and December. In fact, the December number was at -0.7%. Expectations for the January number were for a rebound of +1.1%. The actual number crushed expectations coming in at +5.3%. Wow. YOY retail sales are up +7.4%.
Focus of the week: Markets opened lower this morning. The reason being given is rising bond rate concerns. While a couple of important pieces of economic data come out on Thursday (the January durable goods number and the 2nd read on Q4’s GDP), most of the focus this week will be on Fed Chair Jerome Powell. He testifies before the Senate Banking Committee tomorrow (Tue) and then the House Financial Services Committee on Wednesday. Beyond the political grandstanding that is sure to take place by our elected officials, how will Powell address the concerns of rising Treasury rates and other bond yields?
PCE: We get the update on the inflation number the Fed uses this Friday morning. The prior read (December data) came in at +1.3%. Based on the PPI last week, I expect this number (January data) to be higher.
Earnings season: It continues to wind down. Some of the retail companies reporting this week: Best Buy, Home Depot, Lowe’s, and Macy’s.
Indicator focus: Consumer confidence (Tue); new home sales (Wed); 2nd read on Q4 GDP, durable goods, jobless claims (Thu); and the PCE index (Fri).