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Is Recent Positive Momentum Sustainable?

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Stocks will likely find it difficult to sustain recent positive momentum given the paucity of data over the next few days. With the earnings season now effectively over, the-ever evolving Ukraine situation nothing more than background noise, and not much on the domestic economic docket, we are in a somewhat of data dead zone on the data front.

The soft trade data out of China over the weekend was a big cloud on overnight Asian trading and will likely be a net negative factor in the U.S. trading session as well.
Chinese data over the weekend showed sharp decline in the country’s exports in February, keeping questions about the country's growth outlook front and center. February exports came in weaker than expected at down -18.1%, with the trade balance dropping into a rare deficit, the first since March last year. The soft trade data has added to the Chinese authorities’ deliberate efforts to weaken the Yuan’s exchange value and follows weak inflation readings and persistent loss of momentum in the country’s factory sector.

Some folks may discount the export shortfall on seasonality factors related to the timing of Lunar Year holiday and unconfirmed reports of over-invoicing in the year-ago period, but the fact remains that China’s growth trajectory is far from assured.
On the home front, the only notable economic reading this week is the February Retail Sales numbers coming out on Thursday. Retail Sales haven’t been doing very good lately, with growth on the weak side in January and December. This year’s unusually harsh winter likely was a big factor in keeping the consumer indoors and this week’s February data will likely be no different.

Consumer confidence data has been mixed lately, but the hope is that underlying fundamentals of the U.S. economy remain stable and will start showing up as the weather improves. The positive-looking jobs report from Friday, despite some weather effects, clearly strengthen those expectations.

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