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Pre-Markets Point to Higher Open, Week in the Green
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Friday, March 3rd, 2023
It’s been a week of “thoughtful trading,” if there is such a term. By that I mean more contemplative than purely reactive. And by that I mean market participants have been cautious and deliberate for the most part, allowing economic, earnings and Fed opinion views to digest before pushing or pulling indices higher or lower. Thus, despite some volatility during the week, we’re roughly flat from where we started.
The good new is that pre-market futures are pushing higher, which, if it were to sustain through the close, would be the first week in a while the four major indices will have finished higher. Currently, the Dow is +125 points, the S&P 500 is +20 and the Nasdaq +75 points. All four indices are down over the past month, but still positive for the year, save the Dow, which is -0.45% thus far in 2023.
It was also the last very busy week of Q4 earnings season, with the final leg underway for the next week or two. While we did see our share of misses and lowered guidance, overall the market proved fairly resilient. This goes double for the labor force: weekly jobless claims continue to move downward on both near-term and long-term measures. We’ll see if this gibes with next week’s ADP (ADP - Free Report) private sector jobs report and the Employment Situation report from the U.S. government on Wednesday and Friday, respectively.
After the opening bell today, S&P Global U.S. Services PMI and ISM Services reports for February are due, with estimates for both notably above the 50 level, which marks the difference between expanding and contracting services data. Earlier this week, we saw these same indices report Manufacturing data, and while they were moving in different directions — ISM was higher while S&P tacked lower — both remained sub-50. If we see today’s results tip beneath this level, this will check a box in the “25 bps hike” column for the Fed, instead of the growing “back to 50 bps” narrative we’ve been hearing.
The shadow of the Fed looms over all of these economic prints. There are already tangible results that having raised interest rates 450 bps over the past year — the highest, steepest incline since 1981 — have successfully attacked inflation in certain areas of the economy. Labor seems to be the toughest nut to crack, but economists could have told you that ahead of time.
Ultimately, the question comes down to: will the Fed increase the level of tightening in light of new data showing inflation remaining stubborn, or will they follow their dot plot (basically 25 bps hikes in March, May and perhaps June) and await lagging indicators to register these hikes' effectiveness over time? Currently the odds remain with the latter scenario, but it would stand to reason that more high inflation prints like the ones we've seen between now and March 22nd could meaningfully change this calculus.
Image: Bigstock
Pre-Markets Point to Higher Open, Week in the Green
Friday, March 3rd, 2023
It’s been a week of “thoughtful trading,” if there is such a term. By that I mean more contemplative than purely reactive. And by that I mean market participants have been cautious and deliberate for the most part, allowing economic, earnings and Fed opinion views to digest before pushing or pulling indices higher or lower. Thus, despite some volatility during the week, we’re roughly flat from where we started.
The good new is that pre-market futures are pushing higher, which, if it were to sustain through the close, would be the first week in a while the four major indices will have finished higher. Currently, the Dow is +125 points, the S&P 500 is +20 and the Nasdaq +75 points. All four indices are down over the past month, but still positive for the year, save the Dow, which is -0.45% thus far in 2023.
It was also the last very busy week of Q4 earnings season, with the final leg underway for the next week or two. While we did see our share of misses and lowered guidance, overall the market proved fairly resilient. This goes double for the labor force: weekly jobless claims continue to move downward on both near-term and long-term measures. We’ll see if this gibes with next week’s ADP (ADP - Free Report) private sector jobs report and the Employment Situation report from the U.S. government on Wednesday and Friday, respectively.
After the opening bell today, S&P Global U.S. Services PMI and ISM Services reports for February are due, with estimates for both notably above the 50 level, which marks the difference between expanding and contracting services data. Earlier this week, we saw these same indices report Manufacturing data, and while they were moving in different directions — ISM was higher while S&P tacked lower — both remained sub-50. If we see today’s results tip beneath this level, this will check a box in the “25 bps hike” column for the Fed, instead of the growing “back to 50 bps” narrative we’ve been hearing.
The shadow of the Fed looms over all of these economic prints. There are already tangible results that having raised interest rates 450 bps over the past year — the highest, steepest incline since 1981 — have successfully attacked inflation in certain areas of the economy. Labor seems to be the toughest nut to crack, but economists could have told you that ahead of time.
Ultimately, the question comes down to: will the Fed increase the level of tightening in light of new data showing inflation remaining stubborn, or will they follow their dot plot (basically 25 bps hikes in March, May and perhaps June) and await lagging indicators to register these hikes' effectiveness over time? Currently the odds remain with the latter scenario, but it would stand to reason that more high inflation prints like the ones we've seen between now and March 22nd could meaningfully change this calculus.
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