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About to Put a Bow on Q1: Another Up-Day

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As we feel our way past the halfway point of the trading week, we seem to be pushing forward, albeit without a ton of conviction or belief that these market levels are warranted. But the bank deposit destruction fears appear to have waned, and that looks to be good enough for now: the Dow grew +323 points in the session, +1.00% — and it was the laggard. The S&P 500 gained +1.42% on the day while the Nasdaq, breaking a two-day losing streak, hoisted +210 points, +1.71%. The Russell 2000 added +1.08% for the session.

It’s likely too early to know the complete toll of bank failure contagion amid aggressively higher interest rates and a Fed balance sheet draining half a trillion in assets off its massive balance sheet. But since several Northern California dominoes fell — and then Credit Suisse , of all places, started to destabilize — we’ve not only not seen a forest-fire-like contagion sweeping through the banking industry, but we’ve seen other banks step up and buy big portions of the next wave of banks. As this episode looks to be behind us now, investors were exhaling into new equity positions.

For the 21st straight month, Pending Home Sales for February have tacked lower — not by the deep-cut results we saw late last year, but at -21.1% year over year, the lowest single-month print we’ve seen since July of last year. Month over month, we saw Pending Home Sales rise to +0.8%, swinging to a positive from a -0.8% expected. This is all in the face of steadily rising mortgage rates (after a small downtick in recent weeks) and demonstrating their is still consumer command in the market.

Formerly Restoration Hardware, RH (RH - Free Report) shares are down on the company’s first bottom-line miss in seven years, on fiscal Q4 results after the bell. Earnings of $2.88 per share was well off the expected $3.35 and the year-ago $5.66 per share. Revenues of $772 million in the quarter was off the $777.36 million in the Zacks consensus. Further, full-year revenue guidance has been taken down to $3.1 billion — analysts had expected $3.59 billion previously.

We imagine this may negatively affect RH’s current Zacks Rank #3 (Hold), especially as the company cited macroeconomic headwinds continuing to keep prices on RH’s products lower. The company does correlate with the fortunes of home sellers, particular of luxury homes, which have started to come down in the wake of higher mortgage rates, due directly to Fed policy on interest rate levels. Shares of the luxury home furnishing company are down -6% upon the earnings release.

We’ll track the latest results on Initial and Continuing Jobless Claims tomorrow morning, and we’ll also get a final revision on Q4 GDP (expect to come in flat year-over-year at +2.7%). But otherwise, we’re sort of biding our time ahead of the next high-impact economic release: Personal Consumption Expenditures (PCE) for February, on Friday. There, we look for a lower core print year over year from +4.7% reported for the previous month. Core PCE on headline is expected to move down 20 basis points to +0.4% month over month.

Tomorrow we’ll also hear real-time thoughts and analysis from no fewer than three Fed members: Tom Barkin from Richmond, VA, Boston’s Susan Collins and Minneapolis’ Neel Kashkari. The potential end of bank deposit struggles may be high on the list of talking points. Without the PCE report yet released, and a week-plus out from a new Employment Situation report, we don’t expect much by way of newsworthy updates from the Fed.

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