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Main U.S. indexes modestly lower: S&P 500 off ~0.3%
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Energy weakest S&P 500 sector; cons disc leads gainers
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Euro STOXX 600 index up ~0.4%
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Dollar up, bitcoin gains >3%; gold, crude fall
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U.S. 10-Year Treasury yield rises to ~3.80%
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WEDNESDAY DATA: RETAIL SALES SPREE COUNTERS ECONOMIC
SOFTENING NARRATIVE (1110 EST/1610 GMT)
A truckload of data dumped on investors' front lawns on
Wednesday provided treasures for optimists and pessimists,
showing evidence of robust consumer spending, softening
manufacturing and a potential light at the end of the tunnel for
the woebegone housing market.
No matter the outlook, market participants will read the tea
leaves for clues as to when Powell & Co will press the rate-hike
pause button.
Receipts at U.S. retailers bounced back last
month, jumping by 3.0% - the biggest monthly surge in almost two
years - and marking a solid about-face from December's 1.1%
decline.
The number sailed well above the 1.8% monthly gain analysts
expected.
On the granular level, sales at department stores roared
back to life, surging 17.5%, autos jumped 5.8%, and food & drink
services leapt 7.2%.
"Today's Retail Sales report came in much higher than
expected and the prior report was revised higher, showing the
strength of consumers and their willingness to keep spending,"
writes Chris Zaccarelli, chief investment officer at Independent
Advisor Alliance. "The labor market's resilience is the main
reason consumers continue to spend and as long as that's the
case, inflation is likely to remain sticky."
So-called "core" retail sales, which strips out autos,
gasoline, building materials and food services - a measure which
most closely corresponds with the personal expenditures element
of GDP - gained a less impressive, but still respectable 1.7%.
Year-over-year, the core figure accelerated from 5.89% to
6.38%.
But those scanning the skies for economic softness found it
in the form of January's industrial output number,
which flatlined, unchanged from December.
Economists polled by Reuters predicted a 0.5% increase.
Line-by-line, as 1.2% increase in business equipment and a
1% rise in manufactured goods was canceled out by a 0.7% drop in
consumer products and a whopping 9.9% decline in utilities.
On an annual basis industrial production lost momentum,
rising 0.79%, down from 1.15% the month prior.
"Abstracting from the noise, the bigger picture here is that
the trend in manufacturing output has softened significantly
since the middle of last year, as the 450bp of hikes by the Fed
takes its toll on business capex," says Ian Shepherdson, chief
economist at Pantheon Macroeconomics.
Capacity utilization , often seen as a barometer
of economic slack, unexpectedly inched 10 basis points lower to
78.3, in rude opposition to the 20 basis point gain analysts
expected.
Add this to the upside surprise column: activity in the
factories of New York State was much less dire than anticipated.
The New York Fed's Empire State index landed at
-5.8, much improved from last month's -32.9 print and a mile
above the -18.0 consensus.
Even so, the report marks the index's third consecutive
month in the red - an Empire State number below zero signifies a
monthly contraction of activity.
Despite the could-have-been-worse print, "the worst is
likely ahead," says Gurleen Chadha, U.S. economist at Oxford
Economics. "Manufacturing is being hurt by higher interest rates
stifling demand for goods, past appreciation of the dollar, and
a softening in global demand."
What's more, the mood amongst U.S. homebuilders is showing
some robust improvement in February.
The National Association of Home Builders' (NAHB) jumped 7 points to 42, and breezing past the 37
level predicted and touching the highest level since September.
The glass-half empty crowd will be quick to outpoint that
builder sentiment has been below 50 - pessimistic territory -
for seven months.
This is largely attributable to the perfect storm of
skyrocketing home prices, rising mortgage rates and tighter
financial conditions, which have combined to push the prospect
of home ownership beyond the grasp of many potential buyers.
Still, "even as the Federal Reserve continues to tighten
monetary policy conditions, forecasts indicate that the housing
market has passed peak mortgage rates for this cycle," says NAHB
chief economist Robert Dietz.
And finally the value of goods stacked in the store rooms of
U.S. businesses hit the consensus bull's eye by
increasing 0.3% in December.
Business inventories have increased now for 20 straight
months, and private inventories contributed to the plus column
of fourth quarter GDP, according to the Commerce Department's
advance take released last month.
Wall Street is just modestly red with NVIDIA ,
Amazon.com , and Meta Platforms weighing
heaviest.
Small and mid-caps , however, are both green.
(Stephen Culp)
*****
U.S. STOCKS RED AFTER RETAIL SALES (1005 EST/1505 GMT)
Wall Street's main stock indexes are lower early on Wednesday after stronger-than-expected retail sales data underscored a resilient U.S. economy, which could offer more room for the Federal Reserve to raise interest rates. All S&P 500 sectors are down with energy taking the biggest hit by far, down more than 2%. Crude futures are off 1%.
Most other sector changes, however, are relatively muted. Utilities are now just below flat. In a note Wednesday morning, Art Hogan, chief market strategist at B Riley Wealth wrote, "We assume that inflation will look better in the second half. Core PCE, the inflation measure the Federal Reserve looks at, could be 3% or a bit lower by the end of the year, which suggests that the Fed will need to be less aggressive."
Hogan added "While we envision more choppiness in markets in
the first quarter, we see markets settling into a slow grind
higher after that."
Here is a snapshot of where markets stood a little over 30
minutes into the trading day:
(Terence Gabriel)
*****
BITCOIN BACK ON TRACK AFTER FALSE BREAK? (0900 EST/1400 GMT)
Recently battered bitcoin is trying to make a quick
come back. And if last week's downside range resolution proves
to be a false break, it may signal another risk-on charge.
From its Feb. 2 high, BTC plunged about 12% into its low on
Monday:
With this, the Nasdaq Composite , which also topped
on Feb. 2, lost more than 5% over its next six trading days.
BTC's recent decline included a sharp slide last Wednesday
to Friday. Just prior to this, bitcoin's daily Bollinger Band
(BB) width, a historical volatility measure, had once again
become especially compressed suggesting a market ripe for much
more spirited action, or indeed, its next trend.
Given BTC's breakdown, BB width popped. However, unlike with
several sharp BTC slides in the spring and summer of last year,
or its explosive advance earlier this year, the measure's rise
proved surprisingly stunted.
A stunted BB width rise occurred in fall 2022 with a BTC
upside breakout. Bitcoin's bigger move then occurred after
reversing back below its 20-day moving average (DMA).
BTC is now rallying back to challenge its 20-DMA at just
over $22,750. Reclaiming and holding above this swing level can
tilt back toward the potential for a further rise in volatility
to instead accompany an upside run.
Such a turn could be good news for stock bulls given that
bitcoin's rolling 50-day correlation with the IXIC is a robust
0.89 (1.00 is a perfect positive correlation).
(Terence Gabriel)
*****
FOR WEDNESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400
GMT - CLICK HERE
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
