Yesterday wasn't exactly the finish to February bulls were hoping for, yet it was only fitting perhaps for the roller-coaster month February was.
The major indices looked good early, but looked bad late after a wave of selling pressure hit in the final hour of trading. That selling was precipitated by a break of technical support at the 50-day simple moving average for the S&P 500, which in turn combined with month-end dynamics and selling by weak-handed longs to take the indices down in an abrupt fashion.
Things haven't shaped up much for the bulls this morning either.
The S&P futures are up one point and are trading a smidgen above fair value. The Nasdaq 100 futures are up 12 points and the Dow Jones Industrial Average futures are down three points.
The first day of a new month often invites new inflows, yet buyers are holding their fire for now despite some impressive earnings reports from Kohl's (KSS) and Best Buy (BBY), afraid perhaps they may be hit with another hawkish-sounding bullet point from Fed Chairman Powell.
Mr. Powell is back on the Hill today appearing before the Senate Banking Committee to provide his semiannual monetary policy testimony. That testimony will get underway at 10:00 a.m. ET.
It is assumed Mr. Powell is going to keep to his script so as not to look as if he is pandering to a stock market that has had a rough few days following his remarks in front of the House Financial Services Committee.
Before that testimony begins, however, the market will have digested a slate of economic data. The first reports this morning offer plenty to crow about.
The Personal Income and Spending report for January was pretty much in-line with expectations on all key metrics.
Personal income, led by a 0.5% increase in wages and salaries, increased 0.4% (Briefing.com consensus +0.3%), personal spending rose 0.2%, the PCE Price Index increased 0.4%, and the core PCE Price Index, which excludes food and energy, went up 0.3%.
The one point of notable weakness in the report is that real PCE decreased 0.1%. That will be a negative input for Q1 GDP forecasts.
Separately, the report also revealed a stable rate of inflation. The PCE Price Index, which is the Fed's preferred inflation gauge, was up 1.7% year-over-year for the third straight month while the core PCE Price Index was up 1.5% for the fourth straight month.
The key takeaway from the report is that it won't shift the prevailing perspective that the Fed is expected to raise the fed funds rate at least three times this year.
The initial claims report helped validate the latter view, too.
Claims for the week ending February 24 decreased by 10,000 to 210,000 (Briefing.com consensus 227,000). That was the lowest level of initial claims since December 6, 1969! The four-week moving average of 220,500 was the lowest average since December 27, 1969. Continuing claims for the week ending February 17 increased by 57,000 to 1.931 million.
The trend in initial claims will support the Fed's thinking that tight labor markets should ultimately invite a pickup in wage inflation.
The ISM Index for February (Briefing.com consensus 58.4; prior 59.1) will be released at 10:00 a.m. ET along with the Construction Spending report for January (Briefing.com consensus +0.3%; prior +0.7%). Auto sales for February will be released throughout the day.