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A nice rebound effort set in Friday, but it still wasn't enough to prevent a fourth straight week of losses for the stock market. Currently, the S&P 500 futures are flat and are trading roughly in-line fair value, the Nasdaq 100 futures are up 34 points and are trading 0.2% below fair value, and the Dow Jones Industrial Average futures are down 78 points and are trading 0.2% below fair value.
There is some mistrust in the tape in the sense that market participants are waiting to see if Friday's rebound effort was more than a one-hit wonder in a stock market that has been inclined to sell into strength.
This morning's economic data is coming into play as a market mover. There were a lot of misses in the headline numbers, but one number -- control group retail sales -- has stood out as an uplifting element for the growth outlook, which helped mitigate some of the selling interest seen earlier in the equity futures market.
Briefly, retail sales increased 0.2% month-over-month in February (Briefing.com consensus 0.7%) following a downwardly revised 1.2% decline (from -0.9%) in January. Excluding autos, retail sales were up 0.3% month-over-month (Briefing.com consensus 0.4%) following a 0.6% decline (from -0.4%) in January.
The key takeaway from the report is that control group retail sales, which exclude auto, gasoline station, building materials, and food services sales, jumped 1.0% month-over-month following a downwardly revised 1.0% decline (from -0.8%) in January.
This number is the basis for why the Treasury market saw selling following the report. Also, the New York Fed Empire State Manufacturing Survey contained some unnerving inflation news juxtaposed with a disappointing reading on business activity.
Specifically, the General Business Conditions Index declined to -20.0 in March from 5.7 in February. A number below 0.0 denotes a contraction in business activity in the New York Fed region. The Prices Paid Index rose five points to 44.9, its highest level in more than two years, while the Prices Received Index jumped three points to 22.4, hitting its highest level since May 2023.
The key takeaway from the report is that it plays into some of the stagflation worries that have infiltrated the market.
The economy will be a focal point throughout the week, which will feature the March FOMC meeting on Wednesday. That meeting, which isn't expected to produce any change in the target range for the fed funds rate, will included an updated Summary of Economic Projections and the Fed's so-called dot plot. Participants will be anxious to see if the dot plot still shows a median estimate of two rate cuts this year.
In some related economic news, the OECD has cut its 2025 GDP forecast for the U.S. to 2.2% (from 2.4%) and its 2026 forecast to 1.6% (from 2.1%), citing in part concerns about the effects of tariff actions. There isn't much of a surprise element here, however, given that the stock market and the Treasury market have been out front in recent weeks with their own growth concerns related to the tariff policies.
