What Do Today’s Data Say?
Recent releases suggest a “just about right” base case.
A couple of economic reports could cause some commotion this morning. We’ll see Producer Price Index and retail sales data for February at 8:30 a.m. ET.Everyone wants to know what the Federal Reserve is going to do, and they want to know right now.
In the grip of this tension, stocks were mixed in mild action on Wednesday, with the S&P 500 and the Nasdaq Composite closing lower, the Dow Jones Industrial Average and the Russell 2000 closing higher.
Stocks were up 16 out of the last 19 weeks heading into this one, and we’ve now gone 266 straight trading sessions without a 2 percent or greater decline for the S&P, the longest such streak since 2018.
There’s a lot of fundamental support underneath that action, with earnings growth still solid. Investors, traders, and speculators are all still bouncy about the next Fed rate cut, and AI is no doubt attracting new market participants.
And, of course, Bitcoin $BTC hit $73,000 on Wednesday, and gold resumed its upward march.
“Soft” numbers will support arguments for a rate cut. Cool PPI would be considered disinflationary. Slower retail sales would also signal, like the mini two-tenths-of-a-percent surge in the February unemployment rate, that the economy is slowing.
Tuesday’s price action in the aftermath of the Bureau of Labor Statistics’ release of February Consumer Price Index data might be instructive: a big move one direction right on the news, an even bigger move the other direction upon a little further reflection.
Analysts expect February month-over-month headline PPI of 0.3 percent, in line with 0.3 percent in January. Core PPI will be 0.2 percent versus 0.5 percent in January.
Headline year-over-year PPI will be 1.1 percent, down from 0.9 percent in January.
Analysts expect the Commerce Department to report that retail sales rose 0.7 percent in February following a 0.8 percent decline in January. The month-to-month numbers can be noisy, owing to factors such as bad weather. That’s what held January’s number down.
The Fed’s favored inflation gauge, the Personal Consumption Expenditures Price Index, incorporates data from both the CPI and the PPI. The PCE index won’t be updated until the week after the March 20 Federal Open Market Committee decision.
It’s worth reiterating that the long-term trend probably won’t change today. We’re still talking about strong consumer balance sheets supported by real wage growth in a labor market that remains tight.
Are the structural supports for that trend shifting? Probably, that’s what happens in dynamic economies.
It’s unlikely the time for their collapse is now.