The Tuesday Market Minute
- Global stocks edge higher on re-opening bets as markets hold gains despite higher bond yields heading into today’s February retail sales reading.
- Benchmark 10-year note yields slip to 1.599% in overnight trading while the dollar index rises 0.05% to 91.875 ahead of the start of today’s FOMC meeting .
- February retail sales likely affected by the brutal mid-month winter storms in Texas, but still supported by last December’s $600 stimulus checks.
- CDC data shows 109 million coronavirus vaccine doses have been administered as of yesterday, with nearly 38.3 million now fully inoculated.
- U.S. equity futures suggest a mixed open on Wall Street ahead of February retail sales data at 8:30 am Eastern time and after-the-bell earnings from Nike.
U.S. equity futures were little-changed in overnight trading, with the Dow looking to extend its seven-day winning streak, as investors digested a key reading of February retail sales that could mark a turning point in consumer sentiment and the final throes of the year-long pandemic.
February retail sales were marked 3% lower from last year to a collective $561.7 billion, the Commerce Department said, well shy of the Street consensus forecast of a 0.5% decline and January’s upwardly-revised total of $579.1 billion. Stripping out auto and gasoline sales, retail sales were down 2.7%.
Record closes for the Dow and the S&P 500 last night — largely driven by gains in ‘re-opening’ stocks such as airlines, casinos and movie theatres — came amid largely bearish moves in the bond market, where benchmark 10-year Treasury note yields held over right around the 1.6% mark for much of the session.
The equity gains suggest traders are prepared to weather higher market rates, and faster inflation prospects, while betting on the implied gains from a fully-reopened economy and the near $2 trillion in stimulus lawmakers have elected to support it with over the coming months.
February’s retail sales reading, in that respect, provides an early signal of pent-up consumer demand, powered by last December’s mini-stimulus package, that took advantage of early re-opening decisions in various states around the country.
Brutal winter storms in Texas and the southwest, however, blunted some spending growth, and analysts were correct in forecasting a modest cooling of the 7.6% growth rate recorded in January.
With the February data at 8:30 am Eastern time, and the Federal Reserve’s Open Markets Committee set to begin its two-day policy meeting later today, stock futures were muted in overnight trading, with contracts tied to the Dow Jones Industrial Average suggesting a 10 point opening bell dip and those linked to the S&P 500 priced for a 3 point gain from last night’s record close.
With benchmark 10-year note yields holding at 1.606% in early European dealing, contracts tied to the Nasdaq Composite index, which is still around 5% lower from its February 12 peak, are priced for a 45 point opening bell gain.
The U.S. dollar index was marked 0.1% lower against a basket of its global peers at 91.71 heading into the start of the Fed’s two-day meeting, with investors looking for any suggestion of a change in rate-hike forecasts from the FOMC now that the economy looks to outperform prior post-pandemic expectations over the second half of the year.
The dollar’s gains, as well as bets on rising U.S. crude stockpiles ahead of data releases from the American Petroleum Institute and the Energy Department over the next two days, have oil prices on the back foot, with WTI down 63 cents at $64.76 per barrel and Brent off 65 cents at $68.23 per barrel.
European stocks were modestly higher in the opening hours of trading, with the Stoxx 600 moving closer to last year’s all-time high on re-opening bets that appeared unaffected by the region’s uneven vaccine rollout and the ongoing questions over the safety of the AstraZeneca /Oxford University single-shot treatment.
Overnight in Asia, a weaker yen helped the Nikkei 225 into a modest 0.5% gain on the session, while the region-wide MSCI ex-Japan benchmark was marked 0.6% higher heading into the final hours of trading.
This article was originally published by TheStreet.