E-mini S&P 500 Futures (March): Settled at 3898.75, up 89.50
E-mini Nasdaq-100 Futures (March): Settled at 13,279.75, up 368.75
U.S. benchmarks, as expected, surged to start the month and snapped a 2-day break, but the road ahead isn’t clear just yet.
After yesterday’s rebound, China’s top bank regulator threw cold water over the rally by warning of a bubble in foreign markets, like the U.S. and Europe. The comments dragged global equity markets lower through the night and the S&P lost as much as 1% before snapping back.
The Shanghai Composite finished down 1.2% and, after last week’s loss, pins the index only 1.5% from its summer surge. To us, these comments feel as if China is justifying the underperformance of the country’s benchmark.
Bloomberg is certainly playing along: their headline article this morning reads, “Wall Street Bullishness Is Becoming a Contrarian Sell Signal.” Wait a minute; U.S. benchmarks just started the month off with a bang after battling to hold the utmost technical construction and the entire board was green yesterday. Comments and headlines like these encourage us to stay the course.
Yesterday’s ISM Manufacturing exuded everything we’ve pointed to; a sharp increase in economic activity, a surge in prices, and a drawdown of inventories. Inflation is coming, but last week’s capitulation in Treasuries allows for relief from the rise in rates and paves a path of least resistance higher in stocks.
Today, we look to Fed Governor Lael Brainard at noon CT and San Francisco Fed’s Mary Daly at 1:00 p.m. CT. Services data is in the picture tomorrow, but the most pivotal data point this week is, of course, jobs. Fed Chair Jerome Powell has said the real Unemployment Rate is closer to 10% and this narrative keeps the stimulus pumping, both fiscal and monetary.
Although the market may react bullishly in the near-term to a strong Nonfarm Payroll report, such would give credence to inflation and thus reinvigorate rates. In the end, this would pose a tall hurdle for our rally to fresh record highs.
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