E-mini S&P 500 (March): Settled at 3873.25, up 54.00
E-mini Nasdaq-100 (March): Settled at 12,788.75, up 491.50
U.S. benchmarks surged yesterday from the depths of Monday’s closing failure. Mega-cap tech took the reins, and it was banks and energies that rested.
Gains of about 4% for each Apple, Facebook, and Amazon, a whopping 20% for Tesla, and the best day in nearly a year for semiconductors brought the S&P and Nasdaq to critical levels of technical resistance: these levels will potentially define the next bull leg. However, each index slipped into the close and consolidated overnight, not only because of the technical landscape, but ahead of today’s CPI data and 10-year Note auction.
February U.S. Core CPI, excluding food and energy, came due at 7:30 a.m. CT. For January, this read was flat MoM. Today, it was expected at +0.2% with January being revised to +0.1%.
The YoY read is expected to remain steady at +1.4%, and well below the Federal Reserve’s 2% target. By these measures, there is no inflation, but everyone can touch and feel real inflation in everyday life; there’s a laundry list of commodities at or within multi-year highs. Lumber is our favorite, which has surpassed its May 2018 record by 56%.
Still, this read is crucial because with no sign of inflation through these measures, it’ll keep Fed policy accommodative for the foreseeable future and this is bullish for equity markets. However, a “hot” read would rain on yesterday’s rally, giving credence to the soft close and technical rejection.
The strong rebound in the longer end of the Treasury complex aided yesterday’s risk-on session. Today, $38 billion in 10-year Notes will be auctioned at noon CT. Many bond traders certainly have the February 25th cratering in the back of their minds, and this raises the ante on today’s auction.
Although the amount being auctioned is historically large, it pales in comparison to recent debt issuance. If demand is steady today and keeps a bid under the longer end, coupled with avoiding a “hot” CPI, we believe it should reinvigorate strength across equities.
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