E-mini S&P 500 Futures (September): Settled at 4443.50, down 30.50
E-mini Nasdaq-100 Futures (September): Settled at 14,997.50, down 136.50
U.S. benchmarks finished off their worst levels yesterday and found not-so-hawkish comments from Fed Chair Jerome Powell to be supportive. Although he didn’t intend to address monetary policy ahead of next week’s Jackson Hole, most notably he emphasized how Covid-19 poses to act as a continuous wild card. In many respects, yesterday’s healthy pullback was the culmination of buyer exhaustion.
On Monday, the S&P and Dow found a low within the first 30 minutes of the opening bell and produced positive candles every 30 minutes through the close. This was the 5th straight record close for each, and amid lukewarm volume. In fact, the only reason Monday’s volume was decent was because of selling within the first 30 minutes.
There was a barrage of poor data going back to Michigan Consumer Sentiment last Friday, China’s deluge Sunday night, and the NY Empire State Manufacturing miss on Monday. Also, mounting Covid-19 fears and Home Depot’s -4.3% weighed on the tape. This equated to a poor performance across a mix of sectors including Semiconductors, Consumer Discretionary, Financials, and Industrials.
The interesting thing was yesterday’s Retail Sales and Industrial Production. We noted here the headline miss on Retail Sales, but the U.S. Dollar and Treasuries acted counterintuitively. We believe 1 or a combination of 3 reasons for such a reaction. Despite the headline miss, we actually found many positives within the report.
Remember, June’s data was revised sharply higher and marked a much tougher base comparison than headline expectations alluded to. At the end of the day, Retail Sales was +15.8% YoY in July and +18.7% YoY for June. Furthermore, these aren’t compared against contractions in 2020, proving the consumer remains very strong.
Next, Industrial Production blew the doors off after a slow June. Market participants either agree with our interpretation of Retail Sales, believing all data negativity was flushed out due to an obsolete and politically-infused measure of consumer sentiment, or they’re repositioning hawkishly in front of today’s Fed Minutes from the July meeting due at 1:00 p.m. CT.
Building Permits and Housing Starts were mixed this morning. On the earnings front, Lowe’s beat top and bottom-line estimates. The stock is up more than 4%, but it’s all relative after losing 5.3% yesterday. Same-store sales declined less than forecast and the company raised full year guidance. Target also beat estimates, but the stock is slipping ahead of the bell.
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