/ March 26
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Wednesday:
Durable Goods Orders MoM (-1% exp.)
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Thursday:
Initial Jobless Claims (225K exp.)
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Friday:
Core PCE Price Index MoM (0.3% exp.)
Personal Income MoM (0.4% exp.)
Personal Spending MoM (0.5% exp.) -
Wednesday:
Dollar Tree
Chewy
Paychex
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Thursday:
Lululemon Athletica
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Friday:
N/A
Daily Briefing
*The major equity indices closed higher for a third consecutive session; this price action pushed the S&P 500 further above its 200-day moving average (5,754); the moves were modest, however, and mostly driven by gains in the mega cap space;
*There was an overall negative bias under the index surface as participants continue to weigh worries about US trade policy and economic growth; the latter was piqued by the day's economic releases;
*SPY has exited extreme oversold conditions and appears to be holding above the 200-DMA for now; we would expect a re-test at some point to confirm or deny that it now indeed acts as “support”; resistance stands at the 50-DMA, close to the technically important level of $580, where the 50% correction retracement occurs;
*The MACD continues to suggest an improvement in short term trading conditions and is not yet meaningfully extended to the upside;
*The Consumer Confidence Index showed a fourth consecutive decline, and the Expectations Index fell to its lowest level (65.2) in 12 years, with worries about future employment prospects and inflation pacing that downturn;
“Likely in response to recent market volatility, consumers turned negative about the stock market for the first time since the end of 2023. In March, only 37.4% expected stock prices to rise over the year ahead—down nearly 10 percentage points from February and 20 percentage points from the high reached in November 2024. On the flip side, 44.5% expected stock prices to decline (up 11 ppts from February and over 22 ppts more than November 2024). Meanwhile, average 12-month inflation expectations rose again—from 5.8% in February to 6.2% in March—as consumers remained concerned about high prices for key household staples like eggs and the impact of tariffs.”
-Stephanie Guichard, Senior Economist, Conference Board
*The readings in the Conference Board survey echo the data reported by University of Michigan; the graph below, courtesy of Jeff Weniger, illustrates that since 1990, rises in the University of Michigan consumer inflation expectation index to 5% or more have typically anticipated a decline in inflation; he notes that the UM inflation expectations measure reached 4.9% in the most recent survey;
*Notably, the deviations from this pattern which occurred in 2020 and 2021 were happening during wildly irregular and unpredictable circumstances; excluding those years, other instances of rising inflation expectations coincided with decreasing CPI;
*Furthermore, there is a wide divide based on political beliefs among survey respondents; democrats think inflation will be 6.5%, while Republicans only believe it will be 0.1%;
*Jeff’s comment sums up the situation best: “The public is most worried about inflation at the moment the inflation rate is ready to tank.“;
*New home sales increased a modest 1.8% month-over-month in February, yet higher-priced homes made up a smaller percentage of sales than the prior month; affordability constraints remained a headwind as sales of higher-priced homes accounted for a smaller percentage of new home sales in February than the prior month;
*In other housing market-related news, KB Home's (KBH, -5.2%) disappointing earnings and guidance contributed to the downside bias; shares hit a 52-week low after the homebuilder reported below-consensus Q1 earnings and lowered its FY25 housing revenue outlook, piling onto concerns of an intensifying housing market slowdown; this comes less than one week after competitor Lennar (LEN, +0.2%) issued soft 2Q25 EPS and deliveries guidance;
New Home Sales MoM %
*Options market data suggests there wasn’t a lot of confidence in either short or medium term prospects for the equity market; SPY’s price action was predominantly bearish, with most contracts being bought puts and sold calls; some sector ETFs did fare better, most notably Financials (XLF) and Tech (XLK);
*Treasuries settled higher in another manifestation of growth concerns; the 10-yr yield dropped two basis points to 4.31%, and the 2-yr yield dropped three basis points to 4.00%; on a related note, a $69 billion 2-yr note sale met strong demand;
*TLT settled mostly unchanged, continuing its technical consolidation between retracement levels;