See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“Observation is a dying art.” – Stanley Kubrick

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Yesterday’s bounce continued to a second morning as both S&P 500 and Nasdaq futures were in the green ahead of the just-released reports on weekly jobless claims, Q4 productivity, and Q4 unit labor costs at 8:30. Productivity numbers were revised slightly higher, Unit Labor Costs were lower than expected, and jobless claims were just slightly higher than expected.

Overnight, Asian stocks were mostly lower with Japan leading the way down as the Nikkei fell over 1% as the yen rallied on speculation that the BoJ would abandon its negative policy rate. What Asia taketh away, though, Europe has giveth, and the tone there is more positive as the STOXX 600 rallies 0.4% with Spain leading the way with a gain of 0.6%. In Germany, Factory Orders dropped 11.3%, which was nearly twice the 6% decline that was expected. The ECB just announced its latest policy decision, and as expected, they left rates on hold. You can read more about it in the full Morning Lineup report.

In discussions about inflation this week, we’ve heard multiple references to rising prices at the pump as a sign that inflation is poised to take another leg higher. Based on AAA’s tracking of the national average price of a gallon of gas, prices have taken a turn higher. In mid-January, the price was as low as $3.07 per gallon, but as of today, it’s up to just under $3.40 per gallon and at the highest level since early November.

While the rise in gas prices looks like a concern in isolation, proper context is in order. What if we told you that gas prices almost always rise in the early months of a new year? Going back to 2005, there have only been three years when prices were down on a year-to-date basis through 3/7, and the average YTD change is 8.3%.  Given that history, this year’s 9.2% increase doesn’t seem so extreme or worrying.

Look at the chart below where we compare this year’s change in gas prices to a composite of the average YTD change for all years since 2005. They track each other perfectly.  Gas prices have increased this year, but they nearly always do at this time of year.  When prices start to decline after Memorial Day, as almost always occurs at that time of year, do you think the people crying today about higher gas prices being a canary for higher inflation will also be screaming about a ‘deflationary’ warning then? Something tells us, probably not.

For more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.

See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“The greatest danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it.” – Michelangelo

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

After a relatively rough day yesterday, futures have been bouncing back this morning with the Nasdaq trading up about 0.8% and the S&P 500 up by a more modest 0.4%.  The ADP Employment report for February just came out, and it showed modestly lower-than-expected job growth (140K vs 150K), but investors are more focused on the 10 AM testimony of Fed Chair Powell before Congress.  Will he say anything to jawbone the markets?

We’ve highlighted a version of the chart below multiple times in our discussion of Fed rate cuts and the market, and it illustrates the fact that as much as people want to credit (or blame) the Fed for the market rally since the October lows, it hasn’t been the case.  While the early stages of the rally did coincide with the market pricing in a higher number of 25 basis point (bps) rate cuts by the December 2024 meeting, that reading peaked in early January at just under seven.  In the nearly two months since then, the number of cuts priced in for December has been more than cut in half, yet stocks kept rallying.  If the rally was just about rate cuts, we’d be closer to 4,000 on the S&P 500 now rather than above 5,000.

Back in early December, when the market was pricing in cuts as soon as April, we noted that no rate cuts by then would be “the best thing for the market”. The reasoning was that by the Fed just pivoting and moving to the sidelines and no longer actively looking to kneecap economic growth, it was enough for the market to embrace the good news is good again mentality.  If the Fed had to come in and cut rates so soon, it would have only meant that something was going wrong in the economy.

This brings us to yesterday’s market decline. While stocks opened the day lower, the weakness was modest…until just after the 10 AM release of Factory Orders, Durable Goods, and ISM Services.  All the reports were weaker than expected, including the ISM Services report which showed a contraction in employment.  Immediately, after the release, the market had a Pavlovian response of briefly trading higher, but within seconds, stocks reversed and traded lower throughout the day, finishing down just over 1% in what was the third weakest day this year. The market was overbought and due for a breather heading into yesterday, but the weaker-than-expected slug of economic data didn’t help.

For more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.