E-mini S&P 500 (March): Settled at 3927.75, down 3.25
E-mini Nasdaq-100 (March): Settled at 13,767.75, down 37.00
U.S. benchmarks erased their holiday session gains early yesterday and battled at unchanged before finishing slightly lower. Only halfway through the month and even after yesterday’s soft tape, the S&P and Nasdaq are up 6% and 6.6%, respectively. The rebound from January’s late swoon has been miraculous and we must acknowledge that some degree of perfection, for the landscape we have, is already priced in; an accommodative Fed, $1.9 trillion in fiscal stimulus, and an improving vaccine rollout.
For at least 1 of those narratives, the stage is set today. At 1:00 p.m. CT, the Federal Reserve releases the minutes from their January 27th meeting, which ultimately set the wheels in motion for a healthy pullback.
All 3 of those narratives have invited inflation and a tailwind to Treasury yields. Today, the 10-year Treasury hit 1.33%. There’s no doubt in our mind that rising Treasury yields will be a headwind to this market. We’ve discussed here before that a quick move from 1.25% to 1.50% is possible and would tap a pain threshold for risk assets.
Bringing added support to this narrative today is blowout Retail Sales and PPI data. Core Retail Sales for January, excluding autos, came in at +5.9%, versus +1.0% expected. Also, headline PPI at +1.3% MoM (versus +0.4%) is the best since September 2012. The strong consumer data and inflation will be on traders’ minds this afternoon upon the release of the FOMC statement.
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