Big week of economic data ahead

Monday, March 28, 2022

We have a big week ahead of us on Monday morning, after a pretty much rudderless week with information to push or pull the market: after interest rates were expected to rise by a quarter of a percent mid-month, the indices have breathed a clear sigh of relief: the Dow Jones and the Nasdaq have risen 1500 points or more since then, and the S&P 500 is up +350.

This week we expect to see new results from the Case-Shiller report on house prices, consumer confidence, job openings/quits, ADP private sector jobs, a fourth quarter GDP revision, the weekly and ongoing jobless claims, the PCE price index, the manufacturing PMI & ISM, construction spending and, of course, the ever-important report on nonfarm payrolls and the unemployment rate. And all this before the first quarter earnings season gathers pace in the coming weeks.

This morning, there is a slight decrease Advancing Trade in Goods for February, falling from its all-time high (or low, depending) -$107.6 billion to -$106.6 billion. Exports increased by +1.2%, driven by consumer goods and industrial supplies, while imports grew at a much more moderate pace of +0.3%, driven by foreign automotive imports driven towards the bottom of nearly -10% over the month. The US trade deficit really started around the turn of the century; before that, it was relatively close to equilibrium.

We were looking for yield curve inversions – which is historically, but not always, a predictor of an upcoming recession – and we finally saw one: 5-year bond yields exceeded 30-year bond yields for the first time since 2006 (which actually anticipated the Great Recession). But the main comparison economists are making is between 2-year and 10-year bond yields: there, as the flattening continues – 2.31% versus 2.46% – for now, the gap is narrowing maintains. The 10-year yield rose 30 basis points last week.

Pre-market futures are flat to negative at this hour: the Nasdaq is near zero before the opening bell, while the S&P is at -3 points and the Dow Jones at -30. These economic data points should go a long way in determining the direction of the economy, including significant levels of inflation and employment.

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