March 11, 2024

 

(THE MARKET IS HUMMING ALONG, BUT IS RIPE FOR A PULLBACK)

March 11, 2024

 

Hello everyone,

 

Week ahead calendar

Monday, March 11, 2024

Earnings: Oracle

 

Tuesday, March 12, 2024

8:30 am Consumer Price Index (February)

2:00 pm Treasury Budget (February)

 

Wednesday, March 13, 2024

Earnings: Dollar Tree, Lennar

 

Thursday, March 14, 2024

8:30 am Producer Price Index (February)

8:30 am Retail sales (February)

10 am Business Inventories (January)

Earnings: Dollar General, Adobe, Ulta Beauty.

 

Friday, March 15, 2024

8:30 am Export Price Index (February)

8:30 am Import Price Index (February)

8:30 am Empire State Index (March)

9:15 am Capacity Utilization (February)

9:15 am Industrial Production (February)

9:15 am Manufacturing Production (February)

10 am Michigan Sentiment preliminary (March)

Earnings: Progressive

 

February’s consumer inflation data this week comes after January’s surprisingly hot report put a spanner in the works for investors, puncturing hopes that the last mile to the Fed’s 2% inflation target will be a walk in the park.

On a monthly basis, headline CPI is expected to have risen a little from the prior month – even though the year-over-year gain remains the same.  Economists polled by FactSet are anticipating a 0.4% increase, up from a previous gain of 0.3%.  On a yearly basis, it’s expected to have risen by 3.1%.

Core CPI – which excludes food and energy prices – is expected to show a slight moderation in inflation.  Economists’ forecasts increase by 0.3% and 3.8% on a monthly and yearly basis.  That’s down from respective gains of 0.4% and 3.9% in January’s report.

Wall Street’s focus will be where inflation has proved to be stubborn.  Those sectors include medical expenses, transportation, airline fares, food (takeout), and shelter.

Do we have healthy consumers?

This week will also highlight the health of the consumer.  Rising credit delinquencies have some investors wringing their hands and pacing the floorboards.

The corporate earnings season has been stronger than expected, with the S&P500 profits tracking to have risen by 4.1% in the fourth quarter, according to FactSet data.

But all the euphoria around the potential for artificial intelligence has not been seen in consumer-oriented companies, perhaps offering us a cautionary narrative that positive sentiment is not felt by all.

Nordstrom shares dropped 18% after the department store chain warned of a potential sales drop this year, even after beating fourth-quarter expectations.  Who physically shops in department stores anymore or even online?  The competition now is fierce for the consumer’s dollar, and I believe department stores fall last in line when consumers want to part with their pennies.

Used, second-hand, pre-loved – whatever you want to call it – is very “modern” these days. More and more of these stores are popping up online and consumers are migrating to these stores on mass. 

Many consumers are also shopping in various charity shops and are finding absolute bargains. I, for one, have picked up some incredible finds in various charity shops over the years, some of which I have on sold and some of them I am still wearing.  Shoes that sell for a retail price of $400, I picked up for $25.00, and jeans that retail for around $120, I bought for $12.00. 

But these items are still probably going on credit cards.  And that’s becoming a big problem.

Credit card delinquencies last year were shown to have risen by more than 50%, with consumer debt expanding to $17.5 trillion – signalling “financial stress.”

Any rise in inflation combined with this financial hardship puts pressure on the consumer.  You can read the narrative as a domino effect.  If the economy starts to slow and inflation ticks higher, then the consumer may start to tighten the reins and limit spending, which can feed into the markets as well.

On Thursday, Wall Street receives sales data for February.  So, we will see how healthy the consumer really is.  A healthy consumer equals sunny days in the weeks ahead.

Everything is humming along nicely now, but…

The economy is motoring along, earnings have surprised to the upside, investor sentiment remains bullish, and the consumer remains resilient.

But with high valuations, a pullback is not far away.  So, what do you do?  You can take profits here and allocate that money to stocks in underperforming sectors, or you can take half off the table and let the other half run, or you can ride out any pullback – meaning just leave it.

A pullback is healthy and lets the market breathe and take stock.

IN BRIEF:

U.S. STOCK MARKET (S&P500)

We are in for a correction, but please note this is not the death of the bull market.  Support lies at around 5040, and any lower should contain around 4,950.  Our ‘Big Picture’ target is still around 5,750.

GOLD

The yellow metal broke out of its symmetrical triangle and has rallied well.  Support lies around $2,120, which will enable another rally toward $2,250 level.  Medium-term target is $2,530.

SILVER

Rally is well underway.  Potential inverse head and shoulders target = around $34.90

BITCOIN

Uptrend in progress.  Support lies around $66,000/$63,000/$60,000.  Next target is around $77,500 level. 

If you are following Ethereum, the rally will continue in this crypto coin as well.  Medium-term target is around $8,700.

BONDS

TLT should continue to rally, and yields will continue to fall for the medium term.

 

 

Cheers,

Jacquie