Better Than Expected Economic Data

“There are far, far better things ahead than any we leave behind.” – C.S. Lewis

After two strong days, equities are experiencing a bit of a hangover this morning with futures lower across the board. There’s been a lot of discussion concerning the equity market’s wild swings following the announcement, with a sharp sell-off initially followed by a rebound that erased all the original post-FOMC losses. While the Fed’s new projections for rate hikes were more hawkish than its prior forecast, the new numbers were essentially in line with what the market was already pricing in.

Crude, which dropped more than 20% from its recent peak is bouncing back as WTI trades near $100 per barrel, and treasury yields pull back a bit. The 2s10s yield curve continued to flatten overnight, dropping back below 20 bps to new post-COVID lows.

While markets rallied partly on hopes yesterday of a potential ceasefire in Russia, that optimism dried up this morning as the Kremlin says any reports of progress are ‘wrong’.

There’s another busy day of economic data with Housing Starts, Building Permits, Philly Fed, and Jobless Claims all at 8:30, while Industrial Production and Capacity Utilization will be released 15 minutes before the opening bell. The 8:30 reports all came in better than expected, so we’ll see if the 9:15 data can make it a perfect day.

US stocks have enjoyed quite a rally over the last two trading days. The Nasdaq has rallied more than 2.5% on back-to-back trading days. That’s an impressive streak and isn’t all that common, although we would note that the last back-to-back run of 2.5%+ gains was less than two months ago in late January. Going back to 1996, this week’s streak is just the 27th time the Nasdaq has rallied more than 2.5% on back-to-back trading days, but more often than not, these kinds of rallies have occurred during bear markets.

Of the 27 prior steaks, 11 occurred during the dot-com bust from March 2000 through October 2002, and another four occurred during the financial crisis. Of the remaining 12 occurrences, seven occurred leading up to the March 2000 peak, three occurred between October 2002 and March 2003, and the last two have occurred since the start of 2020.