Dow futures rise slightly after Friday’s surge

There was a lot of economic data coming out of the US at the end of last week and most of it was mixed.

Retail sales for June beat estimates up 1% m/m (unadjusted for higher inflation) and by the same amount excluding autos, preliminary consumer sentiment ex UoM (University of Michigan ) improved from 50 to 51.1. Despite this, it remains at worrying levels and where we note an improvement in inflation expectations with a drop to 2.8% from 3.1% for the 5-year and 12-month horizon from 5.3% to 5.2%.

Thursday’s PPI (Producer Price Index) readings were warmer than expected with y/y at 11.3% and m/m 1.1% and its core at 8.2% and 0.4% respectively, these latest numbers slowing from previous readings suggesting it peaked excluding food and energy. Import price growth slowed to 0.2% m/m and 10.7% yoy, partly on the back of a stronger dollar. Unemployment claims suffered their sixth consecutive failure and have been rising on average lately with a reading of 244K. Industrial production contracted 0.2% against growth expectations, and business inventories rose 1.4%.

The central bank spoke to Waller who is for a 75 basis point hike but could go further depending on retail sales and housing data if it showed “demand is still very strong and robust,” although “markets may have gotten a bit ahead of themselves.”

For the stock market, Friday’s session was the most notable, reversing most of the losses from earlier in the week as expectations of a 100 basis point rate hike dropped majority prices, with financials leading after the results from Citi that exceeded estimates. In the bond market, yields were expecting a more noticeable decline at the far end of the curve which is still positive in real terms, but with key spreads reversed, and market pricing of rate hikes from the Federal Reserve (Fed) shows a minority pricing 100 basis point increase for next week’s meeting, roughly a draw between 50 and 75 basis points for September, and somewhat mixed pricing for smaller hikes 25 basis points thereafter.

Looking to the week ahead, US economic data is relatively calm compared to the supply impacting items last week, but housing demand is noted and begins with the NAHB Housing Market Index tonight, building permits and housing starts tomorrow, and existing home sales and weekly MBA mortgage applications the next day.

Other items of note include the preliminary Manufacturing and Services PMIs at the end of the week, S&P readings should show continued but weaker expansion. As for earnings, from America and (component Dow 30) Goldman Sachs today, Netflix and (component) J&J tomorrow, and Tesla on Wednesday.

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That’s thanks to Friday’s boost which reversed almost all of the losses incurred since the start of last week. Thursday’s low below the S/L (stop loss) of its previous first level of support offered some for conformist sell breaks as contrarian buying was halted on the initial decline. The big picture was more contradictory on the short-term time frame where this is a bearish average while stalling here requiring little change to match.

UnitedHealth (beating forecasts, boosting full-year outlook), American Express and JPMorgan (although still slightly down the week after losing earnings and revenue, building up loan loss reserves and the suspension of share buybacks) outperformed among its constituents in a session where all but a few finished in the green. As for the next components, today we have Goldman Sachs and IBM.

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