Good morning contrarians! It is Wednesday, March 29.
State of Play
As of 0620 it looks like we’re due for a rally:
Stock futures are moving higher led by small caps. The Russell 2000 is up 1.8%. S&P 500 and Nasdaq are up 0.9% each;
Cryptos are rallying, with Bitcoin up 5% to trade north of $28,000. That’s its highest level since last spring;
Commodities are up a bit. WTI crude oil is up 1% to trade around $74/barrel;
Bonds are seeing a few bids, with the 2-year down 4 basis points to 4.02% and the 10-year down 3bps to 3.54% (yields move inversely to prices).
Known Events
It’s another slow day. Fed Vice Chair of Supervision Michael Barr returns to Capitol Hill, this time testifying before the House Financial Services Committee.
All we have ito economic data is pending home sales out at 1000. Economists expect this to have declined by 2.3% month-over-month in February versus an 8.1% increase in January.
Speaking of housing we’ll get weekly mortgage applications at 0730 like we do every Wednesday. No economist estimate for this but the average 30-year mortgage was ~6.5% last week.
Little in the way of earnings: Paychex (PAYX 0.00%↑) reports before the open at 0930. Luxury furniture company RH (RH 0.00%↑) is out after the close at 1600.
The Bottom Line
The last couple of days have seen very little in the way of movement. There hasn’t been much in the way of new data and no unanticipated events either. It feels as though a sense of normalcy, even boredom, has returned. The Senate hearings yesterday didn’t create much of a stir, as expected. The politicos did their best to lecture regulators on the bank collapses, but nobody really cared.
There isn’t really much on the agenda that can move markets in a significant way. Certainly not today or tomorrow. We get the PCE Deflator, the Fed’s preferred inflation gauge, on Friday but even that will be dated (it’s for February and we already got CPI data for that month). Next week we’ll get non-farm payrolls but that isn’t until Friday. Earnings season is still a couple weeks away.
The Set-Up
With each passing day of relative quiet we get closer to the whole banking thing moving into the background where eventually it will be forgotten.
If you buy that narrative, and you think that ‘Operation Soft Landing’ can come off after all, then you’ll probably want to get long(er) risk assets like tech stocks. Certainly more upside in regional banks as well. To that end, there was a bit of selling in First Republic Bank (FRC 0.00%↑) yesterday, potentially creating an opportunity to establish a position;
If you think we’re just fooling ourselves here and that there is another shoe to drop in banking — or if you think the economic headwinds are being shrugged off far too early, then you’ll want to reduce exposure to risk. Bonds are probably a relative bargain in this scenario under the premise that the Fed will be forced to cut rates.
There may be other factors at work here. Do your own research, make your own decisions.
A Returning Sense of Normalcy