Good morning contrarians! It is Wednesday, March 1. Welcome to March.
Stocks treaded water yesterday as expected. Dow Industrials declined by 0.7% but the Russell 2000 which tracks small caps managed to eke out a 0.3% gain.
State of Play
Some good news out of China overnight, as the country’s official manufacturing PMI expanded at the fastest pace in a decade. This is the official government figure and therefore to be taken with several grains of salt, but it does indicate that Chinese factories are up and humming again after Covid lockdowns. As of 0610:
Stock futures are pointing to gains, with the Nasdaq up 0.6%. S&P futures are up 0.3%;
Commodities are mixed. Copper is up >1%, likely on this China news, but WTI crude oil is down 1% to trade around $76/barrel;
Bonds continue to see selling at the short end of the curve, with the 2-year yield up 4 basis points to 4.84%, a fresh multi-decade high. The 10-year is up 2bps to 3.94% (yields move inversely to prices).
Corporates
Lowe’s (LOW 0.00%↑) just reported mixed earnings, beating on EPS but missing revenue estimates. The full-year outlook is slightly below forecasts. The stock is down a bit in the pre-market on this news.
Dollar Tree (DLTR 0.00%↑), Kohl’s (KSS 0.00%↑), Jack-in-the-Box (JACK 0.00%↑), Abercrombie & Fitch (ANF 0.00%↑), Wendy’s (WEN 0.00%↑), Hilton Grand Vacations (HGV 0.00%↑), and Tupperware (TUP 0.00%↑) are among other companies reporting before the open at 0930.
After the close at 1600 we’re due to hear from Snowflake (SNOW 0.00%↑), Salesforce (CRM 0.00%↑), American Eagle Outfitters (AEO 0.00%↑), and others.
It’s Tesla (TSLA 0.00%↑) investor day, which will invariably generate a lot of hype around the electric car manufacturer and all things Elon. That kicks off this afternoon. Investopedia has a good preview of what to expect.
Economic Data
A pretty slow day here. We get the final February reading of ISM Manufacturing PMI at 1000. The previous reading was 47.4 and economists are now expecting 48.0.
Construction spending for January is out at the same time. Economists expect this to increase by 0.2% month-over-month after dropping by 0.4% MoM in December, but it makes sense for this to drop in December due to seasonal issues.
The Bottom Line©️
One would expect Tesla’s investor day to be good for the stock, which would be good for stock indexes seeing how it is part of so many of them. Of course, Elon Musk very much personifies the whole over-promise/under-deliver thing, not that that dissuades his fanboys very much.
China’s re-hope-ning is nice but keep in mind that this brings added inflationary pressures in the short term. Inflationary pressure being the one thing the Federal Reserve really can do without right now. Our guest this week, Mark Szemerszki, had a few thoughts on this as well on other things that are absolutely worth listening to if you haven’t already.
If there is to be any hope of this Fed Pivot, then inflation needs to ease. That simple. But at some point the Fed Pivot hopes start to develop into a farce. Right up there with transitory inflation. We’re getting closer to that each day.
So yeah, China and Tesla may provide a welcome reprieve today from all the downward pressure we’ve been seeing for stocks. Whether it will be enough to start a sustainable rally is an entirely different question.
China ReHopeNing, Tesla Investor Day, Retailer Earnings