Database Liquation?
Bitcoin Accelerating Down!
KR Opinion
As we approach the upcoming Federal Open Market Committee (FOMC) meeting, market volatility is expected to increase. Recent developments include the publication of the Reserve Bank of Australia's (RBA) statement, which could foreshadow the Federal Reserve's forthcoming announcement.
The RBA's report highlights that inflation remains moderate, aligning with its forecasts, and the Consumer Price Index (CPI) has stabilized at 3.4% year-over-year.
Despite a reduction in momentum, excess demand persists within the economy, exerting pressure on labor and non-labor costs.
This scenario suggests a potential parallel with the Federal Reserve's anticipated stance, which is likely to reiterate a commitment to achieving a 2% inflation target, albeit with a slight uptick in unemployment rates.
In the context of global monetary policy, there is a notable trend of coordinated action among Western central banks, with most beginning to raise interest rates in anticipation of inflation. This alignment underscores a concerted effort to manage inflationary pressures, a significant shift given the prolonged period of low rates.
However, Japan deviates from this pattern, with its central bank not aligning with the broader trend of rate increases. For the first time in years, Japan's inflation forecasts indicate a break from its longstanding deflationary cycle, marking a unique stance within the global monetary policy landscape.
Furthermore, the release of Producer Price Index (PPI) data last week supports the expectation that the Federal Reserve will maintain its current policy stance. We have observed an uptrend in yield curves, affecting interest rates across various maturities, from two-year to thirty-year bonds.
Market analysis predicts this trend will continue, with implications for bond yields and equity market dynamics in the near term. Additionally, recent liquidation activities in the market database indicate potential for further short-term sell-offs despite the database's robustness on an intermediate basis.
Reviewing my recent reports reveals an anticipated market peak in the first week of March, which has materialized. As the FOMC meeting approaches, early signs of market strain are evident despite a brief rally on Monday morning. I anticipate moderate selling pressure to intensify during the FOMC announcement.
Regarding other economic indicators, upcoming housing starts and permits reports are not expected to impact market sentiment significantly. However, these reports might reflect a slight improvement in the real estate sector, influenced by recent decreases in interest rates, as evidenced by increased mortgage applications.
This potentially positive news from the real estate sector contrasts with the broader market's cautious outlook as we near the FOMC meeting.
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Looking Back on Monday’s Action
The stock market experienced peak performance during the first hour of trading but gradually receded from those highs throughout the session. Despite this, the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 all concluded the trading day with gains, primarily driven by the performance of mega-cap stocks.
Nevertheless, the overall sentiment did not convey a sense of triumph, as the day's market dynamics suggested a cautious approach to avoid losses rather than aggressively seeking wins.
A noticeable observation was that, although the market registered gains, they were somewhat tempered by increased selling pressure in the final 15 minutes of trading. Market participants today showed limited enthusiasm, which could be attributed to the anticipation of the Bank of Japan's policy decision and the forthcoming Federal Reserve's interest rate projections.
However, the focus was on mega-cap stocks, exemplified by the Vanguard Mega-Cap Growth ETF (MGK), which closed up by 0.9%.
Noteworthy contributions to the day's market activity included significant moves by high-profile companies. Alphabet (GOOG) saw an increase of up to 7.6% following reports of potential collaboration with Apple (AAPL) on the Gemini AI engine, NVIDIA (NVDA) advanced in anticipation of its GTC Conference, and Tesla (TSLA) surged after an announcement about a forthcoming price increase for the Model Y. Despite their strong starts, these stocks did not maintain their highest gains, impacting the overall market indices.
The performance of small-cap stocks, as represented by the Russell 2000 index, remained subdued, failing to recover from the previous week's 2.1% decline.
Banking stocks also faced challenges, highlighted by Raymond James Financial's notable downgrade of New York Community Bank (NYCB), which contributed to a downturn in the SPDR S&P Regional Banking ETF (KRE).
Conversely, the consumer staples sector showed resilience, buoyed by an upgrade of PepsiCo (PEP) by Morgan Stanley, marking it as the day's standout performer alongside the communication services sector.
While most sectors ended modestly higher, health care and real estate sectors closed with slight losses. The bond market also declined, with yields on the 2-year and 10-year Treasury notes rising, partly due to concerns over inflation prompted by increasing oil prices.
In summary, the trading session was marked by cautious optimism, with investors navigating a complex landscape of economic indicators and corporate news.
Reviewing Monday’s data
The March NAHB Housing Market Index reached 51, surpassing KR Forecast's forecasted consensus of 49 and showing an improvement from February's index of 48.
Economic releases for Tuesday
The February Housing Starts report, with expectations set at 1.435 million, compared to the previous figure of 1.331 million, per KR Forecast consensus.
The Building Permits are projected to be at 1.485 million, slightly below the prior number of 1.489 million. These reports will be available at 8:30 a.m. Eastern Time.
Moreover, the January Net Long-Term TIC Flows report, which previously valued the sector at $160.2 billion, is scheduled for release at 4:00 p.m. Eastern Time.
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