Will The Banks Rollover?
Week of consolidation...
KR Opinion
If you haven't heard yet, I've made my return to YouTube with "The Kendall Report." Click on the image to watch the video.
I'm inviting you to join me daily at 6:00 PM Eastern Time for videos and live streams that dive into the macroeconomic events shaping our marketplace. In the coming days, I'll be focusing particularly on the banking sector, among other pressing issues, so make sure you don't miss out.
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In the most recent video, I've taken a step back to look at the bigger picture, analyzing data and our algorithms to decipher quarterly and monthly trends. This broader perspective is balanced with tonight's newsletter, where I'll zoom in on the shorter-term aspects as we step into the first full week of March. It's shaping to be a busy week, especially with the unemployment report due this Friday, predicting 210,000 new jobs and a slight rise in the employment rate.
Throughout the week, I'll also be keeping an eye on the ISM non-manufacturing index, which is expected to come in at 52.7, a slight dip from last month, indicating a mild softening in the economy. Yet, in the banking sector, where tensions seem to be rising, with recent declines in major bank indexes, with noise, banks are fueling talks of a crisis. Despite the gloomy predictions by some, these market dynamics often prove to be more bluster than crisis, and I've found they can usually be navigated quite smoothly.
Ending last week on a high, the S&P 500 and NASDAQ reached all-time highs, continuing the trend we've seen this year. As we enter the final month of Q1, I anticipate some continuation of these trends, though a period of consolidation might also be on the cards. However, I expect the gains made in the first two months to largely hold, and I'll be refining these predictions as we move through the month.
Looking ahead, I'm not bracing for any disasters this March. The much-discussed banking crisis 2.0 seems unlikely; the banking system is accustomed to dealing with stressors, and last year's asset mismatch issues were quickly resolved through a discount window facility.
Our database continues to show strong rotation and positive, forward-looking expectations.
As we start March, I expect a bit of consolidation in the first few days, followed by a pickup in volatility as we approach the week's end and the release of unemployment numbers.
Just a quick mention our database on an intermediate basis continues to get traction as crazy as it seems the rotation is very strong keeping the forward-looking expectations very positive more on this later.
Looking Back on Last Week
The stock market exhibited cautious trading patterns in the early part of the week. Still, as the week progressed, buying activity intensified, propelling the Nasdaq Composite to reach a new all-time high by week's end. This achievement marked it as the last of the major indexes to hit a new record, following the S&P 500 and Dow Jones Industrial Average, which had already established new all-time closing highs earlier in the year.
The anticipation of a potential market pullback grew among some investors due to the S&P 500 and Dow Jones already achieving record highs earlier in the year, and the Nasdaq Composite nearing its record high at the week's start. This anticipation led to subdued trading early in the week as investors awaited significant market events, including the release of the Fed's preferred inflation measure, the PCE Price Indexes, on Thursday.
The January Personal Income and Spending Report did not present any surprises, and the PCE Price Indexes matched expectations, indicating a slight decrease in inflation. The market's reaction to this report was muted, but it did not alter the prevailing expectation of potential rate cuts within the year, providing a degree of support to the market.
The week's gains were predominantly driven by mega-cap and semiconductor stocks, although a broad array of stocks also saw upward movements. Notably, the Invesco S&P 500 Equal Weight ETF (RSP) increased by 1.2%, while the PHLX Semiconductor Index (SOX) surged by 6.8%. Shares of NVIDIA (NVDA) and Meta Platforms (META) rose by 4.4% and 3.7%, respectively, with Salesforce (CRM) notably jumping 8.2% after its earnings report.
Small-cap stocks outperformed the broader market, leading the Russell 2000 to a 3.0% gain. Healthcare was the only S&P 500 sector to decline, while other sectors experienced minimal losses. The information technology sector was the standout performer, gaining 2.5%, followed by real estate and consumer discretionary sectors.
Treasury yields fell over the week, providing additional support to the stock market. This movement came in the context of mixed results from treasury note auctions.
In corporate news, UnitedHealth faced a setback with the launch of an antitrust investigation by the Department of Justice, as The Wall Street Journal reported. According to Bloomberg, Apple shifted its focus towards generative artificial intelligence, moving away from its electric car project. New York Community Bancorp disclosed material weaknesses in its internal controls related to loan reviews.
The economic data released on Friday highlighted a slowdown in manufacturing activity and a modest deceleration in price growth in February, which could influence the market's view on future monetary policy. The final February reading of the Univ. of Michigan Consumer Sentiment Index showed an improvement in consumer sentiment, reflecting easing inflation pressures and a strong labor market. January's Construction Spending slightly declined, contrary to expectations of a modest increase.
Here are the upcoming Economic Reports
Mar 05
09:45 ET: S&P Global US Services PMI - Final
For: Feb | Trading Impact: Low | KR Forecast: NA | KR Forecast Consensus: NA | Prior: 52.5
10:00 ET: Factory Orders
For: Jan | Trading Impact: Low | KR Forecast: -2.3% | KR Forecast Consensus: -2.5% | Prior: 0.2%
10:00 ET: ISM Non-Manufacturing PMI For Feb | Trading Impact: High | KR Forecast Forecast: 53.0% | KR Forecast Consensus: 52.7% | Prior: 53.4%
Mar 06
07:00 ET: MBA Mortgage Applications Index
For: 03/02 | Trading Impact: Low | KR Forecast: NA | KR Forecast Consensus: NA | Prior: -5.6%
08:15 ET: ADP Employment Change
For: Feb | Trading Impact: Medium | KR Forecast: 165K | KR Forecast Consensus: 150K | Prior: 107K
10:00 ET: JOLTS - Job Openings
For: Jan | Trading Impact: Medium | KR Forecast: NA | KR Forecast Consensus: NA | Prior: 9.026M
10:00 ET: Wholesale Inventories
For: Jan | Trading Impact: Low | KR Forecast: -0.1% | KR Forecast Consensus: -0.1% | Prior: 0.4%
10:30 ET: EIA Crude Oil Inventories
For: 03/02 | Trading Impact: High | KR Forecast: NA | KR Forecast Consensus: NA | Prior: +4.20M
14:00 ET: Beige Book
For: -- | Trading Impact: Low | KR Forecast: NA | KR Forecast Consensus: NA | Prior: NA
Mar 07
08:30 ET: Initial Claims
For: 03/02 | Trading Impact: High | KR Forecast: 220K | KR Forecast Consensus: 217K | Prior: 215K
08:30 ET: Continuing Claims
For: 02/24 | Trading Impact: High | KR Forecast: NA | KR Forecast Consensus: NA | Prior: 1905K
08:30 ET: Productivity-Rev.
For: Q4 | Trading Impact: Low | KR Forecast: 3.0% | KR Forecast Consensus: 3.1% | Prior: 3.2%
08:30 ET: Unit Labor Costs-Rev.
For: Q4 | Trading Impact: Low | KR Forecast: 0.7% | KR Forecast Consensus: 0.6% | Prior: 0.5%
08:30 ET: Trade Balance
For: Jan | Trading Impact: Medium | KR Forecast: -$63.5B | KR Forecast Consensus: -$63.3B | Prior: -$62.2B
10:30 ET: EIA Natural Gas Inventories
For: 03/02 | Trading Impact: Low | KR Forecast: NA | KR Forecast Consensus: NA | Prior: -96 bcf
15:00 ET: Consumer Credit
For: Jan | Trading Impact: Low | KR Forecast: NA | KR Forecast Consensus: $10.0B | Prior: $1.6B
Mar 08
08:30 ET: Nonfarm Payrolls
For: Feb | Trading Impact: High | KR Forecast: 210K | KR Forecast Consensus: 195K | Prior: 353K
08:30 ET: Nonfarm Private Payrolls
For: Feb | Trading Impact: High | KR Forecast: 165K | KR Forecast Consensus: 150K | Prior: 317K
08:30 ET: Avg. Hourly Earnings
For: Feb | Trading Impact: High | KR Forecast: 0.3% | KR Forecast Consensus: 0.3% | Prior: 0.6%
08:30 ET: Unemployment Rate
For: Feb | Trading Impact: High | KR Forecast: 3.8% | KR Forecast Consensus: 3.7% | Prior: 3.7%
08:30 ET: Average Workweek
For: Feb | Trading Impact: High | KR Forecast: 34.3 | KR Forecast Consensus: 34.3 | Prior: 34.1
Earnings Report for the Week of March 4
Weekly Earnings Reports Summary
Monday, March 4
- Earnings Reports: 145 companies
Tuesday, March 5
- Earnings Reports: 266 companies
Wednesday, March 6
- Earnings Reports: 141 companies
Thursday, March 7
- Earnings Reports: 201 companies
Friday, March 8
- Earnings Reports: 32 companies
Total Earnings Reports for the Week: 785 companies
WaveTech Database
