On hopes of a China trade deal, markets moved a bit higher last week.
The latest Fed minutes came out on Wednesday. Two things to discuss: interest rates and the Fed’s balance sheet. Interest rates: the minutes showed the Fed has moved into two camps. One camp feels, unless there is an issue with inflation, there shouldn’t be any interest rate hikes for the entire year. The other camp feels there could be room for a hike or two towards the end of the year. My read: based on their current rhetoric “hike watch” has now moved all the way to their September meeting. Balance sheet: both camps are in agreement the Fed should stop reducing their balance sheet. The question will be how quickly they will taper it off. “Patient” and “data dependent” are two themes we are likely to hear often from the Fed moving forward.
Durable goods orders were up +0.8% in December. The January number came in at +1.2%.
My model’s status: Speed #1, the short-term indicator, is strongly positive. Speed 2 is slightly positive, Speed 3 and 4 are in transition (upward); while speed 5 still remains down. Summary: two up arrows, one neutral, and two down arrows.
The focus of the week: It will come on Thursday morning at 8:30am when we get the first look at Q4’s GDP number. Q3 came in at +3.4%. Expectations are for Q4’s first read to come somewhere between +2.0 and +2.4%.
Earnings season is beginning to wind down. Some of the important companies reporting this week: Anheuser-Bush, Best Buy, Gap, Home Depot, HP, Lowe’s, and Macy’s.
Indicator focus: December’s housing starts, Case-Shiller home index, February consumer confidence index (Tue); December’s international trade, December’s factory orders (Wed); Q4 GDP estimates (Thu); and February’s ISM manufacturing index (Fri).
Have a great week.
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