Macro the week ahead

Macro Week Ahead: U.S. CPI Inflation, Retail Sales, Consumer Confidence

By:Ilya Spivak

Stocks look vulnerable after struggling to rise despite falling yields. U.S. inflation data is front and center

  • Stocks struggle despite falling bond yields, steady Fed policy outlook.
  • Analysts expect U.S. inflation data to show slow-and-steady progress continues.
  • Retail sales and consumer confidence data are in focus as investors gauge growth trends.

Last week marked an eye-catching change of pace for financial markets.

Stock markets fell, even as bond yields declined for a second consecutive week, despite statis on the priced-in policy outlook for the Federal Reserve. The Fed is still expected to deliver about 80 basis points (bps) in rate cuts in 2024.

The tech-tilted Nasdaq led the way lower with a drop of 1.6%, while the bellwether S&P 500 slid 0.3%. Crude oil prices also fell, shedding 2.5% and adding to the sense that a risk-off mood took hold among investors. Tellingly, gold prices and the anti-risk Japanese yen saw outsized gains. The U.S. dollar weakened modestly.

Here are the macro waypoints that are likely to shape price action in the week ahead.

U.S. consumer price index (CPI) data

Inflation is expected to inch lower in the U.S. in February. While experts expect the headline rat to remain unchanged from the prior month at 3.1% year-on-year, the core measure excluding volatile food and energy prices is penciled in for a decline to 3.7%. That would mark the slowest reading since April 2021.

Analytics from Citigroup show that U.S. economic data outcomes have soured relative to baseline forecasts over the past month. Leading activity survey data from the Institute of Supply Management (ISM) points to a slowdown across the manufacturing and service sectors, coupled with an easing of price pressures.

If this amounts to a soft result, the key question for traders will be whether that is able to lift financial markets. If not, this might signal that a speculative mood shift toward “classic” de-risking, where stocks and bonds diverge and other standby defensive asset gold, yen and the U.S. dollar push upward.

U.S. consumer price index Y/Y
Data source: BLS

U.S. retail sales data

A pickup in U.S. retail activity is expected in February, with sales rising 0.8%. That would mark a welcome pickup from January, when they suffered the largest drawdown in 10 months. Perhaps most worryingly, the year-on-year growth rate fell to just 0.6%, the lowest since slump in the second quarter of 2020 amid the onset of the COVID-19 pandemic.

Leading purchasing managers index (PMI) data signaled that the consumer goods space outperformed among the seven major sectors of U.S. economic activity last month, while consumer services expanded at the fastest pace since August 2023. This might set the stage for brisk results that push against Fed rate cut speculation.

U.S. retail sales M/M
Data source: U.S. Census Bureau

U.S. consumer confidence survey

Consumer sentiment is expected to hold steady in the March survey from the University of Michigan (UofM). The mood soured a bit in February as one-year inflation expectations ticked up from 2.9% to 3%. Outcomes in line with expectations might bring little that demands repricing from financial markets, but traders will be on the lookout for any surprises.

University of Michigan U.S. consumer confidence survey
Data source: UofM

Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

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