Worst possible scenario for stocks
High inflation and weak consumer spending are the stock market's version of getting an STD for Valentine's Day.
S&P 500 futures fell 40 points after the data, from up 7 points beforehand. The market is clearly spooked by inflation and the weak retail sales numbers were a shock.
Normally, it would be easy to brush aside as weak month or quirk in the data but markets are on edge after last week's drama. Naturally, the talk of stagflation has already kicked off.
It's obviously an overreaction in markets but it's understandable.
For instance, Guy Lebas from Janney points out that three factors drove the beat to the upside in inflation:
- Apparel (+1.7% vs +0.5% exp)
- Used cars (+0.4% vs -1.0% exp)
- Hospital svcs (+1.3% vs 0.0% exp)
These three items added +0.15%, which was the entire beat to the upside.
Anyway, for today you need to play the hand you're dealt. The dollar is looking strong.
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