Investors have a busy week ahead with a string of economic data and continued monitoring of President Trump's Tweets and Executive orders. On the economic front, we have Manufacturing PMI, the Unemployment Rate, Non-Farm Payrolls and Average Hourly Earnings.
Interest Rates: Last week, the odds of the Fed raising interest rates at March's meeting spiked as multiple FOMC members made hawkish comments. Odds have jumped from 30% at the beginning of last week, to 80% by Friday (3/3). Even though only 1 Fed speaker is scheduled to speak this week, investors will be taking note as the better chance we have of seeing a fed rate hike, the broader markets may fall. However, financials, the US Dollar and Treasury prices will likely increase.
Non-Farm Payrolls & Unemployment Rate: To finish the week off, we have the release of Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for February. This is the first full month reading with Donald Trump as President. Should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we will likely see the markets go higher, the US Dollar go higher and oil go lower. Should these numbers disappoint, we believe the markets will go lower along with the US Dollar. If the number is strong, this will give the Fed additional ammo for tightening interest rates when they make their decision next week.
Chinese Data: This week, Ghina will be releasing CPI, Trade Balance and PPI. Investors will monitor the data and the Yuan's reaction as weak data will put downward pressure on the currency, with the potential for markets to fall globally.
Super Mario Speaks: On Thursday (3/9), ECB President Mario Draghi will announce the latest interest rate decision. Even though, inflation is finally starting to go up in Europe, investors are not expecting any changes to rates. However, investors will be listening to any possibility of the bank pulling back their bond buying program. Any hawkish comments would send the Euro higher amongst most currencies and send stocks lower.
ETF Fund Flows: The Healthcare ETF shot up 6% over the month of February while seeing 2.6B of inflows, a 19% increase from the prior month's assets. The ETF was only down 2 days for the whole month of February (almost as good as JP Morgan's or Virtu's rigged trading desk). This is likely on the thought that the repeal and replacement of Obamacare will send the sector higher. Investors will continue to monitor the healthcare sector and its progress on an Obamacare replacement. Republicans are so tight lipped about the progress on it that it is literally under protection from Capital Police for even other Congressman from seeing. Great government transparency there. However, the sooner more details get leaked out, the better chance of a move higher, or a reversal. Overall, investors poured $62.9 billion into ETF's in February, with a YTD total inflow now of $124 billion.
House of Trump: After President Trump's speech to Congress which helped to push the markets up over 1% for the first time in over 50 trading sessions, traders will be listening to any follow up on actual plans for tax reform. Since the markets were almost shocked that he acted Presidential, it is actually baffling that they think a 70 year old man overnight can stop acting like he has. Sometime this week, we will likely hear Trump's new travel ban (which is starting to affect tourism into the US as foreigners change their travel plans). We should continue to watch Donald Trump's twitter page as his tweets continue to impact individual stocks or FX. The market will also continue to watch his executive orders.
This latest blog post is brought to you by the Long Island Rail Road.
"Your Misery, Our Joy"
By "Anonymous Long Island Railroad Rider" after his train was late for the millionth day in a row while the fare went up another 4% last week to help pay for the railroads retiree's 2nd vacation home in Florida. He has also not had a seat in weeks on his commute as trains in 3rd world countries are less crowded.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.