In yesterday’s note I mentioned that this week is not-small in terms of data releases. Given that the market obsession is ultimately over the Fed, and that the Fed’s obsession has to be ultimately with the overall state of the economy, well, data surprises (along with Fed-commentary) will indeed move markets — more than “usual”, I suspect, as things shake out…

Today, for example, we’ll get the reads from the ISM US Manufacturing Survey, job openings, speeches from Fed-heads Williams and Bullard and the Fed’s Beige Book (the local state of economic affairs as reported by each Fed branch). The Fed speeches in particular could inspire notable intraday moves, in either direction.

I pointed out in last week’s economic update that part of the narrative among economists who remain sanguine about the present state of affairs is the massive amount of savings ($2+ trillion) that presently rests on consumer balance sheets. Per the following from BCA research, those savings are either very concentrated, or are being closely guarded for the time being. I’m guessing the former:

“Excess savings may help achieve the “soft landing.” However, there are early signs that either many lower-income Americans have spent the money, or their savings accounts are earmarked for a rainy day, and many people aim to spend only what they earn.

Higher-income Americans are still willing to spend, but this group is shifting spending away from goods and towards services, which is consistent with strong results from the US airline carriers, which report a significant gain in pricing power. A similar message came from both Nordstrom and Macy’s. Clearly, American consumers are highly heterogeneous, and there is a significant bifurcation between “haves” and “have nots.”

It is, however, concerning that many of the wealthier Americans have lost a significant percentage of their nest eggs in the stock market. The theory goes that the wealth effect is one of the main mechanisms through which monetary tightening affects consumer demand. It stands to reason that it is only a matter of time (unless the stock market rebounds) before even the wealthier cohorts start tightening their belts, dampening demand for consumer services.”

While we sympathize with the above narrative, and while growth has clearly slowed, our present base case remains that the US sidesteps recession in 2022… Of course that is subject to change based on the facts, as they emerge, going forward.

Yesterday’s equity market delivered a choppy session characterized by ugly breadth (even when the SP500 was green its losers notably outpaced its gainers). We’ll see if this is just a pause in this snapback rally, or if that’s all we get. The SP500 is in the green as I type, although, once again on some pretty stinky breadth (over half of the SP500 and 60% of the Nasdaq Comp members are presently in the red). Hmm…

Asian equities leaned slightly green overnight, with 9 of the 16 markets we track closing higher.

Europe attempting to bounce off of yesterday’s drubbing, with 12 of the 19 bourses we follow trading up as I type.

US stocks are mixed to start the session: Dow up 29 points (0.09%), SP500 up 0.30%, SP500 Equal Weight down 0.33%, Nasdaq 100 up 1.02%, Nasdaq Comp up 0.98%, Russell 2000 down 0.09%.

The VIX sits at 25.55, down 2.44%.

Oil futures are up 2.15%, gold’s up 0.50%, silver’s up 1.44%, copper futures are up 0.86% and the ag complex (DBA) is up 0.59%.

The 10-year treasury is down (yield up) and the dollar is up 0.50%.

Among our 38 core positions (excluding cash and short-term bond ETF), 22 — led by energy stocks, silver, Disney, communications stocks and AMD — are in the green so far this morning. The losers are being led lower by Albemarle, Dutch Bros, healthcare, consumer staples, materials and financial stocks.