Report (Premium Edition) 02-08-2021

The easing in virus infections and restrictions, as well as widening distributions of vaccines have underpinned global equities, while the fast-tracking of the $1.9 tln U.S. stimulus package through Congress and solid earnings have helped propel Wall Street to more record highs. Recent data have confirmed the economy remains in recovery and these factors should keep the bulls in control near term. Meanwhile, Treasuries have been underwater in a bear steepener and continued strength in risk appetite and upcoming supply could keep the pressure on. 

Equities are continuing a bullish trend. Looking the S&P 500 (see chart above) we see the what could be describe as a reversal of the start of a bearish trend with the price breaking a bullish trend pattern. We interpert this as a possible sign that the bull trend is not as strong as it appears and investors should be on the look out for possible market dip.

Earnings top today’s calendar amid a lack of data and other events. There are reports from Global Payments, Simon Property, KKR, Restaurant Brands, Hasbro, Loews Corp., Chegg, Credicorp, CNA Financial, and Dunn & Bradstreet. The only other item today are comments from the Fed’s Mester who will discuss the economy. Over the rest of the week the data calendar is highlighted by CPI (Wednesday), and also includes JOLTS (Tuesday), jobless claims (Thursday), and the preliminary February consumer sentiment report from the University of Michigan survey.

Treasury supply is at hand with the $126 bln February refunding, beginning with the 3-year note sale (Tuesday), and also includes 10-, and 30-year offerings (Wednesday, Thursday, respectively). Chair Powell will be speaking at the Economic Club of New York (Wednesday). The earnings docket heats up over the rest of the week but slows slightly from its torrid pace of the past week.

Key Drivers for the Week of February 8

TIP – This is a 1 minute brief bullet-point summary as a tool that gives them a fast and simple list of what to watch for and talking points.

  • Stocks extend 2021 rally, supported by stimulus hopes, vaccines, earnings
  • Bond yields on the rise on economic recoveries and as inflation risks heat up
  • U.S. CPI highlights thin data slate, along with initial claims, consumer sentiment 
  • Treasury’s $126 bln February refunding includes 3-, 10-, 30-year maturities
  • Earnings slate has Astrazeneca, NVIDIA, Coca-Cola, GM, Walt Disney, PepsiCo
  • China reports CPI, PPI; Japan PPI; Philippines central bank on hold at 2.00% 
  • German industrial production, trade, HICP due; Eurozone industrial production
  • UK December and Q4 GDP, industrial production, manufacturing production

Tip: Use this as a quick guide on the direction of key markets. I once had a client that would call me nearly every day asking the direction of the markets. This is a quick cheat sheet to know the trend and help understand what is happening with the markets.

S&P 5003886.840.39%15.093894.563874.93Bull
Crude (WTI)57.5381.03%0.58957.6556.949Bull
10 Year1.1861.63%0.0191.21.167Strong Bull
US Dollar Index91.190.16%0.14891.23590.967Bull
REIT Index2168.720.40%8.722172.372160.76Strong Bull

S&P 500 Sectors

Tip: Use this section to know the performance of various sectors, weight portfolios, or look for trades. Modern portfolio theory stresses the importance of diversification, but recently several sectors like technology have out-performed others like unities. This is also a way to narrow the sectors to find investment opportunities.

Sector Name5-Day Return1Month 6 MonthsYTD Return1YR vs S&P 5003YR ReturnTrend
 Basic Materials4.30%0.40%21.80%1.90%4.40%28.80%Bear
 Communication Services7.50%8.40%28.50%7.30%16.00%53.40%Bull
 Consumer Cyclical5.30%8.50%35.20%8.40%35.10%95.10%Bull
 Consumer Defensive2.90%-0.40%7.90%-1.30%-10.50%32.80%Bull
 Financial Services6.90%6.20%30.00%5.20%-16.80%17.80%Bull
 Real Estate3.70%7.10%11.20%3.70%-22.40%33.00%Bull

Week Ahead: Back to Basics

On February 8, 2021

The markets’ focus has shifted back to fundamentals, returning to the basics of growth and inflation after being captivated by the Reddit/GameStop mania. Optimism that the U.S. will soon pass a $1.9 tln stimulus package, and increasingly encouraging news on the pandemic/vaccines, have underpinned outlooks that the global recovery is on track and poised to accelerate in 2H. That view has boosted equities this year, led by 7% gains in the NASDAQ and Hang Seng. Concurrently, bond yields have started to lift amid signs inflation risks are heating up. And number of consumer price reports highlight this week’s data, with most showing continued pressure. The global calendars also include trade, production, and GDP, along with comments from FOMC and ECB policymakers.


The thin U.S. data slate features CPI, while the Treasury’s February refunding and comments from Fed Chair Powell are also on tap. The second impeachment trial of ex-President Trump will also distract. However, none will really challenge Wall Street’s optimism on the recovery, especially with more stimulus on the near-term horizon and as vaccines help the economy open up more fully.

We’re forecasting increases of 0.3% for headline CPI in January and 0.2% for the core, following respective gains of 0.4% and 0.1% in December. The risk to the headline is to the upside with gasoline prices poised to have bounced 5.4% last month. More broadly, the headline inflation figures were lifted by oil prices over the summer, and now into the new year, while the core figures face divergent pressures from diminished demand for some goods but growing supply bottlenecks for others that will remain problematic in Q1. Figures in line with our forecasts would push up January CPI to a 1.5% y/y rate versus 1.4% previously, though the core rate should slip to 1.5% y/y from 1.6%. We expect headline y/y gains for all the inflation gauges to climb sharply into Q2 due to hard comparisons, leaving a peak headline CPI y/y gain in the 3.5% area in May, alongside a 2.6% y/y core price rise. That’s likely to extend investors’ inflation concerns. But, the Fed will face no pressure to withdraw accommodation any time soon, especially given the new policy framework.

Initial claims (Thursday) will be closely monitored after the slim January payroll gain. We suspect the employment report was more robust than suggested by the headline, especially as infections and lockdowns are easing and vaccines are more widely distributed. The high frequency claims data should reflect that. We estimate a -49k decline in claims to 730k in the February 6 week. While that would still be a historically elevated level, it would mark a further unwinding from the 927k seen in the January 9 week. The University of Michigan’s February consumer sentiment survey (Friday) should improve to 80.0 from 79.0 in January, just shy of the 7-month high of 81.8 in October and well above the 8-year low of 71.8 in April. The confidence measures have shown divergent swings since mid-2020 but with a downward tilt into Q1 due to the second wave of virus, lockdowns, and the political events through January. But unwinding of those, along with stimulus should be boosting sentiment.

The Treasury’s quarterly refunding will be an interesting test of investor demand and whether the pop in rates will be more attractive at the margin, or if inflation concerns limit buying. We suspect the former, especially with over $16 tln in negative rates worldwide. The Treasury is selling $126 bln in coupons including $58 bln in 3-year notes (Tuesday), $41 bln in 10-year notes (Wednesday), and $27 bln in 30-year bonds (Thursday). The volumes are all unchanged from prior new issue sizes, and are all at record peaks. But the debt managers also indicated they will keep volumes unchanged for now. The wi 10- and 30-year yields are 1.5 bps cheaper at 1.175% and 1.960%, respectively, with the wi 3-year 0.5 bps richer at 0.195%. Stops here on the 10- and 30-year paper would be the highest since last February. For the 3-year, this would be the lowest award rate since October as the front end has outperformed on the Treasury’s announcement aggregate bill supply will be cut.

Fedspeak will be monitored but we will not hear anything new regarding the FOMC’s commitment to an accommodative policy stance. Indeed, most policymakers are arguing for keeping the pedal to the metal for now. Fed Chair Powell highlights. He will be speaking to the Economic Club of New York (Wednesday). Also on tap are Cleveland Fed’s Mester (Monday) who is discussing the economy. She has given her full support to an aggressive monetary policy stance and doubt price pressures will be moving up quickly. Also, St Louis Fed’s Bullard (Tuesday) speaks on monetary policy and the economy. Despite his optimism on the economy, he worries over downside risks. He would welcome a pick up in inflation.

The corporate earnings calendar is again busy this week. Monday has Global Payments, Simon Property, KKR, Restaurant Brands, Hasbro, Loews Corp., Chegg, Credicorp, CNA Financial, and Dunn & Bradstreet. Tuesday brings Cisco Systems, S&P Global, Fiserv, DuPont, Twitter, Exelon, Centene, Carrier, Transdigm, Welltower, Enphase Energy, Incyte, Martin Marietta Materials, Akamai, Fox, Canopy Growth, Lyft, Masco, FMC, Gartner, Omnicom, Arch Capital, and Crown Holdings. On Wednesday, Coca-Cola, Uber, Applied Materials, GM, CME Group, Equinix, Manulife, Zillow, O’Reilly Automotive, Sun Life, Cerner, Equifax, Altice, CDW, MGM Resorts, Cincinnati Financial, Teva Pharma, IFF, Lumen Technologies, Molina Healthcare, and Cenovus Energy all report. Thursday has NVIDIA, Walt Disney, PepsiCo, Astrazeneca, Duke Energy, Illumina, Palantir, Roku, Kraft Heinz, Barclays, Credit Suisse, Seagen, Affirm Holdings, Tyson Foods, Verisign, West Pharma, Zebra Technologies, Kellogg, GoodRx, Expedia, Bio-Rad Labs, Generac, Cognex, Molson Coors, and Mohawk Industries. Friday reveals results from Enbridge, Dominion Energy, Moody’s, NatWest, Fortis, and Newell Brands.

There is little on Canada’s docket with only wholesale shipments (Friday) due. We expect a -1.5% drop in December wholesale shipment values after the 0.7% gain in November. The report is not a market mover, but does provide a useful clue for the December GDP estimate. Deputy Governor Lane delivers a speech (Wednesday).


Much of the market focus will remain on Covid’s impacts regionally and globally. Japan will also be on holiday (Thursday) for National Foundation Day, but has extended its state of emergency through March 7. However, the government has taken a harsher stance on enforcing restrictions on bars and restaurants, and that may weigh on activity through the month. Meanwhile, economic fundamentals are beginning to play a larger role in market thinking as vaccines are rolled out in earnest around much of the world, keeping hopes alive for a rapid economic recovery in the second half of this year. On the data front, regional inflation figures will be monitored. Attention will be on China’s CPI and PPI, along with PPI from Japan. India features CPI and industrial production. Elsewhere, production, trade and growth data are due. The Philippines central bank meets and is expected on hold, with rates steady at 2.00%.

In China, January loan data (tentatively Tuesday), with loan growth seen rising to a 13.0% y/y rate from 12.8% previously. The pace of loan growth has been slipping from the 13.2% y/y clip in May. New yuan loan probably rose sharply to CNY 3,400.0 bln, as is typical in January ahead, after dropping to CNY 1,255.2 bln in December. January CPI (Wednesday) is penciled in dropping to a -0.1% y/y rate from 0.2% previously, while January PPI is expected to warm to 0.2% y/y from -0.4%. The Japan December current account surplus (Monday) should narrow to JPY 1,000.0 bln from JPY 1,878.4 bln. January bank loan figures are slated (Tuesday). January PPI (Wednesday) is expected to pick up slightly to a -1.5% y/y pace from -2.0% in December and -2.3% in November. Japan will be closed Thursday for National Foundation Day.

India January CPI (Friday) is forecast to ease to a 4.5% y/y pace from 4.6%, while December industrial production (Friday) is seen little changed at -2.0% y/y from -1.9%. Taiwan January exports (Monday) are expected to surge 25.0% y/y from 12.0% in December. South Korea January unemployment (Wednesday) is forecast to have dipped to 4.4% from 4.6% in December, which was the highest since January 2010. Malaysia December industrial production (Monday) is estimated improving to -1.0% y/y from -2.2% previously. Contraction in Q4 GDP (Thursday) is expected to deepen to a -3.0% y/y rate from -2.7% in Q3. Q4 current account figures are due Thursday as well. The Philippines central bank meets (Thursday) with no changes in policy expected and rates steady at 2.00%.

In Australia, a thin calendar awaits this week, with nothing of note on the data calendar or RBA docket. Last week, RBA Governor Lowe repeated that the cash rate will be maintained at 10bps for as long as necessary. Low for as long as needed remains firmly in place.

New Zealand’s calendar is similarly devoid of top tier data or events this week. We do hear from the RBNZ late this month (February 24) –o change to the 0.25% rate setting is anticipated for quite some time.


Eurozone: Lockdowns remain in place and are unlikely to be lifted soon, which keeps the Eurozone economy on course for a technical recession over the Q4/Q1 period. Yet, vaccine developments, while still slow, should ensure that not just the European, but the global economy will bounce back later in the year. Against that background, Eurozone stock markets have remained supported and yields will likely continue to trend higher over coming weeks and months. These will see the ECB in wait and see mode, but eager to try and keep spreads from widening.

With little on the calendar likely to change the overall outlook, ECB speakers and the updated European Commission forecast will be in focus. Investors will also keep a close eye on political developments in Italy, where former ECB head Draghi has been tasked with trying to form a new government, although support from political leaders has been lukewarm at best, so far.

The data calendar includes German industrial production (Monday) which we expect to show a modest rise of 0.2% (median 0.3%) as lockdown restrictions didn’t hit manufacturing very hard this time around and orders levels already far exceed pre-crisis levels. Eurozone industrial production (Friday), meanwhile, is seen little changed over the month (median 0.4%). German trade data for December is likely to show a solid trade surplus once again, in line with the expected expansion in overall Q4 GDP. Inflation, meanwhile, jumped higher at the start of the year, mainly thanks to base effects as the temporary cut to the VAT rate fell out of the equation and other charges and administrative prices were also lifted. The final reading for German January HICP (Wednesday) is expected to confirm the 1.6% y/y preliminary result, and the national CPI rate at 1.0%.

U.K.: both the pound and UK gilt yields were elevated after the BoE’s more upbeat than expected guidance last week, following its February policy meeting and release of its quarterly Monetary Policy Review, which laid to rest any lingering expectations that the negative interest rate option would likely be implemented. The central bank’s overall upbeat outlook was a jolt to the prevailing sentiment, especially in context of recent ardent dovish signaling from policymakers at the Fed, ECB, RBA and others. The central bank’s 2021 UK GDP growth downgrade, to 5% from 7.5%, which was due to harsher than anticipated return to Covid lockdown measures, was immaterial for markets, with policymakers projecting a rapid recovery toward pre-pandemic levels during 2021, hinging this on the assumption that the vaccination program will lead to an unwinding of societal restrictions. The BoE did caveat that the outlook remains unusually uncertain due to the vicissitudes of the global pandemic.

UK data calendar is quiet this week, at least until the release of Q4 and December GDP data, along with December production and trade data on Friday, which will seem particularly backward looking given the focus on exiting from Covid related lockdowns. On the vaccine front, the UK has now vaccinated over 15% of its population, which is among the most extensive rollouts globally so far (Israel is among the few that are ahead of this). This compares to about 3% in the EU, which has been a bearish argument for EUR-GBP. With new positive case results and Covid hospitalisations plummeting, the process of de-restricting the economy should start within weeks in the UK.

Switzerland: The Swiss data calendar this week will be highlighted by the release of January inflation data (Friday). The median forecast is for a modest rise to a -0.6% y/y reading in the headline CPI figure, after -0.8% in December.

Stocks & ETF Watch List

Tip: Use this section to find stocks and ETFs to add value to your portfolio by increasing the alpha (return) and decreasing beta (beta). Our list is updated weekly to help provide our readers with timely insights.

Solid Picks

This group of stock/ETF picks is likely to experience growth and perform well into the near future. The rank score of a stock, where a score of 1 is best. This algorithm compares a company to its peers and considers the consistency of key return metrics. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.

TickerRankCompanyDividend Beta 1 YR1YR vs S&P 5003YR vs S&P 5003R vs SectorOverall Score
HEAR1Turtle Beach– 0.74253.30%1481.20%1404.30%100
BIO2Bio-Rad Laboratories– 0.7247.30%94.10%92.00%98
KGC4Kinross Gold1.70%0.4827.50%23.10%49.60%86
AVNW5Aviat Networks– 0.85279.00%186.50%109.60%100
HVT6Haverty Furniture Cos2.60%0.8461.30%39.50%-0.30%97– 0.8585.70%155.50%115.60%99
LAKE8Lakeland Industries– -0.3180.90%119.20%79.30%100
HOLX9Hologic– 0.8833.70%50.20%48.10%99
LOGI10Logitech International0.80%0.65128.50%141.20%64.30%99
GLDD11Great Lakes Dredge & Dock– 0.8313.50%183.60%207.00%86
FN12Fabrinet– 0.8914.20%215.90%139.00%99
STX14Seagate Technology3.90%0.8915.00%8.00%-68.90%91
CORT16Corcept Therapeutics– 0.72105.70%15.20%13.10%100
DG17Dollar General0.70%0.55.40%52.80%75.30%47
TMO18Thermo Fisher Scientific0.20%0.7229.80%83.10%81.00%91
HLI19Houlihan Lokey2.00%0.522.40%2.30%39.80%97
OLLI22Ollie’s Bargain Outlet– 0.8950.50%18.30%40.80%82
MTD23Mettler-Toledo Intl– 0.8734.70%32.80%30.70%84
VIPS25Vipshop Holdings– 0.28127.00%62.40%22.50%99
ADUS27Addus HomeCare– 0.789.50%193.40%191.30%93
NOMD28Nomad Foods– 0.4210.40%6.30%28.80%73
A29Agilent Technologies0.60%0.8827.50%30.10%27.90%91
BR30Broadridge Financial Soln1.60%0.82.90%12.00%-64.90%91
AKAM33Akamai Technologies– 0.580.80%27.30%-49.60%93
COST35Costco Wholesale0.80%0.590.50%50.40%72.90%44
WPM36Wheaton Precious Metals1.20%0.3925.60%46.50%73.00%65
HMSY37HMS Holdings– 0.4412.30%81.40%79.30%85

Income Stock & ETFs Picks

This list of stocks and ETFs are selected for their ability to pay dividends. The dividend score of a stock, where a score of 99 is best. This algorithm compares a company to its peers and considers the consistency of key dividend metrics as well as their direction of change. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.

TickerCompanyDividendMargin of SafetySectorBeta 3YRDividends ScoreOverall Score
BIPBrookfield Infr Partners– -2%Utilities1.011415
BKHBlack Hills3.70%– Utilities0.937777
BUDAnheuser-Busch InBev2.20%– Consumer Defensive0.82270
CBSHCommerce Bancshares1.50%-18%Financial Services0.965943
CINFCincinnati Financial2.90%-12%Financial Services1.18268
DDDuPont de Nemours1.60%-15%Basic Materials1.18136
EMREmerson Electric2.30%2%Industrials1.197471
FRTFederal Realty Investment4.70%– Real Estate17840
GPCGenuine Parts3.10%18%Consumer Cyclical1.037029
HDHome Depot2.20%7%Consumer Cyclical1.047375
HRLHormel Foods2.00%-2%Consumer Defensive0.445649
JNJJohnson & Johnson2.50%16%Healthcare0.677092
KOCoca-Cola3.30%4%Consumer Defensive0.716428
LOWLowe’s Companies1.40%10%Consumer Cyclical1.155989
MOAltria Group8.10%12%Consumer Defensive0.688172
NFGNational Fuel Gas4.20%– Energy0.695443
PGProcter & Gamble2.50%9%Consumer Defensive0.646680
PHParker Hannifin1.30%4%Industrials1.45981
SWKStanley Black & Decker1.60%17%Industrials1.448575
TAT&T7.20%23%Communication Services0.779752


TickerCompanyCategory GroupDividend YieldBeta 3-YearExpense Ratio3-Year Return
DNLWisdomTree Global ex-U.S. Quality Dividend Growth FundInternational Equity1.70%0.850.58%43.80%
NOBLProShares S&P 500 Dividend Aristocrats ETFU.S. Equity2.10%0.910.35%38.10%
SPHQInvesco S&P 500 Quality ETFU.S. Equity1.50%0.980.15%51.10%
VIGVanguard Dividend Appreciation Index Fund ETF SharesU.S. Equity1.90%0.90.06%48.10%

Dogs of the Dow

This list of DOW stocks based on H. G. Schneider’s Article in the Journal of Finance in 1951 that used price-earnings ratio. The general idea is that blue-chip companies that pay a dividend are more likely to withstand an economic downturn. The dividend score of a stock, where a score of 99 is best. This algorithm compares a company to its peers and considers the consistency of key dividend metrics as well as their direction of change. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.

TickerCompanyDividendBeta 1YR1YR  vs S&P3YR vs S&P3YR vs SectorDividends ScoreOverall Score
DOWDow5.40%1.33-1.60%– – 961
VZVerizon Communications4.60%0.52-19.90%-25.00%-22.40%6990
WBAWalgreens Boots Alliance3.80%0.8-16.30%-67.30%-74.50%7482
XOMExxon Mobil7.80%1.1-41.10%-79.40%-0.10%6472

Economic Data Calendar

We have only a handful of releases through the second week of February. We expect another round of firm CPI gains in January thanks to an updraft in energy prices, though the trend for CPI core prices remains inert. Rising prices in December should raise wholesale readings for sales, though the advance inventory gain was lean, and the I/S ratio should fall to a 2-year low of 1.30, versus its 1.31 pre-pandemic level. We expect Michigan sentiment to bounce modestly in February after a January down-tick.

Week of February 8

Headlines for the jobs report highlighted the payroll growth shortfall in January, given the paltry 49k rise with a 6k private payroll gain, after what are now even bigger respective December declines of -227k and -204k. Yet, nearly every other major indicator from the report beat estimates, with a particularly important surge in the workweek to a 21-year high of 35.0 that left a near-record 0.9% rise for hours-worked on the month. Had the workweek been constant, we would have seen roughly 1 mln new jobs to support the same hours-worked increase.

The pandamic has prompted a big shift toward having fewer workers working longer hours, and at a higher productivity level, with a big spike with the initial lockdowns last spring, and another spike now with the heightened lockdowns through the holidays. We don’t know how quickly this shift will be reversed as lockdowns ease, but we do believe the hours–worked data are poised for 0%-0.5% monthly gains over the coming six months at least. These increases are supported by either 300k in monthly job gains, or 0.1 hour workweek gains. Our assumption is that the workweek gives back some ground over the coming six months while payroll growth overshoots the 300k per month pace.

For specifics, we assume 400k-500k payroll gains in February and March with -0.1 hour workweek declines. If the workweek stays elevated, payroll gains could be restrained to the 100k-200k area. If the workweek falls back to December’s 34.7 by February, payrolls will surge by about 1 mln. It will be hard to know the mix, but what we do know is that hours-worked, and most output measures, are growing at a healthy clip. Payrolls will need to play “catch up” if employers start to bring back low-paid employees who work short hours. The rate of vaccine distribution and growth in the formation of “crowds” will likely dictate the mix of job growth and workweek averages.

In what may prove to be a case of bad timing, a minimum wage hike to $15/hour may lock in a shift to having businesses run by managers with more limited “hired help.” We may be left with a smaller but more highly paid workforce, as a swath of the urban working poor are permanently driven out of the labor pool.

CPI/Core: 0.3%/0.2%

We expect January gains of 0.3% for the CPI headline and 0.2% for the core, following a 0.4% gain for the headline and 0.1% for the core in December. CPI gasoline prices look poised to bounce 5.4% in January, leaving a tailwind for the headline. As-expected January figures would result in a 1.5% headline y/y increase, following a 1.4% pace in December. Core prices should show a 1.5% y/y rise, down from 1.6% in December. As with PPI, the headline inflation figures were lifted by oil prices over the summer, and now into the new year, while the core figures face divergent pressures from diminished demand for some goods but growing supply bottlenecks for others that remain problematic into Q1. We expect headline y/y gains for all the inflation gauges to climb sharply into Q2 of 2021 due to hard comparisons, leaving a peak headline CPI y/y gain in the 3.5% area in May, alongside a 2.6% y/y core price rise, with respective PCE y/y chain price gains of 2.6% and 2.2%. The Fed will face no pressure to withdraw accommodation any time soon despite the expected temporary Q2 inflation spike.

Wholesale Inventories: 0.1%

Wholesale inventories are expected to rise 0.1% in December as shown in the advance indicators release. This follows a flat figure in November. Sales are estimated to rise 0.8%, after a 0.2% November climb. The I/S ratio should fall to a 2-year low of 1.30 from 1.31 in the prior two months, versus an all-time high of 1.68 in April, as the ratio drops below the pre-pandemic reading of 1.31 in January and February, and well below the prior all-time high of 1.41 in January of 2009 for a data set extending back to 1992. Business inventories should rise 0.5% in December, with other component gains of 0.3% for factories and 1.0% for retailers. The inventory and sales data should be boosted by big energy price gains in December. We’re seeing solid wholesale sector gains with the rapid recovery in trade with China, following the pullback in imports from China between mid-2019 and March of 2020. International trade is disproportionately captured at the wholesale level of production.

Initial Jobless Claims: 730k

Initial jobless claims for the week of February 6 should remain elevated, though we assume a -49k drop in the weekly pace to 730k, after a -33k dip to 779k from 812k. Seasonal adjustment for initial claims was switched to being additive from multiplicative in September, and the usual seasonal rise in NSA claims to a peak in January likely lifted the reported SA data with the new seasonal factors given the unusually high claims level. We likely also saw a lift from expanded coronavirus restrictions. Claims are expected to average 700k in February, after averages of 835k in January, 825k in December, and 749k in November. The 914k January BLS survey week reading exceeded recent survey week readings of 892k in December, 748k in November, and 797k in October. We assume a 400k February payroll rise after the 49k January gain.

Continuing claims fell by -193k to 4,592k in the week of January 23, following an upwardly revised 4,785k figure. We expect continuing claims to fall -192k to the 4,400k area for the week ending on January 30. Though rising coronavirus restrictions are likely prompting some stalling in the continuing claims downtrend, we expect resumed bigger declines later in Q1. Continuing claims fell -551k between the December and January BLS survey weeks. We saw prior drops of -767k in December, -1,734k in November, -4,924k in October, -1,745k in September, -2,459k in August, -2,280k in July, and -1,610k in June.

Michigan Sentiment, Preliminary: 80.0

We expect February Michigan sentiment to rise to 80.0 from 79.0 in January, versus a 7-month high of 81.8 in October. We saw an 8-year low of 71.8 in April and a 14-year high of 101.4 in March of 2018. Current conditions should rise to 89.0 in February from 86.7 in January and a 9-month high of 90.0 in December. Expectations should rise to 74.3 from 74.0, versus a 7-month high of 79.2 in October. The 1-year inflation measure should dip to 2.9%, after popping to a 5-month high of 3.0% in January from an 8-month low of 2.5%. The 5-10 year inflation measure should fall to 2.6% from 2.7% in January, versus a 7-month low of 2.4% in October. The confidence measures have shown divergent swings since mid-2020 that have a downward tilt into Q1, likely due to the surge in virus cases, more stringent lockdowns, and the bizarre political events of January. We should be seeing some lift from stimulus payments and vaccine distributions, however, which may be more evident in February.

 08 Feb 12:00 Cleveland Fed’s Mester speaks on the economy
 09 Feb 06:00 United States NFIB Small Business Optimism Index  JAN   95.9
 09 Feb 08:55 United States Redbook 02/06    -1.6%
 09 Feb 10:00 United States JOLTS Job Openings  DEC   6527K
 09 Feb 10:00 United States IBD/TIPP Economic Optimism Index  FEB 50.5  50.1
 09 Feb 12:00 St Louis Fed’s Bullard speaks on monetary policy and the economy
 09 Feb 13:00 United States Treasury Auctions 3-Year Notes
 10 Feb 07:00 United States MBA Mortgage Applications 02/05    8.1%
 10 Feb 08:30 United States CPI  JAN 0.3% 0.3% 0.4%
 10 Feb 08:30 United States CPI Y/Y  JAN 1.5%  1.4%
 10 Feb 08:30 United States CPI ex-Food & Energy  JAN 0.2% 0.2% 0.1%
 10 Feb 08:30 United States CPI ex-Food & Energy Y/Y  JAN 1.5%  1.6%
 10 Feb 10:00 United States Wholesale Inventories  DEC 0.1%  UNCH
 10 Feb 10:00 United States Wholesale Sales  DEC 0.8% 0.6% 0.2%
 10 Feb 10:30 United States EIA Crude Oil Stocks 02/05    -1.0M
 10 Feb 10:30 United States EIA Gasoline Stocks 02/05    4.5M
 10 Feb 10:30 United States EIA Distillate Stocks 02/05    UNCH
 10 Feb 13:00 United States Treasury Auctions 10-Yr Notes
 10 Feb 14:00 Washington Fed Chair Powell speaks to the Economic Club of New York
 10 Feb 14:00 United States Treasury Budget  JAN -$623.0B -$623.0B -$143.6B
 11 Feb 08:30 United States Initial Claims 02/06  730K 750K 779K
 11 Feb 08:30 United States Continuing Jobless Claims 01/30  4,400K  4,592K
 11 Feb 09:45 United States Bloomberg Consumer Comfort Index 02/07    44.6
 11 Feb 10:30 United States EIA Natural Gas Stocks 02/05    -192B
 11 Feb 11:00 United States Treasury Announces 20-Yr Bonds
 11 Feb 11:00 United States Treasury Announces 30-Year TIPS
 11 Feb 13:00 United States Treasury Auctions 30-Yr Bonds
 11 Feb 16:30 United States M2 – Week Ended 02/01    -$52.8B
 12 Feb 10:00 United States Michigan Sentiment Prelim  FEB 80.0 81.0 79.0
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