Report (Premium Edition) 03-08-2021

The markets were all over the board Friday after a much better-than-expected jobs report where payrolls climbed 379k. Trading was volatile, but not disorderly. And when all was said and done, Wall Street was sharply higher and Treasuries unchanged. Bonds and stocks weakened initially, with yields jumping on the improving growth prospects and rising inflation expectations. Equities were again hurt by the rise in yields as has been the case over the past few weeks.

But after those early wobbles, Wall Street was sharply higher, actually seeing the good news is good news. Dip buying emerged in Treasuries, erasing the losses and leaving rates little changed on the day. That in turn also supported the rally in stocks. Resumption of reflation trades helped boost the S&P 500 to a 1.95% gain, with the Dow 1.85% firmer, and the NASDAQ up 1.55%.

We continue to watch rising oil prices and their relationship to energy stocks. Looking at the oil chart above, you can see that oil prices are very correlated to Exxon Mobil stock (XOM) is up more than 30% for the year. The cause of the sudden surge in prices has been a combination of the recovery from coronavirus lock-downs and supply manipulation by manufacturers.

Readers may recall that last year the Saudi’s and Russian declared a price war on American energy and were able to destroy and/or buy many US and Canadian oil companies by decreasing prices. The Trump administration’s energy independence policy kept foreign oil players somewhat in check, unfortunately, it appears that the Biden administration does not share the same policy and Americans should expect to see rising gas prices at the pump.

Circling back to energy stocks, we believe that they are very high and overbought, but will not likely go down soon. Energy investors should look for political pressure and actions for the trend to turn bearish. Even then, the Biden administration is likely to promote alternative energy as a solution rather than addressing rising energy prices that are due to supply manipulation.

There is not much on this week’s slate and today’s agenda is thin too with just January wholesale figures. Sales are seen climbing 1.5% after the 1.2% prior gain, while inventories are expected to rise 1.3% from 0.3% previously.

Later in the week, CPI, PPI, and the preliminary March University of Michigan consumer sentiment take top billing. The $120 bln in 3-, 10-, and 30-year auctions will be very interesting after the poor auctions last week and a disastrous 7-year sale. The only larger-cap earnings report today comes from ContextLogic.

Key Drivers for the Week of March 8th

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.

  • Bond yields climbing on reflation trades, while inflation expectations creeping in
  • Central bankers monitoring the reflation trade and the climb in interest rates
  • ECB expected on hold, but President Lagarde may offer dovish remarks
  • Widening vaccine distribution boosting optimism on the recovery
  • Equities volatile as recovery optimism dampened by surging bond yields
  • U.S. CPI, PPI reports headline amid rising inflation angst; sentiment also due
  • Treasury auctions $120 bln in 3-, 10, 30-year maturities
  • Bank of Canada expected to maintain 0.25% policy rate
  • China reports CPI, PPI, loan data; Japan has PPI, revised Q4 GDP
  • Eurozone production, GDP; German production, trade, HICP due
  • UK outlook brightened by vaccine distribution, over 1/3 of population jabbed
  • UK data on production, trade, GDP awaited

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 5003841.951.95%73.473851.693730.19Neutral
Crude (WTI)66.2720.01%0.00967.94465.739Neutral
10 Year1.5961.90%0.031.6151.568Bull
US Dollar Index92.2560.30%0.27992.31791.842Bull
VIX27.210.30%2.5428.3927.19Strong Bull
REIT Index2134.221.18%24.922140.112075.67Neutral

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.

REIT Alert: Due to Covid-19, there is a large percentage of people that have not paid rent or mortgages. We are very worried about the effect it could have on real estate investment trusts (REITS) value. Even though the sectors may trending bullish, we believe that REITs could have a significant drop in value.

Sector Name5-Day Return1Month 6 MonthsYTD Return1YR vs S&P 5003YR ReturnTrend
 Basic Materials2.90%3.00%20.90%5.00%13.10%29.50%Bull
 Communication Services1.60%1.20%24.00%8.60%19.10%54.20%Bear
 Consumer Cyclical-1.90%-6.80%18.40%1.00%30.80%78.50%Bear
 Consumer Defensive2.10%-1.40%2.80%-2.70%-18.80%31.10%Bear
 Financial Services4.20%8.90%37.00%14.70%1.00%23.90%Bull
 Real Estate-1.10%-1.40%8.60%2.30%-31.30%32.10%Bear

Week Ahead: Central Bankers Manage the Narrative

On March 8, 2021

The reflation narrative is the global focus. Recent data and upbeat vaccine progress have prompted the markets to increasingly price in a recovery. Worries over inflation are starting to creep in too, complicating the story and exacerbating the rise in rates. That in turn is weighing heavily on Wall Street, and particularly the high-flyers as their lofty valuations have been dependent on the low rate environment. Here monetary policy will continue to play an important role. The Fed has confirmed its very accommodative stance, though Chair Powell disappointed by not explicitly pushing back against the pop in yields, giving tacit approval to the move. Meanwhile, ECB officials have been trying to slow the ascent in rates by jawboning and policymakers will have further opportunity to address current conditions at this week’s meeting. Opportunely, inflation reports are headlining this week’s data slate.


U.S. markets have been increasingly volatile amid major conflicting forces. Optimism on the recovery, a widening distribution of vaccines with three now available for use, easing in restrictions, along with data supporting the bullish outlooks have all helped Wall Street rally. But worries quickly developed over the sudden and sharp jump in rates which has called into question the valuations of the many high-flying stocks. The markets were further shaken after Fed Chair Powell didn’t push back against the jump in rates or signal any policy action to address the pop in longer dated rates and the drop toward negative rates at the front end. Indeed, he and other policymakers have said they are not concerned by rising yields if it is for the “right” reasons. Nevertheless, inflation concerns have been creeping back into the markets and the week ahead will be a challenging one as investors weigh the varying impacts of increasing optimism on the recovery and the updraft in yields to better than 1-year highs. Though still a long ways off, the markets will be jittery regarding inflation risks and the Fed’s ability to control price pressures once they get started.

With inflation the focus, CPI (Wednesday) is the data headliner, while PPI and consumer sentiment will also be of interest. CPI is expected to accelerate to a 0.4% growth rate (m/m, sa) in February following the 0.3% gain in January, driven by gasoline prices. Indeed, CPI gasoline prices look poised to rise 6% in February, providing a tailwind and source of upside risk to our estimate for total CPI. The core CPI is projected to expand 0.2% in February, up from the flat reading in January. As-expected February figures would result in a 1.7% headline y/y increase, following a 1.4% pace in December. Core prices should show a 1.4% y/y rise, steady from January. The headline inflation figures are being lifted by a commodity price updraft into the New Year led by energy, alongside big trade price gains.

Disruptions from the mid-month cold wave may have added to more general supply bottlenecks that are lifting some prices. We expect headline y/y gains for all the inflation gauges to climb sharply into Q2 due to hard comparisons, the base effects noted by Powell, leaving a peak headline CPI y/y gain in the 3.5% area in May, alongside a 2.4% y/y core price rise. The Fed has been clear that it is willing to let inflation run a bit hot, especially given that the Q2 inflation spike is viewed as temporary. However, the market remains skeptical of the Fed’s resolve, becoming increasing worried that the Fed will be forced to withdraw accommodation sooner than expected.

PPI (Friday) plays second fiddle to CPI in terms of importance to the market, but with inflation clearly heating up the report could warrant extra scrutiny this month. A 0.3% February PPI headline rise is seen with a 0.1% core price gain, following massive gains of 1.3% for the January headline and 1.2% for the core. The risk around these forecasts is to the upside amid rising oil prices, while ongoing supply constraints continue to provide a tailwind to prices. Finally, consumer sentiment (Friday) is seen improving to 80.0 in March from 76.8 in February.

The Treasury’s $120 bln in 3-, 10-, and 30-year auctions will be closely monitored to gauge demand for U.S. debt. The very poor 7-year auction was the catalyst for the 20 bp pop in longer rates on February 25, and there are worries that demand for Treasuries will be diminishing. The debt managers are selling $58 bln in 3-year notes (Tuesday), $38 bln in reopened 10-year notes, and $24 bln in reopened bonds. The paper closed mixed on Friday with the wi 3-year fractionally richer at 0.330%, with the wi 10-year flat at 1.58%, while the wi 30-year was 2 bps lower at 2.305%. For the shorter note, a stop here would be the highest since April, but for the longer maturities they would be the cheapest in over a year.

The earnings calendar is thin this week: Monday has ContextLogic. Tuesday is empty. Wednesday brings Prudential, Franco-Nevada, GDS Holdings, Campbell Soup, Weibo, and Skillz. Thursday has Oracle,, DocuSign, Ulta Beauty, GoodRX, Wheaton Precious Metals, and Vail Resorts. Friday is devoid of announcements.

In Canada, all eyes will be on the Bank of Canada (Wednesday), where we expect no change to the 0.25% rate setting, a reiteration of their commitment to low for longer and a continued downplay of rise in rates as reflective of increased confidence in the recover. The market continues to vacillate between optimism over the recovery and worries that inflation will eventually spoil the party. Deputy Governor Schrembi is scheduled to speak (Thursday). Employment (Friday) is seen rebounding 150.0k after the -212.8k contraction in January. The unemployment rate is expected to slip to 9.2% from 9.4% in January. Wholesale shipments and Q4 capacity utilization are also due Friday, but will be largely overlooked.


The 13th National People’s Congress meeting kicked off on Friday and will extend through Thursday afternoon. There wasn’t anything too surprising so far. After a hiatus on outlining a growth target last year, Premier Li announced a rather tame 6+% growth outlook for this year, perhaps keeping a low profile amid covid repercussions, and maybe taking an under-promise/over-deliver stance. China is also expecting to ramp up chip, 5G, and AI production to compete against the U.S. Meanwhile, attention will remain on the pandemic, vaccines, spiking bond yields, and growth considerations. This week’s data slate includes a number of inflation reports, including CPI and PPI from China. Japan’s docket has PPI, current account, consumption, and the second look at Q4 GDP. Elsewhere, prices, trade, employment and production data feature. There are no central bank meetings scheduled.

China February loan data is tentatively due on (Tuesday). New loans slipped fractionally to a 12.7% y/y pace in January from 1.28% y/y in December. Loans were at a 13.0% y/y rate in September. February CPI and PPI (Wednesday) will be closely tracked. Consumer price pressures softened all last year as the globe shutdown, but the dip into deflation should come to an end. We’re forecasting a 1.1% y/y bounce in CPI after the -0.3% contraction rate. Producer prices bounced to a 0.3% y/y pace in January, breaking a string of 11 straight months of deflation, and we’re projecting further strength to a 1.5% y/y pace in February. Japan January current account (Monday) should see the surplus widen to JPY 1,400.0 bln from JPY 1,165.6 bln. The second look at Q4 GDP (Tuesday) should result in a modest downward revision to 12.5% q/q from 12.7% initially. January PCE (Tuesday) is to fall deeper into contraction to a -2.0% y/y rate from -0.6%. This would be the 14th month out of the last 16 in negative territory. February bank loan data are due Tuesday as well. February PPI (Thursday) is penciled in improving to a -0.6% rate from -1.6%. The Q1 MoF business outlook survey (Friday) is forecast slipping to 10.0 after climbing to 11.6 in Q4. This would be the third quarter in positive territory after crashing to -47.6 in Q2.

South Korea’s January current account is due (Tuesday). The surplus widened to $11.5 bln in December from $9.2 bln in November. Taiwan February CPI (Tuesday) is forecast climbing to a 1.1% y/y rate after dipping to -0.2% y/y in January. February export growth (Tuesday) is expected to be halved to 16.0% y/y after surging to 36.8% y/y previously, the fastest in a decade. Malaysia January industrial production (Friday) is seen little changed at a 1.5% y/y pace versus 1.7%. In India February CPI (Friday) is expected to warm to 5.0% y/y from 4.1%. January industrial production (Friday) likely improved to 1.2% y/y from 1.0% previously. Philippines January unemployment (Tuesday) is expected to dip to 8.5% after falling to 8.7% in October. It’s dropped from 17.7% in April. The January trade deficit (Friday) is estimated at an unchanged $2.2 bln.

In Australia, a sparse docket has a speech by RBA Governor Lowe (Wednesday). Last week, the RBA left monetary policy unchanged, as had been widely anticipated, and maintained guidance that the cash rate won’t be hiked until employment and inflation targets are met. New Zealand’s calendar is empty of top tier data this week. However, next week has Q4 GDP.


Eurozone: attention will be on the ECB announcement (Thursday). ECB officials have been trying to manage reflation trades and slow the ascent in yields, although most recent comments have backed our view that the central bank will leave policy settings unchanged. It’s highly possible President Lagarde will deliver a dovish presser and remind markets once again that the enhanced PEPP program offers a considerable degree of flexibility, but at the same time, she is likely to re-affirm the central scenario of strengthening growth in the second half of the year. Indeed, updated staff projections are unlikely to bring major revisions and on the inflation front could actually come in a tad higher than in December — at least for this year, as cost pressures in supply chains are building.

This week’s economic calendar won’t change that assessment and will largely be too backward looking to influence the outlook. German industrial production (Monday) is expected to have corrected -0.1% m/m (median same) in January, after substantial stock building at the end of 2020. The different timing and degree of lockdowns, however, should see overall Eurozone industrial production still rising 0.4% m/m, after the -1.6% m/m contraction in December. Looking ahead, companies are sitting on a large stock of orders, but are experiencing supply chain constraints that could slow output. Germany’s trade surplus (Tuesday) is seen narrowing slightly to a still strong EUR 15.0 bln from EUR 16.0 bln.

The third reading of Eurozone GDP for the fourth quarter of 2020 (Tuesday) could bring a slight upward revision in quarterly growth to -0.5% q/q from -0.6% q/q, following the higher than expected German number, although that would still mean a sharp contraction in activity that leaves the Eurozone on course for a technical recession over Q4/Q1. Final inflation data for February are unlikely to bring major revisions and we expect German HICP (Friday) to be confirmed at 1.6% y/y.

Data releases also include French production data as well as final inflation data for France, Italy and Spain.

U.K.: the ongoing speedy rollout of covid vaccinations in the UK, alongside the end of long-running Brexit uncertainty, can be attributed to a brightening outlook for the UK economy. Over a third of the population have received at least the first dose of a covid vaccine, and only Israel and the UAE are ahead globally, while the vaccination count currently stands at about 4 to 5 times more than in most EU nations. The rate of new positive Covid test results in the UK is now less than a 10th of what it was at the peak in early January, while the seven-day moving average of emergency calls with covid-like symptoms is now at the lowest since the pandemic started. Despite this, the UK government is enacting a slow, four-phase reopening process, with the aim of completing the process in mid June.

The UK calendar this week brings January production, trade and GDP data (all due Friday). January was the month that UK-wide covid lockdown measures were re-introduced, and accordingly the expectation is for GDP to contract by a painful 4.9% m/m, and for industrial output to contract by 0.5% m/m.

The March BoE Monetary Policy Committee meeting is up next week (announcing March 18th). The ‘Old Lady’ is widely anticipated to leave policy unchanged by unanimous vote at the nine-member committee, which will leave the repo rate at its historic low of 0.10% and the QE total at GBP 875 bln. Some focus will be on the statement and minutes, though these aren’t likely to be too interesting so soon after last month revising its quarterly forecasts. Nonetheless, it will be interesting to see policymakers take on the transition afoot in markets — the spike in Gilt and global sovereign yields and the tumble and rotation in global stock markets. Most likely the guidance will be sanguine given the basis of improving global growth prospects juxtaposed to the level of spare capacity in the domestic economy.

Switzerland: The Swiss data calendar is quiet with only by February unemployment data (Monday).

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. Readers should do their own research before making any investment.

Solid Picks

This group of stock/ETF picks is likely to experience growth and perform well into the near future. The “Fair Value” is a calculation using a discount cash flow analysis to determine the Intrinsic Value. 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. Share Value is what they think the price per share should be. 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 YieldBeta 1-Year1-Year Return vs S&P 5003-Year Return vs S&P 5003-Year Return vs SectorOverall Ratings ScoreDividends Ratings Score
HEAR1Turtle Beach– 0.83266.90%924.70%871.80%97– 
QDEL2Quidel– 0.4357.20%201.90%204.30%95– 
BIO3Bio-Rad Laboratories– 0.7317.40%69.10%71.50%98– 
HVT4Haverty Furniture Cos2.50%0.8799.00%69.20%40.20%9776
LOGI5Logitech International0.90%0.65109.90%104.40%51.50%9773
MLR6Miller Industries1.70%0.8112.40%41.00%11.90%9583
JOUT7Johnson Outdoors0.60%0.8298.30%69.40%40.30%10069
FN10Fabrinet– 0.8914.30%131.60%78.70%97– 
IRBT11iRobot– 0.84121.40%26.50%-26.50%97– 
HCI12HCI Group2.30%0.7234.10%59.00%84.50%5450
STX14Seagate Technology3.70%0.8924.50%5.90%-47.00%8681
CORT15Corcept Therapeutics– 0.7268.60%18.40%20.80%96– 
TMO16Thermo Fisher Scientific0.20%0.7113.70%68.50%70.90%8844
HLI17Houlihan Lokey2.00%0.51.40%3.60%29.10%9889
VIPS18Vipshop Holdings– 0.33118.00%83.50%54.40%99– 
LSTR20Landstar System0.50%0.8635.90%9.20%24.40%8426
AMED21Amedisys– 0.814.00%261.50%264.00%93– 
WST23West Pharmaceutical Servs0.30%0.6942.00%155.50%157.90%8944
MTD24Mettler-Toledo Intl– 0.8815.00%27.40%29.80%72– 
A25Agilent Technologies0.70%0.8816.10%27.00%29.50%7631
HMSY30HMS Holdings– 0.4132.40%70.70%73.20%95– 

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.

TickerCompanySectorDividend Yield3-Year ReturnBeta 3-YearDividends Ratings ScoreOverall Ratings Score
ABAllianceBernstein HoldingFinancial Services10.40%85.20%1.239798
ABRArbor Realty TrustReal Estate8.40%150.50%1.099890
APAMArtisan Partners AssetFinancial Services6.40%95.70%1.299099
APDAir Products & ChemicalsBasic Materials2.30%73.40%0.999690
AQNAlgonquin PowerUtilities4.10%78.70%0.89279
BRBroadridge Financial SolnTechnology1.60%45.00%0.858794
BTGB2GoldBasic Materials3.60%60.40%0.39798
CCChemoursBasic Materials3.70%-35.30%1.739783
CECelaneseBasic Materials1.80%49.00%1.29199
CODICompass Diversified HldgsIndustrials6.10%83.30%0.799796
CQPCheniere Energy PartnersEnergy6.30%69.00%0.668191
CTRECareTrust REITReal Estate4.40%95.80%1.158396
EVREvercoreFinancial Services2.00%44.70%1.339699
FMCFMCBasic Materials1.90%54.50%1.158385
FRGFranchise GroupConsumer Cyclical4.20%366.30%0.889476
FTAIFortress TransportationIndustrials4.30%146.40%1.049879
HLIHoulihan LokeyFinancial Services2.00%53.00%0.668998
HTGCHercules CapFinancial Services8.30%70.70%0.848595
HUNHuntsmanBasic Materials2.40%-6.80%1.278791
KLKirkland Lake GoldBasic Materials2.20%123.80%0.258294
MANTMantech IntlTechnology1.90%44.70%1.079293
MDCM.D.C. HoldingsConsumer Cyclical2.50%154.00%1.328193
MGRCMcGrath RentCorpIndustrials2.20%68.70%1.129997
MPWMedical Properties TrustReal Estate5.30%99.80%1.088782
NBHCNational Bank HoldingsFinancial Services2.10%29.30%0.928497
NEMNewmontBasic Materials3.90%61.10%0.339586
OMFOneMain HoldingsFinancial Services13.40%129.60%1.59897
PAGPenske Automotive GroupConsumer Cyclical2.20%83.30%1.198398
PHMPulteGroupConsumer Cyclical1.20%62.40%1.149477
POOLPoolConsumer Cyclical0.70%137.40%0.828397
ROKRockwell AutomationIndustrials1.70%48.80%1.148282
STAGStag IndustrialReal Estate4.50%60.90%1.048696
STLDSteel DynamicsBasic Materials2.30%5.40%1.299198
STXSeagate TechnologyTechnology3.70%55.30%18186
TSLXSixth Street SpecialtyFinancial Services7.50%60.30%0.669292
TXNTexas InstrumentsTechnology2.40%67.40%1.179376
VALEValeBasic Materials6.70%52.10%1.329288


TickerCompanyCategory GroupDividend YieldBeta 3-YearExpense Ratio3-Year Return
DNLWisdomTree Global ex-U.S. Quality Dividend Growth FundInternational Equity1.80%0.850.58%39.10%
NOBLProShares S&P 500 Dividend Aristocrats ETFU.S. Equity2.10%0.910.35%40.10%
SPHQInvesco S&P 500 Quality ETFU.S. Equity1.50%0.980.15%46.10%
VIGVanguard Dividend Appreciation Index Fund ETF SharesU.S. Equity1.90%0.90.06%44.60%

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.

TickerCompanySectorDividend Yield3-Year ReturnBeta 3-YearDividends Ratings ScoreOverall Ratings Score
DOWDowBasic Materials4.70%– 1.357566
KOCoca-ColaConsumer Defensive3.40%22.80%0.719340
VZVerizon CommunicationsCommunication Services4.50%28.30%0.487758
WBAWalgreens Boots AllianceHealthcare3.90%-24.90%0.828664
XOMExxon MobilEnergy6.40%-18.20%1.046970

Economic Data Calendar

We have a light release schedule in the second week of March that includes the early February readings for the inflation metrics. We expect solid headline gains for both the CPI and PPI reports, with lifts from rising commodity prices and disruptions from the February cold-wave, alongside moderate core price gains. We expect solid January wholesale sector gains for both sales and inventories, as the sector benefits by the economy’s inventory rebuild. We expect a moderate March climb in Michigan sentiment.

Week of March 8

The February jobs documented a likely huge weather hit to all the upcoming February economic reports, despite a nonfarm payroll gain that managed to beat our own optimistic forecast, thanks to weakness in the workweek and hours-worked data. We expect a -2.0% February plunge for retail sales that lies below nearly all market estimates on the assumption that we’ll see huge declines in mid-February sales in Texas in particular, and the entire south-central region overall, despite the underlying lift we’re seeing from stimulus payments and re-openings. Sales of building materials should take a big hit, as should all the February housing data. We expect February drops in the manufacturing and mining components of industrial production, though a 5%-6% utility surge should allow a small headline gain.

We also expect a big -7.5% pull-back in personal income in February as stimulus payments are unwound, and this year’s big delay in tax refunds will depress the income available for households to spend as well, leaving another reason that retail sales will under-perform in February.

Overall, the February economic data will look ugly on the surface given the combination of weather-hits and unwinding stimulus, though markets and the Fed will easily look past this, given the strong underlying trajectory of the economy, soaring commodity prices with rising inflation expectations, a steepening yield curve, and more fiscal stimulus in the pipeline. Prospects are clearly bright, despite February speed bumps.

Wholesale Inventories: 1.3%

Wholesale inventories are expected to rise 1.3% in January after a 0.5% (was 0.3%) gain in December, as seen in the advance indicators report. Sales are estimated to rise 1.5%, after a 1.2% November climb. The I/S ratio should dip to a 2-year low of 1.29 from 1.30 (was 1.29) in December, versus an all-time high of 1.68 in April, as the ratio fluctuates below the pre-pandemic reading of 1.31 in January and February of 2020, 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 0.3% in January, with other component swings of 0.1% for factories and -0.6% for retailers. The inventory and sales data are being lifted by big energy price gains in December and January. We’re seeing solid wholesale sector gains with the recovery in imports from China, after the pullback in imports from China between mid-2019 and March of 2020. International trade is disproportionately captured at the wholesale level of production.

CPI/Core: 0.4%/0.2%

We expect February gains of 0.4% for the CPI headline and a 0.2% for the core, following a 0.3% gain for the headline and flat for the core in January. CPI gasoline prices look poised to rise 6% in February, leaving a tailwind for the headline. As-expected February figures would result in a 1.7% headline y/y increase, following a 1.4% pace in December. Core prices should show a 1.4% y/y rise, steady from January. As with PPI, the headline inflation figures are being lifted by a commodity price updraft into the new year led by energy, alongside big trade price gains. Disruptions from the mid-month cold wave may have added to more general supply bottlenecks that are lifting some prices. 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 2.4% y/y core price rise, with respective PCE y/y chain price gains of 2.9% and 2.3%. The Fed will face no pressure to withdraw accommodation any time soon despite the expected temporary Q2 inflation spike.

Initial Jobless Claims: 720k

Initial jobless claims for the week of March 6 is expected to ease to 720k, after last week’s rise to 745k from 736k that likely reflected disruptions from the Texas freeze. The weather impact may linger, and the unwind of initial claims from the holiday peak has more generally proved slower than hoped. Claims are expected to average 683k in March after averages of 789k in February, 852k in January, and 825k in December. The 841k February BLS survey week reading follows prior survey week figures of 914k in January, 892k in December, and 748k in November. We assume a XXXk March payroll rise after the XXk February gain.

Continuing claims fell by -124k to 4,295k in the week of February 20, following an unrevised 4,419k figure. We expect continuing claims to fall -95k to the 4,200k area for the week ending on February 13. We expect continuing claims to extend their downtrend through Q1. Continuing claims look poised to fall about -540k between the February and March BLS survey weeks. We saw prior drops of -366k in February, -537k in January, -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.

PPI/Core: 0.3%/0.1%

We expect a 0.3% February PPI headline rise with a 0.1% core price gain, following enormous gains of 1.3% for the January headline and 1.2% for the core. As expected readings would result in a y/y headline PPI metric of 2.6%, up from 1.7% in January. We expect a 2.5% y/y rate for the core, up from 2.0% in January. The commodity price updraft into 2021 has provided a particularly big lift for the PPI index, alongside big January gains for the service sector measures, and energy prices continued to climb into February. The y/y headline PPI reading should climb to a peak in the 5.1% area in April due to hard comparisons, while the core y/y rate rises to a peak near 3.2% around May. Oil prices are rebounding thanks to a better supply-demand balance in the petroleum sector and restraint in OPEC production, with an additional lift from disruptions related to the Texas freeze. Ongoing supply constraints for some sectors should continue to provide support for the inflation indexes through Q1.

Michigan Sentiment, preliminary: 80.0

We expect the preliminary March Michigan sentiment report to reveal a climb to 80.0 from a 6-month low of 76.8, with a lift from stimulus spending and expanding vaccine availability. We saw a 7-month high of 81.8 in October, an 8-year low of 71.8 in April, and a 14-year high of 101.4 in March of 2018. Expectations are expected at 73.6 from a 3-month low of 70.7, versus a 7-month high of 79.2 in October. Current conditions are expected to rise to 90.0 from a 4-month low of 86.2, versus the same 9-month high of 90.0 in December. The 1-year inflation gauge should sustain the February rise to a 3.3% figure last seen in July of 2014, while the 5-10 year inflation gauge sustains the 2.7% high since January that was also seen last August, September and May, and previously in March of 2016. The confidence measures have shown divergent swings since mid-2020 that had a downward tilt through the holidays but an upward tilt now into late-Q1, thanks to stimulus payments and vaccine distributions.

 08 Mar 10:00 United States Wholesale Inventories  JAN 1.3%  0.3%
 08 Mar 10:00 United States Wholesale Sales  JAN 1.5% 1.2% 1.2%
 09 Mar 06:00 United States NFIB Small Business Optimism Index  FEB   95.0
 09 Mar 08:55 United States Redbook 03/06    -0.3%
 09 Mar 13:00 United States Treasury Auctions 3-Year Notes
 10 Mar 07:00 United States MBA Mortgage Applications 03/05    0.5%
 10 Mar 08:30 United States CPI  FEB 0.4% 0.4% 0.3%
 10 Mar 08:30 United States CPI Y/Y  FEB 1.7%  1.4%
 10 Mar 08:30 United States CPI ex-Food & Energy  FEB 0.2% 0.2% UNCH
 10 Mar 08:30 United States CPI ex-Food & Energy Y/Y  FEB 1.4%  1.4%
 10 Mar 10:30 United States EIA Crude Oil Stocks 03/05    21.6M
 10 Mar 10:30 United States EIA Gasoline Stocks 03/05    -13.6M
 10 Mar 10:30 United States EIA Distillate Stocks 03/05    -9.7M
 10 Mar 13:00 United States Treasury Auctions 10-Yr Notes Reopen
 10 Mar 14:00 United States Treasury Budget  FEB -$450.0B -$627.0B -$162.8B
 11 Mar 08:30 United States Initial Claims 03/06  720K 725K 745K
 11 Mar 08:30 United States Continuing Jobless Claims 02/27  4,200K  4,295K
 11 Mar 09:45 United States Bloomberg Consumer Comfort Index 03/07    48.9
 11 Mar 10:00 United States JOLTS Job Openings  JAN   6,646K
 11 Mar 10:30 United States EIA Natural Gas Stocks 03/05    -98B
 11 Mar 11:00 United States Treasury Announces 20-Yr Bonds Reopen
 11 Mar 11:00 United States Treasury Announces 10-Yr TIPS Reopen
 11 Mar 13:00 United States Treasury Auctions 30-Yr Bonds Reopen
 12 Mar 08:30 United States PPI  FEB 0.3% 0.5% 1.3%
 12 Mar 08:30 United States PPI Y/Y  FEB 2.6%  1.7%
 12 Mar 08:30 United States PPI ex-Food & Energy  FEB 0.1% 0.3% 1.2%
 12 Mar 08:30 United States PPI ex-Food & Energy Y/Y  FEB 2.5%  2.0%
 12 Mar 10:00 United States Michigan Sentiment Prelim  MAR  78.0 76.8
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