Just like when the bald child in "The Matrix" pointed out there is no spoon, there is no Fed pivot on the horizon. Equities snapped a 4-week win streak last week as the reality begins to set in that the Fed isn’t finished raising rates.
Investors have been clinging to hopes of a Fed pivot that isn’t going to happen, at least not yet. Futures for Fed Funds Rate hikes are point to continued increases through March of 2023. This realization seemed to hit investors last week. Stocks approached a key metric last week, the 200-day moving average, but quickly moved lower.
The technical metric is not the only bad news for bulls. According to the NAHB Housing Market index, the housing market has officially entered “contraction.”
Existing Home Sales declined for the 6th consecutive month and reached levels not seen since the beginning of the pandemic. Retail Sales were flat (0.0%) in July and have disappointed expectations in 6 of the last 9 months. The manufacturing data was mixed last week, as the Philly Fed index improved, but the NY Empire index plummeted—also reaching the lowest level since the pandemic. This week, the Richmond, Kansas City, and Chicago will be critical to determining the state of U.S. manufacturing. In addition, we will get a further peak at the U.S. consumer this week with Personal Spending. It could be a week of choppy trading.
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