Stocks Mixed and Await Tomorrow’s Monetary Policy Reveal…..

U.S. stocks closed mixed in another subdued session, as the markets await tomorrow’s monetary policy decision from the Federal Reserve. The markets appeared anxious to hear Fed Chairman Powell’s comments in his customary press conference given the backdrop of rising inflation expectations, as well as concerns that the Fed may be losing control of the yield curve amid the recent spike in Treasury yields. Further contributing to the cautious markets were a set of largely underwhelming economic data reports which showed a surprising decline in retail sales and a tumble in industrial production, as well as a slight downtick in homebuilder sentiment. Meanwhile, growth-oriented stocks built on yesterday’s gains, as the Information Technology and Communications sectors led the way. Treasuries were mixed, but yields on the long end ticked up, while gold and the U.S. dollar were little changed and crude oil prices fell. News on the equity front was scarce, as Dick’s Sporting Goods announced that it will enter the highly competitive men’s athletic apparel arena with its own line, while Designer Brands posted lackluster Q4 results. Asia finished in the green, and Europe saw gains amid continued recovery hopes.

The Dow Jones Industrial Average fell 128 points (0.4%) to 32,826, the S&P 500 Index lost 6 points (0.2%) to 3,963, and the Nasdaq Composite advanced 12 points (0.1%) to 13,472. In moderate volume, 981 million shares were traded on the NYSE and 5.4 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.59 to $64.80 per barrel. Elsewhere, the Bloomberg gold spot price nudged $0.70 higher to $1,732.36 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world.

Retail sales, industrial production fall sharply on busy economic day…..

Advance retail sales for February fell 3.0% month-over-month (m/m), far more than the Bloomberg consensus forecast of a 0.5% dip and following January’s upwardly adjusted 7.6% increase from a previously reported 5.3% advance. Last month’s sales ex-autos declined 2.7% m/m, compared to expectations of a 0.1% increase and January’s figure was positively revised to an 8.3% rise from a 5.9% gain. Sales ex-autos and gas were down 3.3% m/m, compared to estimates of a 0.5% decline, and January’s reading was adjusted higher to an 8.5% increase from a 6.0% rise. The control group, a figure used to calculate GDP, lost 3.5% m/m, versus projections of a 0.6% decrease and January’s favorably adjusted 8.7% increase from a 6.0% gain.

The Import Price Index rose 1.3% m/m for February, versus expectations of a 1.0% gain, and compared to January’s unrevised 1.4% increase. Versus last year, prices were up by 3.0%, compared to forecasts of a 2.6% increase and January’s upwardly adjusted 1.0% gain.

The Federal Reserve’s industrial production fell 2.2% m/m in February, well below estimates of a 0.3% gain, and versus January’s upwardly revised 1.1% increase. Manufacturing and mining output both fell sharply, but utilities production increased. However, the Fed noted that the severe winter weather in the south-central region of the country in mid-February accounted for the bulk of the declines in output for the month. Capacity utilization decreased to 73.8% versus forecasts calling for it to remain at the prior month’s downwardly revised 75.5% rate. Capacity utilization is 5.8 percent below its long-run average.

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment in March ticked lower to 82 versus estimates calling for it to remain at February’s 84 reading. A level north of 50 depicts positive conditions. The NAHB said, “Builder confidence peaked at a level of 90 last November and has trended lower as supply-side and demand-side factors have trimmed housing affordability.” The report also noted that steadily rising lumber prices have added approximately $24,000 to a new home, and that mortgage rates, while still historically low, have increased over 30 basis points over the past month.

Business inventories rose 0.3% m/m in January, matching forecasts and compared to December’s upwardly revised 0.8% gain.

Finally, the Federal Open Market Committee (FOMC) is set to begin its two-day monetary policy meeting today, which will conclude with tomorrow’s statement, as well as updated economic projections and the customary press conference from Fed Chairman Jerome Powell. Powell’s comments are likely to be highly scrutinized given the backdrop of rising inflation expectations, as well as concerns that the Fed may be losing control of the yield curve amid the recent spike in Treasury yields.

Treasuries were mixed, with the rate on the 2-year note little changed at 0.15%, while the yield on the 10-year note was up 1 basis point (bp) to 1.62% and the 30-year bond rate rose 2 bps to 2.38%.

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