Morning Notes

China reopening optimism and expectations for an imminent Fed pause have combined to form an emerging ‘soft-landing’ scenario often cited as the driver of year-to-date gains.

At 4025, the S&P 500 (SPX) is currently trading above its 50, 100, 200 day moving averages and above the downward sloping trend channel that contained the bear market all of last year.

The S&P 500 (SPX) was unable to hold key momentum levels earlier in the week after weaker-than-expected data challenged the soft-landing narrative.

We may be entering a new phase as the disinflation narrative is now consensus and a still-hawkish Fed drives concerns for a hard landing.

Bonds and stocks have been positively correlated over the last 12 months, and today’s bifurcation may reflect growing concerns for a deeper economic slowdown in the months ahead.

The S&P 500 outlook is in focus as the index has gained over 4% to start the year and is now trading above its 50, 100 and 200-day moving averages.

Quiet overnight headlines ahead of tomorrow’s CPI report and Friday’s start of calendar Q4 earnings season. Trends this morning are likely the result of position squaring ahead of these events. There’s more upside for stocks with the highest short interest.

CPI scenarios are in focus as we await the macro event of the week. Options markets are currently priced for a ~2% move in the SPX.

Friday’s inline payroll gain and softer than expected wage number fit the rarely seen soft landing scenario.

December non-farm payrolls came in slightly above expectations and the Unemployment Rate declined, but softer wage gains have dovish implications for markets.