Inside Markets — Catalyst Vacuum

Wednesday’s inline CPI report and yesterday’s improved retail sales number combined to temporarily reestablish the Goldilocks narrative that died in the wake of the 8/2 Jobs Report.  But the macro-fundamental debate is far from settled with next Thursday’s flash PMI data and August payrolls (9/6) as key near-term risks. The reinstated narrative was also partially attributed to WMT’s same-store-sales beat and improvement in general merchandise.  But WMT’s better-than-feared results came from share gains as the consumer often trades down during periods of stress.  TGT’s earnings report on Thursday will be the next input on the consumer.  A contraction in August PMIs and disappointing/underwhelming report from TGT on Thursday would challenge the narrative into a seasonally weak period.

Yesterday’s risk-on rally that pushed the SPX through technical resistance at 5447 was largely led by short-covering and CTA demand.  The sustained break above 5447 only eliminates the bearish technical pattern that developed after July payrolls and the absence of meaningful catalysts until Thursday should generate some near-term trend continuation – but that’s about it.  This week’s rally may cause long-only managers to take another look at strong fundamental stories, but macro doubts remain and the index will struggle to recapture sidelined cash.