Stocks and dollar-yen maintain gains following inflation and income data

The overnight rally in global equities remained intact after a wrath of US economic data supported the current narrative for the US economy, inflation is going nowhere and the first quarter will be soft.  Both the January reading on Personal Income and December print on Personal Spending support the big miss we saw in retail sales and the cautious outlook for first the first quarter.

Fed – Data confirms wait and see approach

Oh Canada – loonie sinks on poor GDP and falling oil

Tesla  – Here come the sellers

Oil – Production cuts have run their course

Gold – Falls toward key support

Fed

The Fed’s wait and see approach was confirmed as economic data for this week came in-line with the Fed’s overall stance of the US economy.  The better than expected fourth quarter GDP pretty much confirmed the annual target the Fed had and their preferred inflation gauge came in line with market expectations, confirming inflation is stable.  The rest of the data confirmed December was weak and January is showing softness and that the financial markets will need to wait to see how soft the first quarter is before seeing the market price in what the next move will be for the Fed.

Canada

A big miss with Canadian GDP along with collapsing headline inflation means the Bank of Canada will keep rates steady at the March 6^th meeting and that expectations for the next move could switch from a rate hike to a cut.  The loonie is looking vulnerable here on both softer Canadian macro data along with a fizzling oil rally which could be losing momentum from the OPEC + production cuts as US production is poised to ramp up in the coming months.

Tesla

Tesla short-sellers have more ammunition following yesterday’s announcement of job cuts, a cheaper model 3 and failure to keep promise on being profitable.  While the measures announced yesterday will likely help them become profitable in the future, it will take a few quarters for them to reap the rewards of the $35,000 Model S.  The first quarter is going to disappoint and with an earnings loss and stress on cash flow, shares could see further pressure if technical levels are breached.

Oil

Crude prices are struggling to deliver another weekly gain as the start of the new month means we are getting further away from winter and that US production will take centerfold in the coming months.  The market has priced in OPEC to extend their production cuts until year end and markets may need a new catalyst to take crude higher.  While sanctions remain firmly in place for Venezuela, many are starting to wonder if we will see Maduro step down sooner than later as political violence grows and it appears he is struggling for cash.  Yesterday, he reportedly successfully removed 8 tons of central bank gold last week.  Eventually Maduro will concede and that could hurt oil prices in the short-term.

Gold

Gold is on track to have its worst week since November and is approaching very key technical levels, the psychological $1,300/oz handle and the 50-day SMA.  The uncertainty in what will be the next move from the Fed is preventing the precious metal from breaking higher and right now the path of least resistance appears to be on the side of sellers.

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