Tempting Charts & Positive Conflicts
US retail sales blew away expectations on Tuesday, rising 5.3% compared to 1.1% expected. Core measures were even stronger as $600 stimulus checks immediately went to work. It wasn't just a one-month effect either, sales for Nov-Jan were up 4.6% y/y.
That big beat led to higher revisions for Q1 GDP and should drive assumptions higher regarding the $1400 check that's likely to be authorized in the next month.
On that front though, the market is feeling some jitters. The size and contents of the package are still up in the air and flat equities and lower Treasuries yields Tuesday may be reflecting some of that uncertainty.
The dollar tried to break higher but was also reeled in as the market grapples with stimulus, the inflation and the Fed. On the latter front, the Fed minutes didn't sound any alarm bells and there was a consistent message that policymakers believe the anticipated bumps in the months ahead will be temporary.
The commodity and housing markets are telling a different story though. Crude briefly fell on a report about Saudi Arabia bringing back supply in April but it quickly erased the dip and ran to a new high on US inventory tightening. Meanwhile virtually every other commodity continues to run with supplies tight everywhere.In the housing market, the home builder survey rose to 84 from 83 and remains near all time highs reached late last year. In the day ahead, the US January housing starts report is due. There is a growing risk of a US housing boom with all the knock-on effects that entails. While we agree that much of the inflation in the spring will be temporary, the prices rises in commodities and housing look increasingly durable.
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