If you read last week's blog you might recall that my primary forecast for this week was "Bullish", citing what appeared to me as a favorable technical set-up for the S&P 500 heading into this week. Specifically, the SPX had dropped to its 200-day SMA and registered a technical pattern known as a "hammer" on the charts last Friday, so it appeared as if the index found support (more on this in the "Technical Take" section below). However, tariff headlines continued to pour in along with concerns around a potential government shutdown and stocks continued their recent downdraft nearly all week. I say nearly all week because stocks are putting in a relatively strong rally today (+1.50-2.30% across the majors), at least at the time of this writing (~1:00 PM ET). I think today's bounce is largely technical in nature, though perhaps optimism that a government shutdown will be averted prior to tonight's deadline at midnight. The stopgap funding bill already cleared the House vote earlier this week and CNBC reported that the Senate is pressing forward with a key procedural vote this afternoon, so markets are still on standby.

On the economic front, this week's inflation and employment data was supportive for the bulls, but there were some troubling sentiment surveys from small business and consumers (more on this in the "Economic Data, Rates & the Fed" section below). Yes, the sentiment surveys, or soft data, are not as important as hard data, but we have seen some indications elsewhere the consumer is reigning in spending, like Delta's guidance cut earlier this week. We've also heard a similar tone about a more cautious consumer from retailers like Walmart, Target, Dollar General and Kohl's. Softer consumer spending isn't a surprise given the recent market sell-off and heightened fiscal uncertainty, but the important question that markets have been trying to price-in is 'to what degree are consumers pulling back'? Markets have taken the forward P/E on the S&P 500 down 2 points (from 22 to the current 20) to reflect slower growth, so fresher economic data in the coming weeks will be needed to determine if the recent valuation re-set was enough.

At the time of this writing (2:05 PM ET), all the major indices are in the green and just off the highs of the session (DJI + 572, SPX + 98, COMP + 380, RUT + 42), which appears to be technical in nature in my view. Markets attempted a similar bounce last Friday only to revert to the downtrend this week, so the bulls likely will want to see more than a one-day bounce. There are several potential market-moving catalysts next week which include the monthly Retail Sales report on Monday, an FOMC meeting on Tuesday-Wednesday and Nvidia's annual GTC conference which will run throughout the week. In this current environment there's also the potential to get developments around tariffs, which could be either escalating or de-escalating in nature. I'm encouraged on the technical set-up heading into next week as several technical indicators have been signaling an oversold state, but this was also the case last week. I'm a little concerned about Monday's Retail Sales report, but I'm also curious to see if the stock market reacts negatively if the report comes in weak (haven't we priced in a softer U.S. consumer with the recent correction?). As for the Fed, given the relatively benign inflation data and further evidence of a slowing economy, I feel the odds are that Fed Chair Powell conveys more of a dovish rather than hawkish tone to the markets. Therefore, my forecast for next week is once again "Bullish", since I feel today's bounce could have more room to run on the upside. What could challenge my outlook? If the government's stopgap funding bill doesn't get passed today (we still don't have confirmation at the time of this writing), or if we get additional tariff escalations next week, markets could revert back into 'risk off' mode and turn lower.

Other Potential Market-Moving Catalysts:

Technology Event:

• Nvidia GTC Conference (March 17th-21st): Nvidia will kick-off its 2025 GPU Technology Conference (GTC) on Monday where NVDA CEO Jensen Huang is expected to provide AI industry updates, along with details of the company's new Vera Rubin GPU.

Economic:

• Monday (3/17): Business Inventories, Empire State Manufacturing, NAHB Housing Market Index, Retail Sales, Retail Sales ex-auto
• Tuesday (3/18): Building Permits, Capacity Utilization, Export Prices, Housing Starts, Import Prices ex-oil, Industrial Production
• Wednesday (3/19): EIA Crude Oil Inventories, FOMC Rate Decision, MBA Mortgage Applications Index, Net Long-Term TIC Flows
• Thursday (3/20): Continuing Claims, Current Account Balance, EIA Natural Gas Inventories, Existing Home Sales, Initial Claims, Leading Indicators, Philadelphia Fed Index
• Friday (3/21): no reports

Earnings:

• Monday (3/17): Textron Inc. (TXT), Science Applications International Corp. (SAIC), Getty Images Holdings Inc. (GETY)
• Tuesday (3/18): KE Holdings Inc. (BEKE), Tencent Music Entertainment Group Inc. (TME), ZTO Express (ZTO), GDS Holdings Ltd. (GDS)
• Wednesday (3/19): General Mills (GIS), Ollie's Bargain Outlet Holdings Inc. (OLLI), Signet Jewelers Ltd. (SIG), Five Below Inc. (FIVE)
• Thursday (3/20): Darden Restaurants Inc. (DRI), FactSet Research Systems Inc. (FDS), Jabil Inc. (JBL), Nike Inc. (NKE), Micron Technology Inc. (MU), FedEx Corp. (FDX), Lennar Corp. (LEN)
• Friday (3/21): Carnival Corp. (CCL), NIO Inc. (NIO)

Markets received a moderate dose of economic data this week, which included the monthly inflation reports (CPI/PPI). The batch of data contained a mix of both positive and negative read throughs. On the bullish side, the inflation data came in below estimates across the board and the employment reports (JOLTS/Initial Claims) conveyed health. However, the sentiment surveys, or the soft data, from both the NFIB Small Business Optimism Index and this morning's University of Michigan Consumer Sentiment report conveyed a high level of uncertainty. Here's the breakdown from this week's reports:

• Consumer Price Index (CPI): Headline month-over-month (MoM) increased 0.2% in February, below the +0.3% expected. On a year-over-year (YoY) basis headline CPI increased 2.8% which was below the +2.9% economists expected.
• Core CPI: Increased 0.2% on a MoM basis, below the +0.3% expected, and +3.1% on a YoY basis, below the +3.3% expected. The YoY +3.1% gain is the lowest reading since April 2021.
• Producer Price Index (PPI): Came in 0.3% below estimates on a MoM basis (0.0% vs. +0.3% est.), putting the YoY gain at 3.2%, a marked step down from the +3.7% YoY reported in January.
• Core PPI: Declined -0.1% on a MoM basis, well below the +0.3% expected, putting the Core YoY change at +3.4% versus +3.8% in January.
• JOLTS – Job Openings: Came in a 7.74M, which was above the 7.65M economists had expected.
• NFIB Small Business Optimism Index: Fell by 2.1 points in February to 100.7. The Uncertainty Index rose by 4 points to 100, representing the second highest reading ever. Only 12% of owners reported that it is a good time to expand their business, which is a 5-point decline from January and represents the largest monthly decline on record.
• Initial Jobless Claims: Decreased to 220K from 222K in the prior week, and below the 225K economists had expected. Continuing Claims decreased 27K to 1.80M from last week, and below the 1.90M economists had expected.
• University of Michigan Consumer Sentiment (Preliminary): Came in at 57.9, which is a 10.5% decline from the prior month and below the 63.2 economists had expected. Within the report, the 1-year inflation expectation rose to 4.9%, the highest reading since November of 2022. The 5-year inflation expectation rose to 3.9%, the highest reading since February 1993.
• The Atlanta Fed's GDPNow "nowcast" for Q1 GDP is unchanged at -2.4% versus last Friday.

Treasury yields are little changed on the week, despite the cooler-than-expected inflation data out of the monthly CPI/PPI reports. Partly to blame for the relatively buoyant yields could be the government shutdown concerns and a poorly received 30-year Treasury auction. Compared to last Friday, 2-year Treasury yields are essentially flat (3.998% vs. 4.00%) while 10-year yields are lower by ~2 basis points (4.297% vs. 4.317%).

Expectations around potential rate cuts from the Fed cooled some versus last week even with this week's benign inflation data. Per Bloomberg, markets are expecting a 25-basis point rate cut either at the June FOMC meeting (currently 90% vs. 100% last week) or July FOMC meeting (theoretically 100%). The Fed will hold its Federal Open Market Committee (FOMC) on Tuesday/Wednesday next week and while a rate cut isn't expected (~0% probability), investors will be anticipating commentary from Powell about the state of the economy and the potential impact of trade policy.

Last week I provided a bullish technical assessment on the S&P 500 based on what appeared to be support holding up at the 200-day Simple Moving Average (the green "hammer" pattern on the gold line from last Friday on the chart below). However, this week's tariff escalation headlines trumped the technicals and the SPX remained under selling pressure. From a positive perspective, the continued slide in the SPX took the index down to the classic definition of a correction, which is a 10% drawdown from recent highs. Coinciding with the test of the correction "line in the sand" was a sub 30 reading on the Relative Strength Index (RSI) which traditionally is considered an "oversold" reading. The RSI has moved from a low of 27 mid-week to the current level of 36, which could suggest some mean reversion is underway. Should the index continue to bounce next week it may be setting up for a test, from the underside, of the 200-day SMA which is currently 5,740 (i.e. prior support becomes resistance if breached).

Near-term technical translation: bullish

Th Russell 2000 index (RUT), which has been the worst performing index among the majors this year, dropped by nearly double the amount of the SPX (-20% vs. -10%) since mid-February but is finding some bid support this morning. While it's too likely early to say for sure, traders might be using the psychologically important 2,000 level as a potential support level. The RUT technically closed below 2,000 yesterday but is bouncing back above this level today. Additionally, the index is making a move back above the 30 level on the RSI so a mean reversion bounce from oversold levels appears to be underway.

Near-term technical translation: bullish
Intermediate-term technical translation: bearish

Last Friday, lawmakers in the state of Utah passed new blockchain and cryptocurrency regulations, but the bill excluded references to a (previously discussed) Strategic Bitcoin Reserve. The strategic reserve would have allowed the state to allocate up to 5% of funds to cryptocurrencies like Bitcoin. The updated bill, known as the Blockchain and Digital Innovation Amendments bill, outlines the potential to mine Bitcoin, operate nodes and engage in staking. Utah had previously been seen as a frontrunner among U.S. states to adopt a Strategic Bitcoin Reserve, so the news is seen as a setback within the crypto community. Dennis Porter, CEO of Satoshi Action Fund, told reports earlier this year, "We firmly believe that Utah will be the very first state to introduce this legislation. No one else has a faster calendar [than Utah] and no one else has more political momentum and willpower to get it done." Several other states, such as Montana, South Dakota, North Dakota and Wyoming, have rejected or delayed similar bills citing Bitcoin price volatility.

The Bloomberg chart below shows the current % of members within the S&P 500 (SPX), Nasdaq Composite (CCMP) & Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). Stocks continue to slide this week and market breadth (as measured by the 200-day SMA threshold) followed suit as all three indices hit fresh 52-week lows. On a week-over-week basis, the SPX (white line) breadth dropped to 35.80% from 49.50%, the CCMP (blue line) moved down to 28.22% versus 34.32%, and the the RTY (red line) sank to 26.68% from 34.74%.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, % of stocks within an index that are above or below a longer-term moving average or new highs vs. new lows.

This Week's Notable 52-week Highs (30 today): Agnico-Eagle Mines Ltd. (AEM + $0.76 to $103.44), McDonald's Corp. (MCD + $0.35 to $297.85), Root Inc. (ROOT + $6.81 to $141.04), Royal Gold Inc. (RGLD + $0.27 to $153.81), Wheaton Precious Metals Inc. (WPM + $1.76 to $74.48)

This Week's Notable 52-week Lows (75 today): Abercrombie & Fitch Co. (ANF + $1.69 to $77.62), Etsy Inc. (ETSY + $0.44 to $44.85), FedEx Corp. (FDX + $0.52 to $241.50), Hyatt Hotels Corp. (H + $1.01 to $121.84), Novo Nordisk A/S (NVO + $0.17 to $76.06), Ross Stores Inc. (ROST + $0.57 to $123.87)