There isn’t much bad luck factored into the market on this Friday the Thirteenth. In fact, the major indices are on a tear to new highs. The NASDAQ is fast approaching a new all-time high, but for today, it managed to touch a new 15-year intraday high. While the Dow is back above 18,000 again, the S&P 500 managed to touch a new all-time intraday high in the early hours of the session. All of the major indices are back to trading in positive territory for the year, all up over 1.0% year-to-date. Talks between Greece’s government, the European Central Bank (ECB), the European Union (EU) and the International Monetary Fund (IMF) are expected to continue over the weekend with an agreement to be reached on Monday. Fortunately, US stocks will miss that volatility on Monday as the markets will be closed for the President’s Day holiday. Neither of today’s economic releases is weighing on the market, but both show contractionary action, so it’s quite lucky that the market is creeping higher today.

Firstly, deflation is presenting a risk for economic outlook based on the import and export price data, where month-over-month contraction is at its most severe levels since the recession. Import prices dropped by 2.8% month-over-month in January alone, and resulted in a year-over-year contraction of 8.0%. Normally the strength of the dollar would be to blame; however, export prices are also in contraction at -2.0% on the month and -5.4% on the year. Not surprisingly, the contraction is centered on petroleum prices where imports prices of petroleum products fell by 17.7% in the month and year-over-year, fell by a whopping 40.1%. However, when petroleum-related numbers are excluded from the data import prices are still down 0.7% for the month, which is the sharpest drop for the core reading since March 2009. On the exports side, agriculture prices declined by 1.2% for the month and fell by 6.3% year-over-year. The core reading, excluding agriculture, was down by 2.1% which is the largest drop since November 2008. Note that this deflationary pull in the input of products is now resulting in the pulling down of finished-product pricing. There were notable contractions in the pricing of capital goods, motor vehicles, and consumer goods for the month of January. On the export side, there is a similar story of declines, with consumer goods being hit the hardest. The Fed’s policy makers are hoping that the oil-related deflationary effects remain limited, but there’s clearly no evidence that that will happen anytime soon. The January import and export report most definitely points to more deflationary readings in the producer (PPI) and consumer (CPI) price index reports.

Following a very strong consumer sentiment reading in January, the February preliminary reading for the University of Michigan’s Consumer Sentiment Index is a bit subdued. Overall consumer sentiment remains strong, but it moved lower to 93.6 in mid-February compared to the 98.1 final reading in January – which was the best reading in the last 11 years. However, we still note that the 93.6 reading is still very strong, actually matching December 2014’s reading as the second best reading in the past 8 years. The decline was equally divided between the two components: current conditions and expectations. Current conditions came in at a reading of 103.1 mid-month, compared to the 109.3 final reading in January. Expectations on the other hand dropped to 87.5 well below the January reading of 91.0. The decline in current conditions is likely due to a slowdown in consumer activity for the month (due to weather) while the dip in expectations could be less optimism in the outlook for increasing income and job availability. The sentiment spike in January served as a leading indicator for gains in the jobs market, but not in consumer spending which is still flat. So overall, this report doesn’t point to any near-term improvement in the consumer sector.