By Charles Payne

I find it hard to believe the Fed thinks this is a strong economy when there is no wage growth, still, there are enough people on the street ratcheting up more anxiety. The strong dollar is problematic because it’s going to be strong for a very long period of time. The S&P 500 took out Friday’s low in a blink, and while there is some support around 2050, the key number is 2000 (another 2.6% decline).

                                                   S&P 500

The dollar is too strong, but Wall Street has been loading up, making this a crowded trade and there is little rush to take profits. In the meantime, money printing by the European Central Bank (ECB) is not having the same magical effects displayed by other central bank action with respect to the European equity markets.

The Euro is in trouble, make no mistake, but parabolic moves are more reflective of emotions than fundamentals and facts. On that note, there’s no telling when this dollar surge will peak. For stock investors, it’s been about taking some profits, but now the major indices are actually down for the year.

Under Pressure

By Dominique Paul, Research Analyst

The markets are enduring a major pullback today, erasing yesterday’s gains. The Dow Jones Industrial Average fell as low as 247 points from yesterday’s close, however it came back slightly to be down roughly 1.40%. The NASDAQ and the S&P 500 are showing similar declines, down 1.42% and 1.35%, respectively. Weighing on the market is the European Central Bank’s (ECB) quantitative easing program which has brought down the value of the Euro significantly against the US dollar. China’s inflation rate showing signs of life are also putting pressure on the market. For the month of February, China’s consumer price index (CPI) came in at +1.4%, significantly higher than the consensus estimate of 1.0%. Lower currency abroad, whether it be a smaller Euro or smaller yen, does not bode well for US companies. By not raising their prices, when US companies convert payments from foreign customers back into US currency, the value is much lower, adding pressure to margins.

There were a few domestic economic data reports released today that did little to help the market. The most important release was the Bureau of Labor Statistics (BLS) Job Openings and Labor Turnover Survey (JOLTS). Observers were disappointed to learn that the only reason job openings increased in January by 2.5% month-over-month was because December job openings were revised lower to 4.877 million from an original estimate of 5.025 million. Openings in January were far below consensus 5.075 million estimate, coming in at 4.998 million. The amount of hirers also decreased, down from 5.239 million in December to 4.996 million in January. The number of total separations declined to 4.821 million from 4.901 million the prior month; quits accounted for 41.9% of this, down from 44.6% in December. We want to see more workers quitting their current jobs and moving on to better positions as it means that they are confident in the economy.

The weekly Redbook same-store sales report foreshadowed what we would learn from the Wholesales Inventory report. In the week ended March 7^th, sales decelerated, growing 2.6% year-over-year after increasing by 2.7% in the week prior. Luckily, the first week of March is the least important week of the month. Sales are expected to pick up later this month ahead of the St. Patrick’s Day holiday. Still, it’s important to note that the decline in sales were attributed to harsh winter weather in the northeast deterring demand for seasonal goods as well as slowing store traffic.

The Wholesales Inventory report also showed declines in sales. For the month of January, total sales decreased 3.1% month-over-month, or 1% year-over-year, to $433.7 billion dollars. Sales of non-durable goods declined by 1.4% month-over-month; this was led by demand decreasing for electrical and electronic goods (-4.4%) and metals and minerals excluding petroleum (-4.1%). Durable goods sales were down 4.6% month-over-month, naturally brought down by the oil market. Petroleum and petroleum product sales decreased by 13.5% from last month. Inventories of merchant wholesalers, excluding manufacturer’s sales branches, are on the rise. In January, inventories rose by 0.3% following a no change in December. As a result, the stock-to-sales ratio rose to 1.27. In order for this economy to continue growing, we need to see sales rising and inventories decreasing. Lower inventories require manufacturers to increase their labor force to produce more products and meet the rising demand.

However, there was one positive economic release, though not a huge market mover. The National Federation of Independent Business (NFIB) released its Business Optimism report today. The headline number rose to 98.0 in February from 97.9 in January. Small business owners are more optimistic towards the future and intend to increase capital expenditures somewhere down the road as well as take on more hires.