Stocks will likely take a pause today given the almost empty
domestic economic calendar and soft data out of China over the
weekend. It will likely be hard to sustain the strong momentum
from last week given the absence of meaningful economic data this
week, particularly with stocks already in record territory.
China released a bunch of economic data over the weekend and
it mostly came on the weak side. The data pertained to retail
sales, inflation, and industrial production - and all three key
measures disappointed. Part of the weakness could be a result of
the Lunar New Year falling in February this year compared to
January last year, but the softness is evident even when the
two-month data is combined. Any way you look at it, it is a
slower start to 2013 than would be expected from the year-end
Rising inflation and slowing growth produces its own policy
dilemma for the incoming Chinese leaders who will need to balance
price stability and economic growth. Economic growth rebounded to
a 7.9% pace in the last quarter of 2012 and appears on track to
be a little above 8% in the current period, but will likely come
down in the coming quarters.
On the home front, the key data point this week is the
February Retail Sales report coming out on Wednesday. Anecdotal
evidence from retailers like
) doesn't paint a very inspiring picture of household spending,
but part of that was likely due to delayed income tax refunds due
to Fiscal Cliff related issues. On the positive side, payroll
gains have been quite strong, as last week's February jobs report
confirmed. The key point is that consumer spending was good
enough in the fourth quarter of 2012, but it's unclear if the
momentum carried into 2013 due to the payroll tax hike, higher
gasoline prices, and drag from fiscal austerity.
Other reports this week include Industrial Production and the
New York Fed's Empire State regional manufacturing survey on
Friday. The factory sector data should show relatively more
momentum to reflect the need for inventory replenishment
following the weak run on that count later last year.
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