E Cry Havoc And Let Slip The Dogs Of War

Making Sense:

On the Roman calendar, today is the “Ides of March.” This day is famous (or infamous) as the day in which Julius Caesar was assassinated. Today we mark a more modern assassination, for this is the day that the last vestiges of hope (as slim as they were) for a March 2016 Fed rate hike likely died.

One of the catalysts for the recent recovery in risk assets markets was the stronger-than expected January Retail Sales data. So strong were that data, the Street consensus forecast expected February to report a decline from the lofty January data. Not only did February data report declines, many of the once-strong January datasets were revised to outright declines from previous positive data.

February Retail Sales MoM came in at -0.1%, less negative than the -0.2% Street consensus. January data were revised to -0.4% from an initial reading of +0.2%.

Feb. Retail Sales Ex Autos MoM came in at -0.1% versus a Street consensus of -0.2%, but the January data was revised to -0.4% from an initial reading of +0.1%.

Retail Sales Ex Autos and Gasoline came in at +0.3% versus a Street consensus of +0.2%, but the January data was revised to -0.1% from an initial reading of +0.4%.

The Retail Sales Control Group (Ex Food Auto Dealers, Building Materials and Gas Stations) Came in flat (unchanged) from a downwardly-revised +0.2% (from an initial reading of +0.6%). The Street expected a gain of +0.2% from an unrevised +0.6%.

Headline PPI MoM came in at -0.2%, down from a prior +0.1% and in line with the Street consensus.

Core PPI MoM came in unchanged (0.0%), down from a prior +0.4% and lower than the Street consensus of +0.1%

Core PPI Ex Trade MoM came in at +0.1% versus a prior +0.2% and a Street consensus of +0.1%.

Headline PPI YoY came in at 0.0%, up from a prior -0.2%, but less than the street consensus of +0.1%.

Core PPI YoY came in at 1.2%, in line with the Street consensus and up from a prior +0.6%.

Core PPI Ex Trade came in at +0.9%, up slightly from a prior +0.8%.

Empire Manufacturing came in at 0.62 versus a prior -16.64 and a Street consensus of -10.50. Prints over 0.0 indicate improving conditions.

“Men in general are quick to believe that which they wish to be true.” ~ Julius Caesar

When strong January Retail Sales data hit the tape last month, the Street (desperate for good news) latched onto the idea that the economic data had finally turned. Almost instantly, market sentiment went from “recession” to “robust recovery.” As a young bond trader, one thing I was taught was to not overreact to any one economic report (positive or negative) as it was only one report. Now it seems that January Retail Sales were not as strong as originally reported. With the exception of Retail Sales Ex Autos and Gas, the February data were flat or negative and were coming off of the biggest downward revisions in two years. The result is Retail Sales which have been essentially flat for three months.