US STOCKS POST LATE SESSION RALLY TO CLOSE LAST WEEK

Last week saw quite a bit on the news front, but events viewed from a price action perspective were a whole lot more interesting. The equity sell-off dominated the conversation for most of last week, with stocks closing on a bright note. After having tested the previous low as late as 1:30 PM ET on Friday, bulls came in for a late-session rally that drove prices right back-above 2600. That strength has continued into this week’s open with S&P futures looking to start the session above Friday’s close. The big question, of course, is whether last week’s bearish drive continues, and the answer to that likely involves a few other variables that we’ll talk about below.

S&P 500: FRIDAY REVERSAL OFF THE LOWS CARRIES INTO THIS WEEK’S OPEN

Chart prepared by James Stanley

US INFLATION IS RELEASED ON WEDNESDAY MORNING

Matters in US equities and, in-turn, global equities haven’t really been the same since Non-Farm Payrolls earlier in the month. To keep matters in scope, this NFP print came-out at a very awkward time, as FOMC Chair Janet Yellen had just hosted her final rate decision at the Federal Reserve and the bank is currently seeing incoming Chair Jerome Powell settle into the seat. But – we don’t hear from Mr. Powell and the Fed until March 20-21, so there’s a vacuum, so to speak, of no Fed commentary on the way to help pacify risk markets.

In that Non-Farm Payrolls report was the strongest wage growth seen in the United States since May of 2009. Average hourly earnings climbed by an annualized 2.9%, and this stoked fears of stronger forces of inflation in the US economy. Those fears of faster inflation triggered fears of faster rate hikes out of the Fed, and lessened accommodation from the world’s largest National Central Bank. And if we combine that with the growth that’s seen in Europe, appearing to signal an eventual end to European QE, and Bond investors may have some very big issues to deal with in the coming months.