Benchmarks Are Likely To Post Weekly Loss – Economic Highlights

This morning’s negative Q4 GDP revision and the soft Durable Goods report from earlier this week are the latest economic readings indicating that the U.S. economic picture may not be that strong. Next week’s ISM and non-farm payroll reports will help provide fresh light on the economic questions. But the sour after taste from the soft recent economic data points will linger until then. In the Fed-obsessed stock market narrative, this negative turn in economic data should have been welcomed, prompting stocks to move higher.

After all, we heard from the Fed — only last week — that indicated it was in no hurry to start raising rates, and that the starting date was most likely later than June. But that’s not what we have been seeing in the market lately — stocks have lost ground for four days in a row, with the S&P 500 down the most since January.

Modest pullbacks in the past have attracted many in the market, turning the ‘buy the dip’ plan into a fairly successful strategy. We could very well see a repeat of that trend this time around, as well. But if stocks continue to lose ground following weak(ish) economic readings next week, then it would mean that investors expect the Fed to tighten despite the loss of economic momentum. That would certainly be the worst of both worlds for stocks, with a weak economy weighing on profits and Fed tightening raising interest rates. But we aren’t there yet.