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* Dow dips, S&P flat, Nasdaq gains
* Tech leads major S&P sectors; energy biggest loser
* Euro STOXX 600 down ~1.6%
* Dollar up; gold, crude down
* U.S. 10-year Treasury yield ~1.49%
Feb 26 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
FRIDAY ECONOMICS: CONSUMERS STRAINING AT THE GATE (1115
EST/1615 GMT)
Data released on Friday sent market participants into the
weekend and out of February with a snapshot of a U.S. consumer
hungry for fiscal support and economic revival.
Consumers upped their spending last month and incomes got a
boost in the form of pandemic aid from the government, according
to the Commerce Department.
Personal consumption expenditures (PCE), which
contribute about 70% to U.S. economic growth, bounced back to
the tune of 2.4%, a reversal of December's 0.4% decline, while
personal income surged by 10% as stimulus checks
rolled in.
"Looking ahead, we foresee the cocktail of generous fiscal
stimulus from the American Rescue Plan and improving health
conditions will fuel a burst in consumer spending," writes
Gregory Daco, chief U.S. economist at Oxford Economics. "We see
real consumer spending growth of 7.4% in 2021 supporting GDP
growth above 7%."
Meanwhile, with income growth at quadruple the pace of
spending, the saving rate surged to 20.5%, the highest level
since May.
"The virus-enforced reductions in spending on discretionary
services is the biggest driver of the massive $1.4T increase in
households' savings deposits over the past year," says Ian
Shepherdson, chief economist at Pantheon Macroeconomics. "This
money is available to be spent once Covid restrictions are
lifted."
The saving rate, which subtracts personal outlays from
disposable income, is considered a gauge of consumer
expectations - the higher the saving rate, the more concerned
consumers are about the road ahead.
Speaking of consumer expectations, they don't appear to be
as dour as originally thought.
The University of Michigan released its final take on
February consumer sentiment, which came in at 76.8,
above the initial take consensus estimates.
While consumer views of current conditions were unchanged,
the expectations component jumped, pushing the headline number
higher that first reported.
Still, the index marks a decline from January, and lower
earners, who suffered the brunt of pandemic-related job cuts,
understandably have a more pessimistic outlook.
"All of February's loss was due to households with incomes
below $75,000, with the declines mainly concentrated in future
economic prospects," says Richard Curtin, chief economist with
UMich's Surveys of Consumers. "The worst of the pandemic may be
nearing its end, but few consumers anticipate the type of
persistent and robust economic growth that restores employment
conditions to the very positive pre-pandemic levels."
Circling back to the PCE report, the prices consumers pay
for a basket of items rose by 0.3% in January.
Annual core PCE price growth - which strips
out volatile food and energy prices - is the U.S. Federal
Reserve's preferred inflation yardstick.
That measure inched closer to the Fed's average annual 2%
target, rising by 1.5% compared with the prior month's 1.4% pace
and suggesting, along with other inflation indicators, that the
economy might be gaining some heat.
In other data, the Commerce Department also released its
advance takes on goods trade balance and wholesale inventories
for the month of January.
The report showed wholesaler warehouse stocks
grew by 1.3%, a welcome acceleration over December's more
languid 0.5% growth, while the goods trade gap
widened to $83.74 billion.
"Overall, goods imports have rebounded strongly, supported
by strong demand. But the rise in goods exports has been more
muted," notes Rubeela Farooqi, chief U.S. economist at High
Frequency Economics.
Finally, the recovery of manufacturing in the midwest lost
some momentum this month, with the Chicago purchasing managers'
index (PMI) dropping more than anticipated to 59.5,
per MNI Indicators data.
A PMI number above 50 signifies expanded activity compared
with the previous month.
Stocks whipsawed as investors were headed into the weekend
in a selling mood, with all three major U.S. stock indexes well
off session lows.
All three indexes were on track to be down for the week, but
up for the month.
(Stephen Culp)
*****
CHOPPY SEAS (1017 EST/1517 GMT)
Major U.S. equity averages have been whipsawed in the early
portion of trading, as a late move higher in Nasdaq and S&P
futures served to lift both at the opening bell, only to see
those gains quickly fade.
Less than an hour into the trading session and the Nasdaq
has already risen as much as 1.5% and seen a decline of
as much as 0.4%. The gain in the S&P 500 was less
pronounced, with a rise of 0.6% while falling as much as 0.5% at
the low thus far. The benchmark S&P index has also fallen below
its 50-day moving average for the first time since Jan. 29.
The Dow, however, has been mostly in the red, with a
brief move to show a gain of 0.16% at the high of the day. The
CBOE Volatility index continues its ascent, reaching
30.79, its highest level since Feb 1.
The yield on the 10-year U.S. Treasury remains
below yesterday's high of 1.614%, but continues to hover around
the 1.5% range, although sectors that have benefited from the
reflation trade such as energy and financials
are the worst performers on the session. [nL1N2KW1JE}
Below is your market snapshot:
(Chuck Mikolajczak)
*****
BRITISH AIRWAYS: THE BIG "IF" (0930 EST/1430 GMT)
Quite a performance by IAG today!
About two hours from the closing bell, the owner of British
Airlines is up about 4% and the top performer of London's FTSE
100 after announcing a 7.4 billion euro ($9 billion) loss last
year.
While markets are relieved IAG has got enough cash to
weather through the current COVID-19 travel restrictions,
there's some uneasiness about the blurred visibility going
forward and the absence of 2021 guidance.
Not that CEO Gallego was not upfront.
"To be honest nobody knows what's going to happen", is as
straightforward as it gets.
But are investors too optimistic in pricing the recovery?
For Michael Hewson at CMC Markets, the key will be getting
lucrative long-haul business trips back.
"This is where most big carriers make their money, and it is
here that normal service may well take a little longer to return
to the same levels they were in 2019.
Same doubts from Russ Mould at AJ Bell.
"Business travel could be the big ‘if’ for 2021 and 2022 as
companies realize that web conferencing calls using Zoom or
other platforms could be more productive than spending hours on
a plane to different countries for quick meetings", he wrote
this morning.
There's also another strong headwind blowing ahead.
"A lot of businesses are under pressure to be more
environmentally friendly and they could get brownie points for
saying they’ve slashed their corporate travel bill by a large
amount.
(Julien Ponthus)
****
NASDAQ COMPOSITE: ANOTHER TWO-"DAZE" DROP? (0900 EST/1400
GMT)
The Nasdaq Composite has certainly been knocked
around of late, leaving tech-focused investors a bit dazed.
Indeed, the IXIC is on track for its biggest weekly drop in 3
months, ending Thursday down more than 7% from its February 16
intraday high.
Of note, on an Elliott Wave basis, one potential wave count
can suggest a 5-wave decline is forming:
This includes a 2-day, 3.3% drop from the peak, or wave 1,
followed by a 1-day, 2%, bounce, or a wave 2. Wave 2 retraced
59% of wave 1.
Wave 3, or what should be the strongest wave down, was a
2-day, 7%, slide. This was followed by another 1-day bounce, of
4.6%, which potentially formed a 4th wave. Wave 4 retraced 61.5%
of wave 3, or a near perfect Fibonacci 61.8%.
Wave 5 then appears to have kicked off into Thursday's low.
If the 1-day bounce 2-day drop symmetry continues, then the
Composite should end its 5th wave down some time Friday after
violating Tuesday's low (13,003.981).
If this is a correct count, a 161.8% Fibonacci projection of
wave 1 down from the wave 4 high would call for a decline to
12,861.
If a low is found, the IXIC can then see a strong rally.
However, given that a 5-wave decline will then appear to have
formed, it can suggest the larger trend has changed from up to
down. If so, the IXIC would have work to do to prove strength
wasn't just another retracement rally.
Of note, however, Nasdaq 100 futures are rallying
after making a fresh low and nearly tagging their 161.8%
Fibonacci projection in overnight trade. A lack of new lows in
the IXIC and NDX would keep their declines at just 3 waves,
suggesting either a more complex pattern was developing, or that
the recent declines were just an a-b-c correction.
(Terence Gabriel)
*****
FOR FRIDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT
- CLICK HERE:
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
