The stock market continues to battle the upward move in bond yields as the much eyed 10-year Treasury furthers its year-to-date climb and inflation remains a key concern. Our belief is that, at least in the near-term, stocks, particularly growthier ones, will be caught between the push-pull of inflation worries and whether the Federal Reserve or the stock market is correct when it comes to inflation and what that means for the federal funds rate.
While recent economic data showed a month-over-month slump, those headline figures mask favorable year-over-year comparisons particularly for key retail sales categories. With the Biden relief plan checks hitting accounts, more favorable weather conditions, and easing domestic pandemic restrictions the economic outlook looks increasingly favorable, especially compared to that for Europe.
We see all of that raising confidence, which in turn should spur the reopening effort and translate into improving employment levels and consumer spending.
It is our view that tech stocks are being painted with a broad brush amid prospective inflation and interest rate concerns -- and we strongly suspect those names that continue to generate solid revenue and earnings growth as well as positive cash flow from operations will prevail.
With the stage set, what's on tap for the coming week?
Economic Data
We are nearing the home stretch for the current quarter and that means a number of economic data points to watch. There will be several pieces of February housing data, which will likely feel the impact of the recent winter storms similar to what we saw with the retail sales, industrial production and housing starts data for the month.
Also on the docket will be February Durable Goods Orders, and we'll be sure to focus on core capital goods orders, a proxy for capital spending levels. Late in the week, we will get the February Personal Income & Spending report, which will likely see a month-over-month decline following the positive bump in January that was due to the benefit of December stimulus checks.
Here's a closer look at the economic data coming at us this week:
Monday, March 22: February Existing Home Sales.
Tuesday, March 23: February New Home Sales.
Wednesday, March 24: Weekly MBA Mortgage Applications Index; February Durable Orders; Weekly EIA Crude Oil Inventories.
Thursday, March 25: Weekly and Continuing Jobless Claims; Fourth-Quarter 2020 GDP (Third Estimate); EIA Natural Gas Inventory report; February Leading Indicators.
Friday, March 26: February Personal Income & Spending; March University of Michigan Consumer Sentiment (Final).
Don't Forget Earnings
There are only a handful of corporate earnings reports to focus on this week. One we'll be most interested in will be Darden Restaurants (DRI) as it discusses the expected impact of the Biden relief plan as well as loosening COVID-19 restrictions. We'll also be curious to see how the stock market reacts to quarterly results from GameStop (GME) considering the volatile and high-profile moves in those shares over the last several weeks.
Here are the key reports we'll be watching:
Tuesday, March 23: Adobe (ADBE) ; GameStop (GME) .
Wednesday, March 24: General Mills (GIS) ; Winnebago Industries (WGO) ; KB Home (KBH) ; RH (RH) .
Thursday, March 25: Darden Restaurants (DRI) .
This commentary is an excerpt from the Trifecta Stocks Roundup, a weekly feature sent to subscribers of Trifecta Stocks. Click here to learn more about this portfolio, trading ideas and market commentary product.
-- Bob Lang and Chris Versace are co-portfolio managers of Trifecta Stocks.
