Markets registered solid gains on Friday, fueled largely by short term oversold conditions and by a dramatic rally in crude prices (+12.32%). The S&P 500 and Dow Industrials both gained 2% while the NASDAQ moved 1.6% higher. Also adding some lift to equity markets were retail sales figures for January (+0.2%) and December (revised to +0.2% from -0.1%).
The three principle reasons for crude’s surge on Friday and the resultant rally in equities were deeply oversold conditions heading into the session, a drop of 30 North American rig counts in the previous week and expectations that there may be a resolution reached between major producers Russia and Saudi to curtail production this week – at least temporarily.
Saudis and Russia in agreement to freeze, but contingent on other oil producers and Iran
As mentioned above, retail sales for December were revised higher while January’s figures hit consensus. The Import Price M/M change from the previous month was slightly less deflationary than consensus, at -1.1% for January, matching December’s. Business inventories also hit consensus at 0.1%. Consumer Sentiment, as measured by the University of Michigan’s Survey Center was 90.7, slightly below consensus of 92.5. Still quite constructive, given the upheaval in global equity markets and our modest slowdown in economic activity in recent months. The Baker-Hughes Rig Count for the week reflected further declines continent wide, but especially here in the US. The total count reduction was 50, US rig counts dropped by 30 to 541.
Today’s Economic Calendar is rather limited from a data-centric standpoint. Of the three data release the 10:00 AM EST release of the Housing Market Index has the greatest potential to impact the trading narrative. Otherwise, Neel Kashkari is giving his first speech as the Minneapolis Fed President.
This week’s Economic Calendar will be provided the biggest punch by PPI-FD and Industrial Production on Wednesday, Leading Indicators and EIA on Thursday and the CPI on Friday.