Chris Chavez, Market Strategist
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Good afternoon traders. It’s Chris Chavez with the Blue Line Futures and it’s your daily midday market minute retail sales numbers way down a stock market rally here today. But before we get to it, if you’re watching this video, like in subscribe, if you’re at our Web site, there’s also willing to direct you to YouTube. You can subscribe that way.
We would love for you to follow us. We would love for you to help us build our following. Yeah. So we got retail sales numbers this morning and we got a 6/10 increase for the month of December versus a 4/10 expected increase. I’m looking at some of these components, really the biggest contributors inside of retail sales was general merchandise stores up 1/10 of a percent or so, 1/10, 13/10 of a percent.
You could call it. And that’s up from a negative one hundredths of a percent in the prior month in November. Now, gasoline stations also showed an uptick, still negative, but up noticeably from the November contraction of 2.7 tenths. Motor vehicle and parts dealers up 2/10 versus the November release of one and a half tenths. So those are some of the major components.
You know, general merchandise sales. I mean, you got to think, especially in the month of December, holiday spending, things like that. I think it was definitely expected, you know, part of the seasonal spending effect within holiday shopping and such. So I do think that’s one reason why you saw that uptick in retail sales. Now, this really had a big influence on interest rate expectations here today.
You know, the bond market, treasury market, see me Fed watch talk now pricing in a 55% chance of a cut in March. That’s down from, you know, mid-sixties probabilities that we were seeing yesterday, about 64% or so. So you’re continuing to see those odds decline and decline. And at this point, I would say, again, it’s a coin toss whether or not we’re going to see a cut in March.
I would say it’s definitely seeming like we’re not going to see a cut in March. Now, when looking at the cuts laid out for this year, you know, yesterday we were seeing 150 basis points worth of cuts for 2020 for that 625 basis point cuts. And today you actually saw one of those cuts taken off of the table.
The front month ended deferred December. Fed funds futures are now at 130 basis point inversion or so that’s pricing in five cuts now. So you saw one cut taken off the table. You saw those odds, probability odds for a cut in March, decrease by quite a large margin. And really, I think this begs the question of will economic growth be better than expected in 2024?
Current consensus estimates GDP estimates are calling for a 1.3% GDP growth rate in 2024. Is it possible that we actually see economic growth a bit more resilient? You know, maybe we get, you know, one and a half percent in 2024 or 1.82%. And I think that makes a really good case, especially with retail sales. Consumers are still spending that’s still strong.
While this may be a little bit of a seasonal effect, there are other components as well that have shown strength. And when looking at the labor market, it’s still relatively tight. We have seen jolts come in as of late, but the latest non-farm payroll release was higher than expectations. The market added more jobs that the labor market did.
And you know, a lot of those jobs were government jobs. So maybe we see a little bit more fiscal stimulus this year, especially as it’s an election year. So I would imagine that we might see economic growth better than expected this year, or at least better than consensus estimates of 1.3%. But the real important thing to watch will continue to be the labor market.
We’ll get housing data tomorrow, building permits, housing starts, Philly Fed manufacturing index, and there will be a ten year tips tips auction. So Treasury INFLATION-PROTECTED Securities, this could be a really important indicator for inflation itself. You know, if you see demand really come through on tips, that that could be a little bit of an expectation that maybe inflation might be a bit more elevated.
So definitely important auction to watch tomorrow. Today, we’re going to get a 20 year bond auction at 12 Central Standard Time. Also, Atlanta Fed GDP now will be released later today, which is an important indicator to keep an eye on for growth as well. I would imagine you could see this number a little bit higher, if not this week, next week, especially with these retail sales numbers now, support and resistance levels for the S&P three star support, 4748 and a quarter to 47, 52 in three quarters.
NASDAQ three star support levels 16 633 to 16 661 crude oil, a four star level, very significant, 6972 to 7013 gold, a four star support level that we’re below here today. I highlighted this one yesterday as well as 2019 and 2/10. If we break in close below here, the next four star level to keep an eye on is going to be 1987 and 9/10 to 1997 and 3/10.
If you have any questions, reach out to our Trade desk. We’re here for you. Remember, futures trading involves substantial risk of loss and is not suitable for all investors.
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