Inflation Remains In Check

Inflation remained in check with Core PCE for December coming in right at estimates of 1.9, and the ISM Manufacturing PMI reported at 49.4, which missed estimates of 51.5 and dropped below the previous months 49.6 figure. Consumer Sentiment for February was also lower than expected. While all these reports are considered bond friendly and would push rates lower, the bond market reaction has lacked enthusiasm. In fact, bonds are in danger of falling out of their trading channel that has formed for the past month, and the 10-year Treasury has pushed higher out of its respective channel. This will result in interest rates moving a notch higher.

Next week is a big week for economic reports, and it could be critical for stocks as they continue to look for a reason to break the ceiling of resistance since last October. However, the reports could disappoint and be the catalyst that send stocks falling again. Until we see that happen, we will maintain a locking bias.