Equites came under moderate pressure Friday amid concern Greece will run out time for reaching a deal to stave off default. European officials are preparing for the worst as Greece’s prime minister’s brinkmanship is pushing its country’s finances to the limit.
Many times I have commented about the complacency surrounding Greece for if today’s headlines were 4 years ago the markets would be down 20% not 200 points.
This week is a FOMC meeting. There was a sentiment survey Friday stating that Americans were the most upbeat about their wage prospects in seven years. As noted several times, there is wage inflation in some segments of the economy given the dearth of qualified workers. I think this is a positive development given such confidence may increase the propensity to spend.
What are the odds there will be an economic melt up, the result of rising wages and home values? As evidenced by the productivity data, the economy’s capacity to produce goods and services has grown around 2% since the recession ended six years ago. Will demand eclipse supply causing inflationary expectations to rise?
Typically when the economy transitions towards demand led, good news typically becomes bad news in the immediacy given the propensity of higher rates. In such a scenario, manufacturers and commodity companies greatly outperform while highly valued growth companies falter.
Speaking of commodities, oil closed up for the week, advancing 12 out of the last 13 weeks. What is oil suggesting given the extremely negative oil narrative?
The economic calendar is crowded with a host of housing statistics, the CPI and several manufacturing data points.
Last night the foreign markets were down. London was down 0.81%, Paris down 1.24% and Frankfurt down 1.55%. Japan was down 0.09%and Hang Sang down 1.53%.
The Dow should open moderately lower on the collapse of Greek debt talks. The 10-year is up 8/32 to yield 2.37%.
