The State of Markets: “US Equity Pullback Underway”
A pullback in US equity markets started this past week, with sharp moves lower in tech heavy indices. As we noted last Saturday, that’s normal after a phase of frothy price action, DeMark signals, a Longview SELL-off indicator signal, as well as bearish key day reversals* in various equity indices. Usually, equity market pullbacks consist of three waves. That is (i) an initial pullback (wave 1); (ii) a relief rally (wave 2); and then (iii) a final leg lower in which the index often breaks below the lows from wave 1 (i.e. wave 3).
The key question, therefore, given yesterday’s strong close, is: Has ‘wave 1’ finished, with a wave 2 relief rally now underway? And, will European equities participate, at any stage, in this pullback? Or will they remain resilient, as they did last week (see key chart below)? We outline our views on those questions in recent research (available below for subscribers, or click HERE for a trial).
This coming week’s US macro data includes ISM manufacturing & services (on Monday and Wednesday respectively). There’s also a strong job market theme this week, with ADP employment (Wednesday); Challenger job cuts (Thursday) and nonfarm payrolls on Friday. In Europe the ECB makes its policy decision on Thursday, while Eurozone CPI for February is due on Monday. In China the annual ‘Two Sessions’ event takes place between Tuesday to Friday (and is often used by the authorities to announce key policy decisions). Please see below for a full list of upcoming macro data, earnings reports and events.
Key chart: Various US/European equity indices (YTD performance, local currency, %)
*Bearish key day reversals occur when the index opens higher, makes a new intraday high, and then closes below the previous day’s intraday low. NB it’s a technical price pattern which highlights a likely change of trend (i.e. in this instance, BUYER exhaustion).
Upcoming important data/events this week:
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Events: |
ECB policy decision (Thurs, 1:15pm) followed by Lagarde press conference (1:45pm); China ‘Two Sessions’ (annual parliamentary meeting, Tues-Fri); Fed publishes Beige Book (Wed, 7pm); speeches by the ECB’s Lagarde, Nagel, Knot & Panetta at IWD Event (Fri, 9:30am). |
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Monday: |
Chinese Caixin manufacturing sector PMI (Feb, 1:45am); EZ headline & core CPI (February first estimate, 10am); US ISM manufacturing (Feb, 3pm). |
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Tuesday: |
N/A |
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Wednesday: |
Chinese Caixin service sector PMI (Feb, 1:45am); US ADP employment change (Feb, 1:15pm); US ISM services index (Feb, 3pm). |
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Thursday: |
US Challenger job cuts (Feb, 12:30pm). |
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Friday: |
US nonfarm payrolls, hourly earnings & unemployment data (Feb, 1:30pm). |
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Key earnings: |
Target (Tues); Broadcom, Costco, Kroger (Thurs). |
Key Research
(Strategic) Global Asset Allocation Alert, 26th February 2025:
“Reduce Gold & Silver Exposure in Strategic Portfolio”
The recent rally in precious metals (particularly gold) has been largely driven by a short squeeze. That is, gold has not been pushed higher by the historical and traditional fundamental/liquidity drivers (but mainly by portfolio positioning).
In a risk off regime (which we expect), that positioning is likely to unwind, especially given signs that the long gold/precious metals trade is crowded & over-extended. We therefore favour reducing gold and silver positions (& moving modestly UW risk in the portfolio).
Key North American macro data & events:
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Events: |
Speeches by the Fed’s Musalmen on the economy (Mon, 5:35pm), Williams at Bloomberg Invest Forum (Tues, 7:20pm), Bostic on the economy (Fri, 12am) & Williams on a panel on policy transmission (Fri, 3:45pm); Fed publishes Beige Book (Wed, 7pm). |
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Monday: |
Canadian S&P Global manufacturing sector PMI (Feb, 2:30pm); US S&P manufacturing sector PMIs (February final estimate, 2:45pm); US ISM manufacturing (Feb, 3pm); US vehicle sales (Jan, 3pm); US construction spending (3pm). |
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Tuesday: |
N/A |
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Wednesday: |
US ADP employment change (Feb, 1:15pm); Canada S&P service sector PMI (Jan, 2:30pm); US S&P service sector PMIs (February final estimate, 2:45pm); US durable goods orders (January final estimate, 3pm); US ISM services index (Feb, 3pm). |
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Thursday: |
US Challenger job cuts (Feb, 12:30pm); US trade balance (Jan, 1:30pm); US weekly jobless claims (1:30pm); US nonfarm productivity & unit labour costs (Q4 final estimate, 1:30pm); US wholesale sales & inventories (Jan, 3pm). |
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Friday: |
US nonfarm payrolls, hourly earnings & unemployment data (Feb, 1:30pm); Canadian employment data (change in employment, unemployment rate & participation rate) (Feb, 1:30pm); US consumer credit (Dec, 8pm). |
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Key earnings: |
CrowdStrike Holdings, AutoZone, Target (Tues); Marvell (Wed); Broadcom, Costco, Kroger, Canadian Natural (Thurs); Constellation Software (Fri). |
Fig B: US ISM services index vs. S&P service sector PMI
Key European macro data & events
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Events: |
ECB policy decision (Thurs, 1:15pm) followed by Lagarde press conference (1:45pm); speeches by the ECB’s Lagarde, Nagel, Knot & Panetta at IWD Event (Fri, 9:30am) & Ceteno & Kazaks in Lisbon (Fri, 3:45). |
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Monday: |
HCOB manufacturing sector PMIs for Spain (8:15am), Italy (8:45am), France (8:50am), Germany (8:55am) & EZ (9am) - all February final estimates apart from Spain & Italy; EZ headline & core CPI (February first estimate, 10am). |
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Tuesday: |
Spanish unemployment rate (Feb, 8am); Italian unemployment rate (Jan, 9am); Eurozone unemployment rate (Jan, 10am). |
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Wednesday: |
French industrial & manufacturing production (Jan, 7:45am); HCOB service sector PMIs for Spain (8:15am), Italy (8:45am), France (8:50am), Germany (8:55am) & Eurozone (9am) – all February final estimates apart from Spain & Italy; Italian GDP (Q4 final estimate, 9am); Italian retail sales (Jan, 10am); Eurozone PPI (Jan, 10am). |
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Thursday: |
HCOB construction sector PMI for Germany (Feb, 8:30am); Eurozone retail sales (Jan, 10am). |
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Friday: |
German factory orders (Jan, 7am); French trade balance (Jan, 7:45am); Spanish industrial production (Jan, 8am); Eurozone GDP (Q4 final estimate, 10am). |
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Key earnings: |
Universal Music NV (Tues). |
Fig C: EZ headline & core CPI (Y-o-Y %)
Key UK macro data & events
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Events: |
MPs on the Treasury Committee will question the Bank of England Governor and other members of the Monetary Policy Committee (Wed, 2:30pm); speech by the Bank of England’s Mann at the Reserve Bank of New Zealand research conference (Fri, 8:15pm). |
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Monday: |
Net consumer credit, mortgage approvals & M4 money supply (Jan, 9:30am); S&P manufacturing sector PMI (February final estimate, 9:30am). |
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Tuesday: |
BRC shop price index (Feb, 12:01am). |
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Wednesday: |
New car sales (Feb, 9am); S&P service sector PMI (February final estimate, 9:30am). |
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Thursday: |
S&P construction sector PMI (Feb, 9:30am). |
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Friday: |
Halifax house prices (Feb, 7am). |
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Key earnings: |
Flutter Entertainment (Tues). |
Fig D: UK Halifax house prices (Y-o-Y %)
Key Asia-Pacific macro data & events
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Events: |
RBA publishes minutes from February meeting (Tues, 12:30am); speech by the RBA’s Hauser (Tues, 9:45pm); China ‘Two Sessions’ (annual parliamentary meeting, Tues-Fri); speech by the BOJ’s Uchida in Shizuoka (Wed, 1:30am); RBNZ hosts inflation research conference (Wed). |
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Monday: |
Australian headline CPI (Feb, 12am); Japanese Jibun Bank manufacturing sector PMI (February final estimate, 12:30am); Australian ANZ-Indeed job advertisements (Feb, 12:30am); Australian inventories & company profits (Q4, 12:30am); Chinese Caixin manufacturing sector PMI (Feb, 1:45am); Japanese monetary base (Feb, 11:50pm); Japanese jobless rate (Jan, 11:30pm); Japanese capital spending & company sales (Q4, 12:50am). |
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Tuesday: |
Australian retail sales (Jan, 12:30am); Japanese ESRI consumer confidence (Feb, 5am). Australian S&P services sector PMI (February final estimate, 10pm). |
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Wednesday: |
Australian GDP (Q4, 12:30am); Japanese Jibun Bank services sector PMI (February final estimate, 12:30am); Chinese Caixin service sector PMI (Feb, 1:45am). |
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Thursday: |
Australian imports/exports, & trade balance (Jan, 12:30am); Australian building approvals & private sector houses (Jan, 12:30am); China imports/exports & trade balance (Feb, 3am). |
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Friday: |
Australian household spending (Jan, 12:30am). |
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Key earnings: |
N/A |
Fig E: Chinese Caixin manufacturing & service sector PMIs (index)
Last week:
Longview on Friday, 28th February 2025:
“Equity Pullbacks; US Mid-Cycle Slowdown Risks; Pricing Trump’s Economic Agenda; PLUS the Outlook for Gold”
Global Asset Allocation Alert, 26th February 2025:
“Reduce Gold & Silver Exposure in Strategic Portfolio”
Longview ‘Tactical’ Alert No.88, 25th February 2025:
“Equities: Pullback Underway? a.k.a. Stay Tactically NEUTRAL Equities & OW Treasuries”
Prior week:
Longview on Friday, 21st February 2025:
“Europe – Six Potential Upside Surprises”
Global Macro Report, 19th February 2025:
“UK: (It’s Always) Darkest Before Dawn”
The SHORT VIEW (& market positioning), 18th February 2025:
“GBP: Uptrend Underway?”