Here is Schwab's early look at the markets for Wednesday, March 26:
The Conference Board’s consumer confidence report dropped 7.2 points in March to 92.9 versus the 96.0 expectation hitting a 12-year low. “Markets appear to be relatively forgiving of the soft data until, and if, it shows up in the hard data,” according to Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. “Perhaps the tariff uncertainty explains poor confidence from both business and consumers over the last month.”
The Philly Fed Services Sector Survey found the six-month outlook of services firms plunged in March making a new cycle low. The new low is near COVID pandemic levels. Almost 46% of firms surveyed expected decreases, 26% expect increases, and 23% were unchanged. Surveys like this fall under the “soft” data category which has been diverging from the hard data as Schwab’s Peterson cited. Nonetheless, the pessimism is still concerning.
Stocks tried to build on Monday’s gains, but declining sentiment appeared to weigh them down. Retail stocks worked against the bulls as the S&P Retail Select Index (SPSIRE) slid 0.97%. Synchrony Financial, which issues credit cards in partnership with retailers, reported that they’ve seen belt-tightening measures among financially healthy customers, but so far repayments remain on track.
The real estate market may also be weakening despite positive news. A better-than-expected building permits report was released on Tuesday but has turned out three months of declining numbers. The S&P CoreLogic Case-Shiller Index rose 4.7% year over year in January but fell short of the consensus estimate of 4.8%. Most price gains took place in New York, Chicago, and Boston. However, the Northeast saw a 21.4% drop in February new home sales. The new home sales report also fell short of the consensus forecast despite being higher than the previous month.
Traders may have been looking at the Dow Jones Industrial Average ($DJI) last month and seeing a potential double top reversal pattern. Equal highs were created in November and January around the 45,000 level with support drawn at 41,900. The Dow broke support on March 11, giving a traditional double top entry signal. Old support acted as new resistance when the index rallied, but it broke during Monday’s rally, which may have caused some shorts to cover. It could be that the pattern still plays out and the index falls, but only time will tell.
The SPX rose 9.08 points (+0.16%) to 5,776.65; The Dow Jones Industrial Average® ($DJI) increased 4.18 points (+0.01%) to 42,587.50; Finally, the Nasdaq Composite® ($COMP) popped 83.26 points (+0.46%) to 18,271.85.
