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US stocks struggled after the big banks had a rough start to earnings season.  JPMorgan shares dropped sharply over fears that surging expenses and wage inflation may lead to a greater profit miss over the next couple of years. Risk appetite did not get any favors from a wrath of US economic data that missed expectations, raising fears that the underlying recovery is vulnerable. The great cyclical rotation was reversed today and even though Treasury yields soared higher, tech stocks caught a bid.

US data

US retail spending decreased by 1.9% in December, much worse than the expected 0.1% decline.  Online sales fell by 8.7%, but that should not be the beginning of a trend.  Americans most likely got their holiday shopping done early and the spread of omicron dampened some in-store shopping. Retail sales will continue to decline in January.

The preliminary January consumer sentiment dropped sharply to the second lowest level in a decade. This weakness was mostly omicron related but that should hopefully be in March.  Inflation expectations also rose and that will likely remain the case until CPI peaks over the next couple of months.

Manufacturing production weakened, even ex-autos, while Industrial production came in a little soft. The manufacturing and industrial production recovery will improve if this omicron wave passes in February.

By Ed Moya