Bulls are Prepped for Good Data

There are a lot of compelling signs that the U.S. stock market is ready for a fresh breakout, but the ugly string of economic data the past few weeks makes Wednesday's retail sales and CPI a challenging final hurdle to clear.

The charts are all looking quite bullish, as is just the general vibe when cash-burning meme stocks are making short-term winners out of speculators in the lowest-quality cohort of companies. Crypto prices are still trending lower off their highs, but they're the exception to the general rule right now, which is that stocks and risk assets have been trending higher all month. If the data go well, stocks look ready to rip.

The ideal outcome from today's data would be CPI to come in light and retail sales strong. That would be a much-needed relief from three weeks of economic figures that have not just been disappointing, but the most stagflationary in nature we've seen in years: activity slowing, and inflation picking up. I've been shocked at how relaxed the market has been about this string of data, as investors seem to still believe slowing growth is good for stocks. If inflation doesn't slow, too, it's not just not good - it's the most bearish possible outcome.

The worst case for Wednesday would be if retail sales are soft and inflation is hot. That would present a serious wake-up to those who have been ignoring survey data like ISMs and sentiment, and are still hoping for Fed cuts. More desirable but not ideal would be if retail sales are strong and inflation is too. If both numbers come in below expectations, it could be spun by bulls as "Goldilocks," as long as retail sales don't totally bomb.