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1. Is the correction over? Could We See a Tradable Rally?

Last week, major US indices got very oversold, as measured by daily Relative Strength Indices (RSIs), according to Morgan Stanley.

They note that (1) positioning has lightened up considerably, (2) seasonal performance tends to improve in the second half of March, (3) recent dollar weakness could provide a tailwind to earnings revisions, and (4) the decline in rates should benefit economic surprise indices.

All told, the 5500 level on the S&P should provide support for a tradable rally.

To Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, the market has already traded the stagflation theme and the pessimism that’s plagued US stocks is setting the stage for a recovery into the rest of the year. He expects tariff worries to ultimately be resolved as negotiations continue between the Trump administration and other nations, paving the way to a rebound.

At least, the technicals are indicating a solid bounce.

2. Momentum is back.

The U.S stock market found some momentum, opening higher and continuing to drift higher throughout the day.

Beaten-down stocks caught a major bid alongside big tech on reports that Trump’s tariffs will be less severe than anticipated.

Here’s the S&P 500 heatmap. 10 of 11 sectors closed green, with consumer discretionary (+3.46%) leading and utilities (-0.74%) lagging.

3. The “Wealth Effect” of falling stock prices is starting to affect spending.

A recent report in The Wall Street Journal revealed that 10 per cent of America’s highest-income households account for about half of overall spending. Most discretionary spending – such as travel, dining, and entertainment – is concentrated among this very small group, whose attitudes toward spending could change.

Confidence among this cohort, a vital directional indicator of growth, is very dependent on the “wealth effect”: how positive they feel about their home values, stock portfolios and job security.

This wealth effect caused by declining stock prices could force an increasing share of Americans to sit on their wallets.

Roughly 43 per cent of American households’ financial assets are in stocks – the highest share ever.

Consumers, feeling the pinch, have adapted to the uncertain economic environment by pulling back on discretionary spending for things like travel and home improvements.

Below: the passenger airlines industry index versus the S&P

4. Solar Energy, criticized by Trump, claims big U.S. gain in 2024.

The U.S. power grid added more capacity from solar energy in 2024 than from any other source in a single year in more than two decades, according to a new industry report.

The report, produced by the Solar Energy Industries Association and Wood Mackenzie, a research firm, said about 50 gigawatts (equivalent to 50 nuclear reactors) of new solar generation capacity was added last year, far more than any other source of electricity.

Proponents of clean energy celebrated the milestone for solar power as the world moves to increase electricity production to meet the needs of energy-hungry data centers to support the growth of artificial intelligence.

5. “Energy usage from data centers expected to double or triple by 2028.”

The U.S. Department of Energy (DOE) announced the publication of the 2024 Report on U.S. Data Center Energy Use produced by Lawrence Berkeley National Laboratory (LBNL) which outlines the energy use of data centers from 2014 to 2028.

The report estimates that data center load growth has tripled over the past decade and is projected to double or triple by 2028.

U.S. electricity demand is projected to account for data center expansion and the rise of artificial intelligence (AI) applications, domestic manufacturing growth, and electrification of different industries.

“The United States has seen an incredible investment in artificial intelligence and other breakthrough technologies over the last decade and a half, and this industrial renaissance has created greater demand on our domestic energy supply,” said U.S. Energy Secretary Jennifer M. Granholm. “We can meet this growth with clean energy.”

The report finds that data centers consumed about 4.4% of total U.S. electricity in 2023 and are expected to consume approximately 6.7 to 12% of total U.S. electricity by 2028. The report indicates that total data center electricity usage climbed from 58 TWh in 2014 to 176 TWh in 2023 and estimates an increase between 325 to 580 TWh by 2028.
 

Source: Berkeley Lab

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