Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com SETTING YOUR CLOCK FOR THE NEXT RECESSION? LOOK TO FED"S RATE HIKE TIMELINE (1235 EST/1735 GMT) Ahead of the statement due out later on Wednesday after the Federal Open Market Committee meeting, Deutsche Bank strategist Jim Reid was out with a research note pondering, of all things, what clues the Federal Reserve"s decisions could give us for the date of the next recession. If the Fed accelerates the bond-buying taper, which has been clearly signposted by Chair Jerome Powell, DB sees this opening the path for the first rate hike the first half of 2022. "June seems to be the most likely date for the first hike but it could come as soon as March," Reid said. Assuming June as the base case and given that "Fed tightening eventually contributes to recessions, when should the next one occur?" they asked. The median and average time to the next recession is 37 and 42 months after the first hike, according to Reid who calculates that this would mean a recession in either July 2025 or December 2025 respectively. It also notes however that the earliest gap over 13 cycles was 11 months which would imply a May 2023 recession. Reid conceded that "obviously there are some sweeping assumptions used here" but he notes that it "gives you a framework for thinking where we are in the cycle." The other caveat is of course that every cycle is different. If it is true, as some believe, that "the Fed is already behind the curve" and should"ve been tightening policy already it "might mean a more compressed cycle relative to history." He points to the mid-1960s, when the Fed messed up by keeping policy too loose. This delayed the recession to late-1969 but left us "with an inflation problem that created big economic problems in the 1970s that the energy shock then compounded." "However at this stage history would suggest a US recession in 2024 or 2025 is a realistic assumption. It could come earlier but that would assume the earlier end of the historical template," said Reid. (Sinéad Carew) ***** SOCKS AND TOYS: WEDNESDAY DATA GIFTS DUDS AND TREATS (1134 EST/1634 GMT) As if investors didn"t have enough on their minds with the Federal Reserve expected to talk about its "taper timeline" at the conclusion of its two-day monetary policy meeting expected in the afternoon, Wednesday brought with it a hump-day smorgasbord of mixed economic data. Receipts at U.S. retailers (USRSL=ECI) grew in November by a disappointing 0.3%, coming in well below the 0.8% consensus and marking a sharp deceleration from the prior month"s 1.8% growth. read more Line-by-line, the report from the Commerce Department shows sales declines in department stores and electronics helped stunt the headline number, which saw its biggest increases from gasoline stations, food/beverage services and sporting goods/hobbies. Core retail sales (USRLCO=ECI) - which excludes gasoline, autos, building supplies and food services and is the metric most closely associated with the personal expenditures component of GDP - actually inched 0.1% lower, in defiance of the 0.7% expected increase. "Loss in momentum may reflect pay back from strong gains over the prior three months," writes Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "The November data are disappointing but spending is continuing even as inflation metrics are at multi-year highs and consumer sentiment is depressed." Retail sales Retail sales Speaking of inflation - and when are we not, these days? - the prices Americans pay for foreign-made goods (USIMP=ECI) hit the consensus bulls eye, rising by 0.7%, according to the Labor Department. On an annual basis, import prices are growing 11.7%, at the highest rate in a decade, and running hotter than other major indicators as demand in the United States has outpaced its overseas rivals. "Resilient domestic demand will likely continue to outstrip pandemic-hampered supply in the coming months," says Mahir Rasheed, U.S. Economist at Oxford Economics (OE). "Stronger global growth will also keep energy prices on a firm footing, keeping import price inflation uncomfortably high through Q1 2022." The graphic below compares year-on-year import price growth along with other gauges, and how quickly they"re accelerating in relation the to Fed"s average annual 2% inflation target: Inflation Inflation On a more positive note, east coast manufacturing has unexpectedly picked up steam this month. The New York Federal Reserve"s "Empire State" manufacturing index (USEMPM=ECI) added a point in December, accelerating to 31.9. Analysts expected a deceleration, with a mean estimate of an even 25. An Empire State number above zero indicates month-on-month expansion. "The uptick in the Empire State index is a surprise, given that October’s surge came out of the blue; we expected a correction," says Ian Shepherdson, chief economist at Pantheon Macroeconomics. "Overall, the survey indicates that supply-chain pressures remain severe, but they are easing, at the margin." Empire State Empire State While we"re on that other topic du jour - supply chains, the value of goods in the store rooms of U.S. businesses (USBINV=ECI) increased by a stronger than expected 1.2% in October, building on September"s upwardly-revised 0.8% increase. read more This is a positive sign that firms are beginning to replenish their inventories as knots in the massive global supply chain are slowly untangled. It also bodes well for fourth-quarter GDP. As the chart below illustrates, private inventories were a drag on economic growth through much of the pandemic recovery, moving back into the "contributors" column in the third quarter of this year. Business inventories Business inventories Brightening homebuilder sentiment can be added to the good news column. The National Association of Home Builders (NAHB) Housing Market index (USNAHB=ECI) defied economist forecasts by gaining a point to a reading of 84, the highest reading since February. "The most pressing issue for the housing sector remains lack of inventory," writes Robert Dietz, NAHB"s chief economist. "Building has increased but the industry faces constraints, namely cost/availability of materials, labor and lots." Indeed, robust demand for elbow room and home offices, which drove inventories to record lows, has supported builders. But supply constraints and spiraling costs of materials and home prices have pushed affordability beyond the grasp of many potential buyers. NAHB NAHB While we"re in the housing sector, demand for home loans decreased last week even as interest rates held firm, according to the Mortgage Bankers Association (MBA). The average 30-year fixed contract rate (USMG=ECI) held firm at 3.30%, and demand for loans to purchase home (USMGPI=ECI) crept up by 0.7%. But a 6.4% drop in refi applications (USMGR=ECI), which represents the lion"s share of the total, resulted in a 4% softening in overall demand. "We expect home sales to continue to be constrained by limited inventory and high prices," says Nancy Vanden Houten, lead economist at OE. "The recent rise in mortgage rates, which are up more than 30 basis points since the summer, has also taken a toll on affordability. MBA MBA Wall Street was set for its third straight day in the red, with all three major U.S. stock indexes in negative territory before the Fed statement and Q&A session this afternoon. (Stephen Culp) ***** U.S. STOCKS CAUTIOUS AHEAD OF FED (0951 EST/1451 GMT) Wall Street"s main indexes are mixed, posting just slight changes. This ahead of the results of the latest FOMC Meeting later in the day in which the Fed might announce a speedier wind-down of its pandemic-era monetary stimulus. Meanwhile, regarding the Fed laying out a path for the removal of its uber-accommodative policy, Jonathan Golub, chief U.S. equity strategist & head of quantitative research at Credit Suisse Securities, is arguing in a note that the market is already discounting this shift, with futures implying that the 2s-10s yield spread will fall to 20 bps by year-end 2022 from 80 bps today. Golub goes on to say that there have been positive equity returns in the months leading up to, and following, a Fed rate lift-off, and that the real damage from higher rates tends to happen later in the cycle when tighter policy flattens/inverts the curve. read more "While Jay Powell has backed away from the term "transitory", there is little indication that he believes inflation is sufficiently entrenched to justify inverting the curve/stifling demand. Put differently, we believe the Fed will avoid such restrictive policy, providing continued support for economic growth and risk assets." Here is where markets stand in early trade: earlytrade12152021 earlytrade12152021 (Terence Gabriel) ***** NASDAQ COMPOSITE"S INTERNAL STRUGGLE INTENSIFIES (0900 EST/1400 GMT) The Nasdaq Composite ended Tuesday down around 5% from its November 19 record close. Meanwhile, one measure of internal strength, the Nasdaq New High/New Low (NH/NL) index, has managed to turn up from its early December low of 12.5%. That trough was its lowest reading since early April 2020, and may have signaled washed-out levels. In a constructive turn, the measure has now risen to 21.3%, and is above its 10-day moving average (DMA), which is at 18.2%. read more However, another measure of internal strength, the Nasdaq McClellan Summation (McSum), which is based on advancing and declining issues, paints a different picture. It is continuing to sink : IXICMcSum12152021 IXICMcSum12152021 The McSum ended Tuesday at -4,505, which is its lowest level since early April 2020. This measure has now fallen 20 of the past 21 trading days and is still trending down below its 10-DMA. For the McSum, there is still substantial downside risk before it reaches its December 2018/March 2020 lows in the -5,425/-6,207 area. A decline to the late 2008 trough/support line from 2012 would call for the -6,896/-7,000 area. The support line from 2012 contained the 2018 and 2020 weakness. Thus, the Nasdaq appears to be at a critical juncture as it now remains to be seen if the McSum can stabilize and turn up with the NH/NL index, or if the NH/NL index will roll over again and join the McSum in a further collapse. read more (Terence Gabriel) ***** FOR WEDNESDAY"S LIVE MARKETS" POSTS PRIOR TO 0900 EST/1400 GMT - CLICK HERE: read more Terence Gabriel is a Reuters market analyst. The views expressed are his own Our Standards: The Thomson Reuters Trust Principles.