The Day Ahead: Equities Flat Ahead of Housing Data, Bernanke
Equity futures are flat to slightly lower this morning after shares in the S&P 500 jumped 1.06% yesterday. Today markets will received fresh data for the housing market and look for headlines coming from Ben Bernanke and Co. speaking at day three of the Boston Fed’s conference in Cape Cod.
The US dollar is slightly firmer this morning, December oil futures are up 10 cents to $81.29 a barrel, and spot gold futures are up slightly at $1,062.10 per ounce.
Aside from data investors will also be looking at earnings statements. The key release today is from Microsoft; the software maker recently launched Windows 7, opened its first retail stores a la Apple, and revised its online PC store.
In yesterday’s earnings the main event was from Amazon, who posted a 69% leap in Q3 profits led by sales of Kindle, the dominant e-reader on the market. Net income from the online store rose to $199 million, or 45 cents per share, well above expected earnings per share of just 33 cents.
Key Events Today:
8:30 ― Ben Bernanke, chairman of the Federal Reserve, speaks on the supervisory landscape at the Boston Fed’s annual conference in Cape Cod. His lecture is entitled “Financial Regulation and Supervision After the Crisis”.
At day two of the conference yesterday, New York Fed president William Dudley said the central bank “may ultimately avoid any losses on any of the programs” it initiated to stir up liquidity during the subprime meltdown. The Fed is currently winding down the program as the economy improves, a process that Dudley said was “going pretty well.”
10:00 ― Existing Home Sales unexpectedly fell 2.7% in August, ending a four month streak that investors expect to resume in September. The annual pace of homes is expected to move from 5.10 million units to 5.35 million. Investors will also give close attention to the level of overhang, which shank to 8.5 months at the current sales pace in September, the lowest in 2.5 years.
“Inventory levels are in much better shape compared to this time last year and that’s partly the result of the first-time home buyer tax credit (set to expire in November), which will have resulted in an additional 400,000 sold units by most estimates,” said Ellen Zentner, senior economist at the Bank of Tokyo-Mitsubishi. “Yet even outside of the tax-credit-effect, fundamental sales have picked up because prices have fallen so low and, through the Fed’s manipulation, mortgage rates are very low – in other words affordability is too good to pass up.”
11:30 ― Donald Kohn, Vice Chairman of the Fed, speaks in a panel discussion on international perspectives, at the Boston Fed's annual conference in Cape Cod. His talk is entitled “International Perspective on the Crisis and Response”.
Speaking from the audience yesterday, Kohn agreed with his central bank colleagues that exiting the strategy of quantitative easing has so far been successful and natural.
“If you look at the liquidity facilities,” he said, “the 13(3) facilities are in the process of winding down without losses,” he said. Section 13(3) of the Federal Reserve Act relates to the Fed’s special authority in times of emergency.