The Day Ahead: Stocks Retreat Ahead of Treasury Auction & FOMC Minutes

The dollar is stronger but equity futures and commodity prices are each trading lower. The economic docket is empty this morning but in the afternoon the Federal Reserve will release the minutes to the latest monetary policy meeting, which investors hope will answer some key questions about the direction of policy.

90 minutes before the bell, Dow futures are down 13 points to 10,896 and S&P 500 futures are off 2.50 points to 1,180.50.

Meantime, WTI crude oil is roughly flat at $86.59 per barrel and Spot Gold is trading $5.30 lower at $1,126.60.

Speaking on CNBC last night, Richmond Fed president Jeffrey Lacker said there is “good evidence” the labor market has bottomed and that “at some point” the Fed will normalize rates. He also said he’s “comfortable” the US won’t experience a double-dip recession.

Key Events Today:

1:00 -- US Treasury auctions $40 billion 3 year notes

1:00 -- Narayana Kockerlakota, president of the Minneapolis Fed, speaks to the Minnesota Chamber of Commerce in Bloomington, Minn.

2:00 -- The FOMC Minutes from the last central bank monetary policy meeting should help Fed-watchers understand some recent language choices and, hopefully, give some idea of how long the emergency-low interest rates will remain in place. 

Economists from Nomura Global Economics said the minutes could answer three key questions.

“First, has the committee upgraded its assessment of current economic conditions? The statement had a more positive take on these but was more negative on housing. Many analysts argued that the changes amounted to a net positive. In our view, the minutes are likely to make clear that recent data have been broadly in line with the FOMC's forecasts. 

“Second, why did the committee reintroduce the phrase ‘employ its policy tools as necessary to promote economic recovery’ -- its version of ‘whatever it takes’ - which had been dropped in December? We think many members may be concerned about the Fed's pullback from the MBS market given the fragile state of the housing recovery. Indeed, we think the minutes might suggest that, at least for this year, the probability of more MBS purchases is greater than the probability of sales. 

Third, what is the status of the ‘extended period’ language? Hawkish members of the committee clearly do not like it, but mainstream members (and the dovish wing) seem comfortable leaving it in place. As with the January minutes, we think this release will contain relatively little discussion about a major language change -- despite significant media speculation in the run-up to the meeting.”