The Day Ahead: Stocks Rally Ahead of Bernanke, Retail Sales, Inflation Data
A busy schedule of data and speakers from the Federal Reserve awaits investors today. Key data include retail sales and the consumer price index an hour before the bell, and half an hour into the session should see headlines from Fed chairman Ben Bernanke’s testimony to Congress.
Thirty minutes before the first data, equity markets are pointing higher. Dow futures are up 39 points to 10998 and S&P 500 futures are trading 5.25 points higher at 1,198.25. The 2 year Treasury note is -0-01 at 99-27 yielding 1.073% and the benchmark 10 year note is -0-05 at 98-08 yielding 3.838%.
Commodity prices are also on the rise WTI crude oil up 83 cents to $84.88 per barrel and Spot Gold up $6.95 to $1,157.60.
Part of the optimism this morning stems from better-than-anticipated earnings and revenue from Intel.
“Demand was strong in all regions of the world, reflecting the synchronized nature of the global recovery,” wrote Sal Guatieri from BMO Capital Markets. “The report suggests business spending will lead the U.S. recovery, as companies that deferred spending during the recession ramp up purchases of productivity-enhancing high-tech gear. Intel also plans to boost hiring significantly (1,000 to 2,000) for the first time in five years.”
JPMorgan also posted strong results.
Key Events Today:
8:30 ― Consumer Price Index should confirm that inflation has yet to manifest itself as any kind of threat to recovery. After the headline rose a tame 0.1% for both the headline and core indexes in January, the February headline is expected to come in flat and the core index should rise 0.1% again.
“Upward pressures from energy prices experienced from November through January have eased,” noted economists from BBVA. “The shelter component has been suppressed by declining rents. Furthermore, while demand has picked-up, producers have not yet regained pricing powers and wages, a producer’s primary cost, remain low.”
They also said that core inflation should remain low for the rest of the year.
Going further, Deutsche Bank economists said the inflation outlook is “extraordinarily tame, owing to the fact that prices will continue to trend lower in lagged response to the 2008- 2009 downturn.”
8:30 ― Retail Sales are expected to grow at a rapid 1.2% in March, four times the pace increase seen in the prior month. Much of the expected gain is owed to motor vehicle sales, which shot up 13.5% in the month. But even with autos excluded, sales should expand 0.5%, compared to the 0.8% gain a month before.
“Retail sales are just one of many indicators that were depressed by severe weather in February and as such will naturally see a rebound in March,” predicted Ellen Zentner from BMTU. “Add to that an incentive war among automakers over the month and an earlier Easter holiday and retail sales should soar.”
Deutsche Bank economists said the report will have consequences for Q1 growth projections. “Strong results could lift estimates of Q1 consumption—we currently forecast nearly 3% growth—and also lead to upward revisions to current quarter consumption, since consumer spending patterns tend to have a lot of momentum.”
9:00 ― The House Financial Services Committee holds part two of their hearing discussing "Second Liens and Other Barriers to Principal Reduction as an Effective Foreclosure Mitigation Program"
9:30 ― Sandra Pianalto, president of the Cleveland Fed, speaks to the 19th Annual Hyman P. Minsky Conference on the State of the U.S. and World Economies, in New York.
10:00 ― Ben Bernanke, chairman of the Federal Reserve, testifies before Congress on the economic outlook.
10:00 ― Business Inventories are to rise 0.5% in February, following a flat January and a 0.3% decline in December. The report follows last week’s wholesale inventories report, which saw a stronger-than-anticipated 0.6% increase.
“We expect business inventories to increase by 0.4% in February as US private firms have entered a new restocking cycle,” said analysts from Nomura. “Manufacturing firms have accumulated stocks for two consecutive months and wholesalers and retailers look set to add to inventories this month.”
Economists from BBVA said businesses are beginning to re-stock as sales are finally picking up. “This trend has helped to revitalize industrial production,” they wrote. “In addition, the inventory adjustment is expected to have a positive impact on GDP in 1H10.”
11:00 ― Jeffrey Lacker, president of the Richmond Fed, speaks at West Virginia University in Morgantown, WV
12:15 ― Kevin Warsh, a governor of the Federal Reserve, speaks to the 19th Annual Hyman P. Minsky Conference at the Levy Economics Institute of Bard College in New York.
1:00 ― Richard Fisher, president of the Dallas Fed, speaks on the state of the US and world economies at the Hyman P. Minsky Conference in New York.
2:00 ― The Fed’s Beige Book, an anecdotal summary of economic conditions written by each of the 12 Federal Reserve Banks, should reiterate what recent data reports have said: that economic conditions have been improving including gains in retail sales and services. The main difference between this report and the one from six weeks ago could be that recent conditions have been less adversely impacted by weather.
“The opening phrase should note that the economy expanded or increased in the survey period,” said economists from Nomura. “This would be consistent with other measures of activity for March, which have been quite strong so far. The Beige Book is usually not a major market mover, but we believe it contains valuable information about activity.”
7:00pm ― Brian Sack, executive vice president of the markets group at the New York Federal Reserve, speaks on the economic crisis to the University of Vermont alumni group in New York.