The Day Ahead: Retail Sales, Inventories, Consumer Sentiment, Fed Speak
Ahead of what should be a busy day in the markets, equity futures are looking to build upon the broad-based surge on Thursday.
Ninety minutes before the opening bell, Dow futures up 15 points to 10,161 and S&P 500 futures are up 1.25 points to 1,085.00. Yesterday, the Dow jumped 2.76% and the S&P jumped leapt 2.95%.
The 2-year Treasury note yield is 1.6 basis points lower at 0.778% and the benchmark 10-year Treasury note is 2.6 basis points lower at 3.299%.
The NYMEX crude contract is off $0.31 to $75.17, and COMEX Gold is up $2.20 at $1,223.0.
The US dollar index is down nine basis points to 87.07, after the surge in US equities yesterday prompted global gains extending to foreign stocks and currencies.
The Day Ahead:
8:20 ― Charles Plosser, president of the Philadelphia Fed, discusses economic recovery and the role of the central bank before the Blair County Chamber of Commerce in Altoona, Penn.
8:30 ― The week’s top indicator, Retail Sales, could have mixed results for financial markets. The Street anticipates sales to advance by 0.4% in May, repeating the gain in April and following a 2.1% climb in March. Sales excluding autos, however, are expected to slow from +0.4% to +0.2%, indicating that the pick up isn’t so broad-based.
“A data release in line with our expectations would imply real consumer spending is tracking a +3.0 percent growth rate in Q2 2010 compared to +3.5 in the first quarter – assuming that weakness doesn’t permeate spending into June,” said Ellen Zentner from BTMU.
Analysts at IHS Global Insight added that motor vehicle sales probably advanced for a third consecutive month as unit sales of light vehicles increased from an annual rate of 11.2-million units to 11.6-million units.
For broader sales, however, they were more pessimistic.
“Excluding the automotive group, sales fell an estimated 0.4%, pulled down by a sharp drop in gasoline prices and a retreat in sales of building materials dealers. Sales at the latter channel surged 15.2% from February to April in response to federally funded, state-administered rebates on purchases of energy-efficient appliances. Since most of the rebate programs end when available funds are exhausted, their impact on appliance sales is expected to diminish in May and June.”
10:00 ― The first monthly look at Consumer Sentiment could show confidence in a bit of a rut. Economists at Nomura note that the Reuters / University of Michigan index “edged higher in late May despite renewed turmoil in financial markets,” but that in June the Eurozone crisis could have some negative impact.
“Consumer confidence remains lousy but is improving,” said economists from BMO, predicting a 75.0 score. “Though grinding forward, confidence remains at recession levels, undermined by high joblessness and foreclosures.”
Economists at IHS Global Insight added: “Weakening stock prices and doubts over the employment recovery should weigh down on sentiment. Low inflation, lower gasoline prices and lower mortgage rates should provide some offset.”
10:00 ― Business Inventories are anticipated to rise 0.5% in April following a 0.4% gain in March and a 0.5% advance in February. Inventories can play a major role in gross domestic product, so these continual and consistent advances bode well for the broader economy.
“Considering the very low level of inventories, stock building likely continued at all distribution levels,” said economists at Nomura.
12:00 ― Narayana Kocherlakota, president of the Minneapolis Federal Reserve, speaks on entrepreneurship and the economy to the Metropolitan Economic Development Association in Minneapolis.