The Day Ahead: Wholesale Trade, $21 Billion 10s, HAMP Vote

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Stocks have nearly doubled since the market fell to its lowest level of the financial crisis exactly two years ago today. Shares now look to move higher for a second consecutive day as OPEC says an emergency meeting isn’t necessary despite the continued crackdown in Libya. 

S&P 500 futures are 3.00 points higher at 1,323.00 and Dow futures are trading 31 points up at 12,230. Both indexes jumped about 1% Tuesday after Bank of America posted upbeat profits and initiated a financial sector-based rally. Year to date the S&P closed 5.1% higher Tuesday, while the Dow was up 5.5%.

Overseas markets closed higher for a second straight day as well. Shares in Japan rose 0.6%, while those in Hong Kong moved up 0.4% and in China shares ticked up slightly.

Oil prices remain staggeringly high but moved mostly sideways overnight. Light crude is currently +0.01 at 105.03. Gold prices rose another 0.21% to $1,430.30 per ounce.

The benchmark 10-year Treasury yield softened four basis points Tuesday to yield 3.54% at the close. Treasuries traded mostly sideways overnight. The 10-year note is currently +3/32 at 100-24 yielding 3.537%. The FNCL 4.5 is +3/32 at 101-10.

In his morning note, MND's Adam Quinones points out widening breakeven inflation rates on both 5 and 10-year Treasury Inflation Protected securities. The market currently expects a 2.69% breakeven inflation rate on a 5-year timeline and a 2.55% breakeven inflation rate on a 10-year timeline.  Treasury Inflation-Protected Securities (TIPS) are marketable Treasury securities whose principal is adjusted according to changes in the Consumer Price Index. With inflation, the principal increases. With deflation, it decreases.


Just in, the weekly MBA Mortgage Applications Index shot up 15.5% in the week ending March 4. That helped the 4-week average climb 2.7%. 

Refinancings and purchases each advanced as the average interest rate for a 30-year fixed mortgage remained below 5% for the second straight week. Refinancings increased 17.2% in the period and posted the highest level mid-January. Purchases jumped 12.5% for a new calendar year high.  It should be noted that last week's MBA applications data was not adjusted for the President's Day holiday.

“An improving job market is beginning to pave the way for an improving housing market,” said Michael Fratantoni from MBA. 

Key Events Today:

10:00 ― Inventories should climb 0.9% in January’s Wholesale Trade report from the Census Bureau, economists predict. According to Nomura Global Economics, stock-building activity to meet increasing demand and higher commodity prices should each play a role in the month. Also, the nationwide ISM report suggested in its inventory component that manufacturers were building up to begin the new year.

“A close link between stock-piling activity by wholesalers and by manufacturers points to more ― and higher priced ― wholesale inventories in January,” Nomura said.

BMO Capital Markets added: “While overall business inventory investment came to a virtual halt in Q4 following a record build in Q3, it should contribute meaningfully to GDP growth in Q1, which we peg at 3.8% annualized.”

10:00- The House Financial Services Committee continues the markup to consider the following measures: H.R. 839, "The HAMP Termination Act of 2011" and H.R. 861, "NSP Termination Act"

10:15 - The New York Federal Reserve's trading desk will purchase an estimated $5-7 billion in Treasuries maturing between 03/31/2015 – 08/31/2016

1:00 - Treasury will auction $21 billion 10-year notes (reopening)