The Day Ahead: Earthquake, Tsunami Slam Japan
(Reuters) - The biggest earthquake on record to hit Japan struck the northeast coast on Friday, triggering a 10-meter tsunami that swept away everything in its path, including houses, ships, cars and farm buildings. At least 59 people had been killed in the quake and tsunami in Japan, broadcaster NHK said, adding that many were missing. The extent of the destruction along a lengthy stretch of Japan's coastline suggested the death toll could rise significantly. The 8.9 magnitude quake, the most powerful since Japan started keeping records 140 years ago, caused many injuries and sparked fires while the tsunami prompted warnings to people to move to higher ground in coastal areas.
Domestic news agencies said a radoactive leak was possible at a nuclear plant in Fukushima prefecture, north of Tokyo, and some 2,000 residents had been told to evacuate the area. Some nuclear power plants and oil refineries were shut down and a refinery was ablaze.
S&P 500 futures are lower this morning, currently by 2.25 points at 1287.25. Dow futures are down 40 points to 11,880. The S&P 500 has already fallen 45.3 points since Feb. 18, a drop of 3.38%. Yesterday's close marked its lowest level since late January.
Commodity prices dropped sharply overnight, sending oil prices into double-digits. Light crude is down 2.81% to $99.81 per barrel. Gold prices fell 0.33% to $1,407.90 per ounce.
The benchmark 10-year Treasury yield firmed eight basis points Thursday to yield 3.39% at the close. News of the earthquake caused the 10-year to trade in a range of 3.395% and 3.336% overnight. The current yield of 3.37% is the lowest since late January.
The US$ index is across the board, marking the fourth gain in the last five days after hitting a four-month low on Friday, according to BMO Capital Markets.
Key Events Today:
8:30 - Retail Sales are anticipated to rise 1 full 1% in February, more than triple the 0.3% pace increase a month before and double the 0.5% gain in December. Excluding autos the advance should be 0.7%, economists say.
"A solid report would remove some of the sting from the surprising dip in January real consumer spending, keeping it on track for a decent 3% annualized advance in Q1," said economists at BMO Capital Markets.
"While that would mark a setback from Q4's 4.1% pace, it nonetheless would be a decent performance given the amount of money being poured down the gas tank," they added. "With Americans consuming 140 billion gallons of gasoline each year, the nearly one dollar increase in gasoline prices in the past year translates into a 1½% reduction in annual consumer purchasing power, or a 1% hit to GDP."
8:30 - William Dudley, president of the New York Fed, speaks to the Queens Chamber of Commerce in New York.
9:55 - After a sharp increase in February, Consumer Sentiment is anticipated to go for a dip this month. Economists look for the index to fall to 76.5 from 77.5 - a three-year high. Moreover, with the stock mark struggling and oil prices soaring, a slight drop could be considered an understatement.
"Consumer sentiment will be hurt by the recent sharp rise in gasoline and food prices, as well as the ongoing turmoil in the oil and stock markets caused by the violence in Libya," said economists at IHS Global Insight. They anticipate a 75.0 reading.
10:00 - Business Inventories are predicted to rise 0.7% in January, following a 0.8% gain in the final month of 2010. A larger increase may be in the cards too, as Wednesday's wholesale inventories report was stronger-than-expected.
"Increased prices likely led to higher dollar values of inventories accumulated by manufacturers and wholesalers," said economists at Nomura Global Economics. "Additionally, retail sales were strong at the end of 2010 and we expect retailers to be stocking up for future sales."
BMO added: "Inventory investment virtually stopped in Q4 after a record increase in Q3, but it looks to have snapped back in Q1 and add meaningfully to GDP growth. Moreover, inventories remain fairly lean and should continue to support growth this year."