The Day Ahead: CPI, Industrial Production, Jobless Claims

Equity futures are rebounding modestly this morning after substantial losses earlier in the week erased all of 2011's gains.  Bonds are backing up in the process.

S&P 500 futures are 12.00 points higher at 1,266.00 and Dow futures are up 69 points at 11,647. Since hitting a calendar-year high on Feb. 18, the S&P has shed 83.5 points, or 6.23%, while the Dow has lost 705 points, or 5.72%.

Light crude oil rose 1.88% overnight to $99.82 per barrel while gold prices are up 0.16% to $1,401.55.  

"Investor risk appetite is back on as concerns about Japan's nuclear crisis have abated somewhat," said economists at BMO Capital Markets, noting that Japan is adding more workers at the Fukushima power complex and that G7 officials are expected to meet tomorrow to discuss assistance for Japan.

The U.S. dollar is weaker as investors take money out of safe haven assets. Treasuries are down too - the benchmark 10-year yield rose one basis point to 3.22%, reversing a bit of the nine basis point firming yesterday. Rates trading volume continues to be very high.

Equities in Japan finished 1.44% lower while stocks in China fell 1.14% and Hong Kong shares declines 1.83%. Equities in Europe are modestly up, including a 0.83% in London's FTSE 100.

Key Events Today:

8:30 - Initial Jobless Claims rebounded by 26k to 397k in the week ending March 12. Economists hope the downward trend resumes this week, with the consensus looking for 385k new claims for unemployment benefits. Predictions are in a pretty narrow range between 380k and 395k, in line with the February average of 389k.

"The most recent report marks the fourth week in the last five with a sub-400k filing rate," noted economists at Nomura Global Economics. "Although claims rose to 397k last week, the four-week average remained near 2½-year lows. We expect more readings in the 300,000s in the coming weeks."

8:30 - Rising energy prices accounted for two-thirds of the 0.4% uptick in January's Consumer Price Index. February's story is supposed to be much the same with another 0.4% gain in the cards, economists predict. The core index (ex-food and oil prices) is supposed to inch forward 0.1% following a 0.2% rise the month before - the biggest increase since October 2009. Annually, headlines prices were up 1.6% and core prices were up 1%.

"Prices at the consumer level are getting pushed up by energy, specifically gas prices," said economists at BTMU. "The national average for a gallon of gas hit $3.57 in the week of March 7th, and prices averaged $3.26 in February - +3.7% higher compared to January. We think the energy component of CPI likely increased by +3.5% in February with price increases elsewhere in medical care, transportation, housing, and food. Year-over- year headline prices are expected to rise by +2.1% - the highest since April 2010."

9:15 - Industrial Production, the key report for the week, is expected to climb 0.6% in February following a 0.1% slip in January and a 1.2% gain in December. Predictions range from 0.5% to 0.9%. Wild weather swings were blamed for the January decline as utilities output dropped 1.6%, whereas manufacturing output was up 0.3%.

"All manufacturing surveys point to a strong month, much better than January, when factory output was held by inclement weather," said economists at IHS Global Insight.  "February hours worked in manufacturing rose 0.7%, and along with higher vehicle output, should boost the manufacturing sector to a better than 1.0% gain."
10:00 - Leading Economic Indicators, a composite gauge that seeks to anticipate turning points in the economy, has been rising for the past seven months straight. The January index rose just 0.1% though, down from a 0.8% gain to end 2010. Economists look for a more robust 1% gain in February, as economic data continued to be optimistic for the month, particularly in the labor markets.

"The drop in initial filings for unemployment insurance in February-to an average of 389k from 432k in January-is the greatest contributor to the index, followed closely by the widening spread between 10-year Treasuries and Fed Funds," said economists at Nomura Global Economics.

10:00 - The Philadelphia Fed Survey is expected to moderate after leaping to a seven-year high in March. The index rose 16.6 points to 35.9, as all components grew including the employment index - it rose to from 17.6 to 23.6, its highest since May 1973. Economists at Nomura called it the most "encouraging indicator from the manufacturing sector since well before the Great Recession began three years ago."