What’s the Story?

by CC March 13, 2012 9:20 am • Commentary


U.S. stock index futures pointed to a higher open for Wall Street on Tuesday, on positive investor sentiment ahead of the Fed’s latest statement on interest rates and the U.S. economy.

That view was bolstered by the latest retail sales report, which showed retail sales rose 1.1 percent, its biggest gain in five months, as consumers purchased motor vehicles and other goods despite higher gasoline prices.

Federal Reserve policymakers will hold a one-day meeting and release their statement at approximately 2:15 p.m. New York time. Investors expect the Fed to acknowledge a slight upturn in economic data and hold interest rates steady.

At its previous meeting in January, the Fed decided to maintain rates at a record low of between 0 percent and 0.25 percent, and to continue with its bond-buying stimulus program, saying economic conditions were likely to require the rate to be low until late 2014 at the earliest.

At 10:00 a.m., the government will release January business inventories, which economists polled by Briefing.com see rising 0.6 percent, following December’s 0.4 percent increase. At the same time, the Labor Department will release its “Job Openings and Labor Turnover” report.

The Treasury is set to sell $21 billion in 10-year bond notes on Tuesday, with the results available shortly after 1:00 p.m.


The FTSE All-World index is up 0.4 per cent as a 0.6 per cent rally in the Asia-Pacific region is followed by a 1.1 per cent pop for the FTSE Eurofirst 300.

Investors are picking out racier bets, adding to positions in selective growth-focused assets. Copper is up 1.4 per cent to $3.89 a pound, Brent crude has gained 0.5 per cent to $126.02 a barrel, while so-called commodity currencies, such as the Australian and Canadian dollars, are seeing demand.

The other side of that trade is the mild paring of holdings in perceived havens. US Treasuries are attracting some sellers, pushing yields on 10-year paper up 1 basis point to 2.04 per cent. Equivalent Bunds are up 3bp to 1.78 per cent.

But the euro has detached from the broader trend, losing 0.3 per cent to $1.3108, despite the Zew survey of German economic sentiment rising more than expected in March. This, and weakness in the yen, is pushing the dollar index up 0.2 per cent, a move that is having its traditional impact on gold, which is losing 0.2 per cent to $1,696 an ounce.

S&P 500 futures point to Wall Street’s benchmark index adding 9 points, or 0.5 per cent, to reach 1,380 when the opening bell rings. The last time the equity barometer closed at such a mark was when shares had just started to react to the financial crisis. Ten months later, by the time the S&P 500 had hit its cyclical trough, it had fallen by more than 50 per cent.

That March, in 2009, the US market’s volatility measure, the Vix, was above the 50 mark. On Monday the Vix closed below 16: testament to the less febrile and more optimistic mood, say the bulls; indicative of dangerous insouciance and meagre volume, argue the bears.


Retail sales posted their largest gain in five months in February as Americans stepped up purchases of motor vehicles and other goods even as they paid more for gasoline.

Total retail sales increased 1.1 percent, the Commerce Department said on Tuesday, after a 0.6 percent rise in January. The increase was broadly in line with expectations.

Details of the report were fairly upbeat and its tenor was also boosted by upward revisions to the prior months’ data, suggesting recent solid gains in employment were helping to cushion consumers against steep rises in gasoline prices.


The Federal Reserve will show how the capital of 19 U.S. banks might fare through a deep recession and a second housing crisis when they unveil stress-test results in three days.

The tests will show results for revenues, capital ratios and profits or losses at each firm over a nine-quarter period, the Fed said in a paper released today in Washington. The results will be released at 4:30 p.m. on March 15. Templates included in the Fed release today showed an array of categories it plans to disclose, from trading and counterparty losses to credit cards and first-lien mortgages.