What’s the Story?

by CC April 25, 2012 8:51 am • Commentary


The dollar edged down and Treasury prices remained under slight pressure on Wednesday after a report showed U.S. durable goods fell 4.2% in March, more than economists expected. The main focus for currency and bond traders is the Federal Reserve’s statement after its policy meeting, forecasts and a press conference by Chairman Ben Bernanke. The dollar index DXY -0.07% , which compares the U.S. unit against a basket of major currencies, slipped to 79.120, from 79.149 before the report and 79.256 in late North American trade Tuesday. The euro EURUSD +0.0866% extended gains to 1.3216, from $1.3187. Yields on 10-year notes 10_YEAR +0.61% , which move inversely to prices, stayed up 1 basis point to 1.99%, flirting with 2%. Also coming up, before the Fed events, is the government’s sale of 5-year notes 5_YEAR +1.29% .


Demand for long-lasting U.S. manufactured goods dropped by the most in three years in March and a gauge of business spending plans fell, suggesting factory activity lost momentum as the first quarter ended.

Durable goods orders tumbled 4.2 percent, the largest decline since January 2009, the Commerce Department said on Wednesday after a downwardly revised 1.9 percent increase in February.

Economists had forecast orders for durable goods, which range from toasters to aircraft, falling 1.7 percent after a previously reported 2.4 percent rise in February.

Orders were dragged down by a 12.5 percent plunge in bookings for transportation equipment – the most since November 2010.

Excluding transportation, orders fell 1.1 percent after a 1.9 percent rise in February. Economists had forecast this category rising 0.5 percent.


Over the quarter, the nearly five-year-old iPhone remained Apple’s key driver. Apple said it sold 35.1 million of the smartphones, up from 18.65 million units a year ago. The device and related products and services formed 57.9% of Apple’s sales, up from 52.7% last quarter. The company said its latest iPhone is now available in more than 100 countries and at 230 wireless carriers, up from 90 countries and 186 carriers as of March last year.

On a conference call, Chief Financial Officer Peter Oppenheimer said iPhone sales in greater China were five times the level of the year-ago quarter.

The results were an encouraging sign of how the hit device would fare outside the U.S., particularly in less affluent countries where smartphone growth is increasingly shifting.


Britain’s economy slid into its second recession since the financial crisis after official data unexpectedly showed a fall in output in the first three months of 2012, piling pressure on Prime Minister David Cameron’s embattled coalition government.

The Office for National Statistics said Britain’s gross domestic product fell 0.2 percent in the first quarter of 2012 after contracting by 0.3 percent at the end of 2011, confounding forecasts for 0.1 percent growth.

Most economists had expected Britain’s $2.4 trillion economy to eke out modest growth in the early 2012, but these forecasts were upset by the biggest fall in construction output in three years coupled with anaemic service sector growth and a fall in industrial output.


Policymakers at the Federal Reserve wrap up a two-day meeting Wednesday and will explain what they plan to do about interest rates. The consensus seems to be they’ll keep short-term rates near zero to help support the lagging economy.

While policy may remain unchanged, there will likely be a spirited discussion over whether the Fed should change course. And there could be some details released about the give and take around the table, because Federal Reserve Chairman Ben Bernanke will hold a news conference after the meeting. The news conferences happen four times a year and coincide with updates of the Fed’s economic forecasts.