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CNBC ON DIGG

Retail Sales, Geithner and Which Way the Dollar

Published: Tuesday, 12 May 2009 | 7:47 PM ET

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By: Patti Domm
Executive Editor

Good news from Intel will compete with fresh economic data and a speech by the Treasury secretary for investors' attention ahead of the opening.

Hundred Dollar
Bill Haber / AP

Retail sales and import prices for April are reported at 8:30 a.m. Wednesday, and business inventories for March are reported at 10 a.m. There is new foreclosure data from Realty Trac, and Macy's [M Loading... () ] and Dr. Pepper Snapple [DPS Loading... () ]report earnings before the bell.

Treasury Secretary Tim Geithner speaks to the Independent Community Bankers of America Association in Washington at 9 a.m.

After the bell Tuesday, Intel said that its orders and billings for the second quarter have been slightly better than expected and the second quarter sales are "so far, so good." Intel shares [INTC Loading... () ] rose, but the company faces bad news Wednesday when the European Union is expected to seek a hefty fine from Intel for anticompetitive practices.

Also Wednesday, AIG CEO Edward Liddy and AIG trustees are set to testify starting at 10 a.m., before the House Committee on Oversight on the collapse and rescue of AIG [AIG Loading... () ].

Stocks closed mixed Tuesday, with the Dow higher on a late afternoon rebound and the S&P slightly lower. The Dow rose 50 or 0.6 percent to 8469, while the S&P 500 fell less than a point to 908 and Nasdaq slipped 0.88 percent to 1715.

Trend or Rally? — The Dow's Stress Test

"You had a lot of deals in the financials, and the market's absorbed them pretty well," said Tim Smalls of Execution LLC. Billions in new shares have come to market as banks race to raise capital, some to pay back government funds. Other companies, like Anadarko and Ford, are also looking to use the gains in equities to raise cash through secondary offerings.

Tuesday's wishy washy action follows Monday's sell off. Traders have been debating whether the market is entering a phase where it trends lower to sideways for awhile, after its fast run up. "I think we've got to bounce around in whatever the range might be over the next couple of months until we find a proper equilibrium," said Smalls.

Dollar Daze

The dollar's decline continued Tuesday, with the yen [JPY-TN Loading... () ] finishing at 96.3670, its lowest level since March 20. The dollar fell 1 percent against the yen and 0.42 percent against the euro.

Brown Brothers Harriman senior currency strategist Marc Chandler said the move by the yen caught short-term traders on the wrong side of the currency. "Now they're getting hurt. When the yen moves, it's like a snow ball," said Chandler. He said the currency temporarily broke the important 96.30 level, but the move wasn't convincing. Therefore, the dollar could stabilize against the yen but should stay weaker against the euro, he said.

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"I think there's a chance that we exhausted the move today. So the very short term, next day or so will tell us a lot," said Chandler of the yen's move. "... If I was a betting man, I'd say in order to repair the technical damage, we'd have to get back above 97. We might go sideways a little bit in Asia, especially with the gains in the stock market."

"For the most part, the near term dollar negativity is really a function of good news in the world. People are concluding we don't need the safe haven status of the dollar. We see hedge funds, for example, selling Treasurys and buying commodities ... We're seeing huge purchases of east Asian equities, especially Korea and Taiwan. So there are investors who think this is the turn and they don't want to miss it," said Chandler.

Oil Drill

As the dollar waffled, it helped push commodities prices higher. Commodities markets were mixed Tuesday. Gold gained 1.15 percent to $923.50 per troy ounce, but copper slipped 0.17 percent to $2.090 per pound.

Oil [US@CL.1 Loading... () ] cracked the $60 per barrel level for the first time this year Tuesday. It closed, though, at $58.85, up $0.35 per barrel, its highest settlement since Nov. 11. Crude and gasoline inventory data is expected at 10:30 a.m. Wednesday.

From 'Fast Money':

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M.F. Global senior vice president John Kilduff said he's looking for another retest of $60, before crude reverses and heads to the mid $50s.

"We have to keep our eye on this reflation trade and what's happening with the 10-year note ... What happens if this quantitative easing isn't enough to get this interest rate down?" he said, noting the rising yield could be an inflation signal.

Treasurys were mostly firmer Tuesday. The buying in the 10-year helped push its yield slightly lower to 3.175 percent, and the 2-year yield slid to 0.899 percent.

Sinking Ship

There are few worse signs for a stock than news that its top executives are bailing out. General Motors executives, including retiring vice Chairman Bob Lutz, sold their stock, signaling to traders that they've written off the value of the company's equity and that it could soon be driven to bankruptcy. GM [GM Loading... () ] stock lost 20 percent and was trading at a level not seen since 1933.