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Wednesday's Economic News Crunch Could Tilt Markets

A week's worth of economic reports has been crunched into just three days this week, and Wednesday has its share of significant data.

New York Stock Exchange, lower Manhattan, New York City.
Photo: Oliver Quillia for CNBC.com
New York Stock Exchange, lower Manhattan, New York City.

Weekly jobless claims are expected at 8:30 a.m., along with October durable goods, personal income, and consumer spending. Consumer sentiment is released at 9:55 a.m. and new home sales are released at 10 a.m. Jobless claims could be below 500,000 for the first time in months.

Stocks finished slightly lower Tuesday, after shaking off a triple digit Dow loss. The Dow was down 17 at 10,433, and the S&P 500 was down less than a point at 1106. The worst performers were the financials, with names like J.P. Morgan , Wells Fargo , Goldman Sachs , and Citigroup all lower. Financials were 0.8 percent lower followed by techs, off 0.5 percent. Top performers were defensive sectors -- consumer staples, up 1 percent, and health care, up 0.8 percent.

The dollar edged higher, while many commodities sold off. Oil fell $1.54 per barrel, or nearly 2 percent to $76.02 on global growth concerns. But gold rose $1.20 per troy ounce, to $1165.40, another record high.

Two important earnings - Deere and Tiffany are expected before the opening bell. J. Crew's after the bell earnings Tuesday could add some pop to the retail sector Wednesday. J.Crew stock was higher after reporting third quarter profits more than doubled. J.Crew said net income rose to $43.9 million. However Coldwater Creek saw a wider loss and its stock fell.

There is also the last of three major note auctions this week at 1 p.m. Wednesday. A total $32 billion of 7-year notes will be auctioned. Treasury prices moved higher Tuesday after a record issue of $42 billion in 5-year notes drew strong demand. Other news supporting bonds was the downward revision in third quarter GDP to 2.8 percent from growth of 3.5 percent and news from he FDIC that the number of distressed banks was at hits highest level in 16 years.

At the same time, the S&P Case-Shiller home price indexes showed a fifth month of gains in home prices, though less than expected, but monthly consumer sentiment was better than expected. In an afternoon release, the Fed's minutes from its Nov. 4 meeting also showed the Fed sees a slow economic recovery, paired with high unemployment, the ingredients for a period of low rates. The Fed, however, also increased its growth estimate for the economy for 2010.

Dollar Dilemma

Cantor Fitzgerald Treasury Strategist George Goncalves said he believes the strong showing at Tuesday's 5-year auction may be a signal about how some investors view the dollar, which has been moving toward its 2008 lows. "It's a vote of confidence in the U.S. dollar and it's a vote of confidence on the US. Treasury market, which is a building block of U.S. debt," he said.

Traders have been warily watching the flight of money into the Treasury market which has taken yields on short term bills to zero and even negative in recent trading sessions, and has caused a flurry of buying in shorter duration notes. On Tuesday, the 2-year notes was yielding 0.74 percent. Five year notes were yielding 2.10 percent, and the 10-year yield was 3.32 percent.

Monday's 2-year auction was also well bid. "If you're willing to to own a Treasury at this low yield level, it's not just because of the collateral levels, and it's not just window dressing. There's some thing else going on. People are going to own low-yielding Treasurys because the dollar trade has run its course," he said.

"The '09 trade was to be short dollars and long everything that moved. 2010 doesn't necessarily call for a repeat of that as well," he said.

He expects the 7-year auction to go smoothly. "After such a powerful run, I doubt people are going to want to be short going into Thanksgiving or short going into the auction," he said.

Whither Stocks

T. Rowe Price held its annual outlook day for media. Chairman and CIO Brian Rogers commented on a few trends he expects to see in equities in 2010.

Rogers expects companies to raise dividends, or reinstate them, a positive trend for the market. He also to see an increasing "zeal to deal" among companies, looking for strategic merger partners. "It will be an underpinning for equities," he said.

"I think markets will be generally good next year. I think it will be easier for stocks to outperform bonds," he said. Good earnings will be a catalyst, he said.

Hitting the Road?

Tom Kloza of OPIS says the average price of gasoline this Thanksgiving weekend should be around $2.65 per gallon, compared to $1.846 per gallon at this time last year. Oil at this time last year was a relatively cheap $54.45 per barrel, making crude about $23 per barrel more expensive now.

— Questions? Comments? marketinsider@cnbc.

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • CNBC Senior Commodities Correspondent and Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.