January 25, 2012
U.S. equities were lower on the day, with the S&P 500 down -0.10%, led down by Telecommunications and Utilities. Volume was lighter than normal yesterday as investors waited to hear Mr. Obama’s State of The Union address last night, and for today’s FOMC meeting. The 10yr Treasury advanced +1bps yesterday to 2.056%, still holding above a recent downtrend; support still rests at the 100-day MA which is 2.01%. The U.S. Dollar Index rose yesterday, as sentiment was broadly lower amid worries over the Greek debt deal and uncertainty surrounding the State of The Union address and the FOMC releases today.
European stocks slid from a 5-month high on reaction to much of the same news; the Euro Stoxx 50 closed down -0.38%. Yields on sovereign debt increased yesterday, with Italian yields up +6bps to 6.134%. Germany’s 10yr bunds are trading at 1.989%.
Apple announced earnings that beat analyst estimates, its profit doubled on demand for iPhones and iPads in 4Q.
U.S. equity markets opened moderately lower this morning and for the most part remain mostly unchanged before today’s FOMC release. The S&P 500 was down -0.17% at 9:31am (EST). The 10yr is at 2.058% and the U.S. Dollar Index is up on the day amid deteriorating sentiment. LIBOR/OIS has decreased to 46.6bps, down from its early Jan. high of 50bps, and the spread has narrowed between commercial paper and t-bills from an early Dec. high of 58bps to 48.95bps; both indications of increasing investor risk tolerance as credit markets show early signs of easing.
European stocks are down for the day after data out of the U.K. indicated its economy shrank more than economists forecast in 4Q, as manufacturers cut output and services stagnated; Britain’s FTSE 100 is down -0.66%, and the Euro Stoxx 50 is down -0.87%.
The Hang Seng Index remains closed today in observation of the Lunar New Year Holiday, but the Nikkei 225 closed up +1.12%. Japan had its first annual trade gap since 1980, driven by an energy import surge and a shift of manufacturing overseas that threaten to undermine the nation’s status as the world’s largest creditor.
Today’s Economic Data Lineup (EST)
7:00am, MBA Mortgage Apps, week of Jan. 20
10:00am, House Price Index (M/m), Nov., est. 0.1% from -0.2%
10:00am, Pending Home Sales (M/m), Dec., est. -1.0% from 7.3%
10:00am, Pending Home Sales (Y/y), Dec.
11:30am, U.S. to sell $35b 5-yr notes
12:30pm, FOMC Rate Decision, expect unchanged at 0.25%
2:00pm, Fed releases rate forecasts
2:15pm, Bernanke press conference
“Accept the challenges, so you may feel the exhilaration of victory.”
-George S. Patton
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