EmailLike we said yesterday, the uncertainty in Italy and the looming sequester are likely to keep the risk trade in check for the time being. Hah!
Market participants laid dust to that statement yesterday as the major averages rallied on better-than-expected economic news and the hypnotic anecdotes of Fed Chairman Bernanke who again intimated before the House Financial Services Committee that the Fed's quantitative easing program isn't going to be culled in the near future. For good measure, he said it will likely be another three years before the unemployment rate reaches 6.0%.
It was an effective left-right combination -- encouraging data and words of easing encouragement from Mr. Bernanke -- that cut the bears at their knees.
The S&P 500 rallied 1.3% to 1515.99. Combined with Tuesday's advance, the S&P 500 has recouped the entirety of Monday's 1.8% decline and a tad more. In doing so, the S&P 500 got back on track for a winning month in February. A close above 1498.11 today will do the trick.
So far, the prospect of enjoying a positive monthly finish looks pretty good. The S&P futures are little changed and are trading slightly above fair value. That should translate into a slightly higher open for the cash market.
This morning's economic releases have not had quite the same vibrant flair as yesterday's data did.
To begin, the second estimate for Q4 GDP showed the economy growing at a whopping annualized rate of 0.1% (Briefing.com consensus +0.5%) versus a 0.1% decline reported in the first estimate. They are both lowly figures anyway you cut it, but the recognition that real final sales, which excludes the change in inventories, was revised up to 1.7% from 1.1% is being viewed as a consolation factor.
Initial claims for the week ending February 23 declined by 22,000 to 344,000 (Briefing.com consensus 360,000). This is a supportive headline number, as it drops initial claims below the range of 350,000-400,000 where they have been bounded for most of the last year. It is also the lowest claims level since June 2008.
We haven't seen any reports of special factors influencing the initial claims number, but it will take several weeks of claims below 350,000 to conclude a new lower bound is being established.
Continuing claims for the week ending February 16 dropped to 3.074 mln (Briefing.com consensus 3.150 mln) from 3.165 mln.
The Chicago PMI report for February (Briefing.com consensus 54.0; prior 55.6) will follow at 9:45 a.m. ET.
Treasury prices are firmer this morning. The 10-year note is up 5 ticks and its yield is at 1.89%.
Is the risk-on trade back off? Hard to say, but the market has shown this week not to take any positions for granted.
--Patrick J. O'Hare, Briefing.com
