EmailThe continuing litany of bad economic news from around the world is getting some play today in the US. Doubts are also setting in about the likelihood of Fed Chairman Bernanke saying anything substantive in tomorrow's speech. S&P futures suggest a down open of about six points.
Japanese July retail sales fell 0.8% from a year ago. That was much worse than expected. The Japanese government report yesterday that said the economic outlook was worsening was correct. The Japanese stock market fell 1%. Most other Asian markets were also lower although the Shanghai index was flat.
European stock exchanges are down about 0.2% in aggregate. The Spanish exchange is continuing its recent slide and is down 0.9%. The Spanish 10-year note yield has risen 12 basis points to 6.58%. The assumption that European Central Bank President Draghi's absence from the Fed meeting in Jackson means there is a European bond buying program in the works is pure speculation (wishful thinking?). He simply may not want to be photographed at a luxury resort while unemployment in Spain is 25%.
The conclusion appears to be be building that Bernanke will not say anything definitive in tomorrow's speech but simply leave open the possibility of "more action if needed." How long the stock market can find such a tease bullish is hard to say.
New claims for unemployment for the week ended August 25 were unchanged from the prior week at 374,000. This was close to expectations and barely above the four-week moving average of 370,250. July personal consumption expenditures rose 0.4% compared to expectations of 0.5%, personal income was at expectations of 0.3%, and the core PCE deflator was 0.0%. The data were barely noticed.
Retail chain store sales for August are coming in better than expected. Target reported sales up 4.2% from a year ago compared to forecasts of 3.0%. Costco was up 6.0% compared to forecasts of 4.4%. Those are by far the largest reports (Wal-Mart does not provide data) and most smaller chains are also beating forecasts.
The market could go into a holding pattern ahead of one of the most anticipated events in years - Bernanke's speech tomorrow. Then, some wild swings are possible. The market has often moved sharply within minutes of a Fed policy announcement, only to reverse course fifteen minutes later. Expect a volatile day tomorrow.
Founder and Chairman, Briefing.com
