EmailThe excitement level died down a bit yesterday, yet that didn't stop the Dow Jones Industrial Average, which gained 42.47 points, or 0.3%, from extending its reach into record-high territory. The Nasdaq slipped just 1.77 points while the S&P 500 gained 1.67 points.
The early indication is that the major averages won't put a lot of distance between them and yesterday's closing level when trading begins. The S&P futures are trading 0.2% above fair value.
That's not bad given how far the market has come since the start of the year alone. The lack of selling interest reflects concerns about missing out on further gains and getting mentally whipsawed again by the sight of the market quickly bouncing back from any type of dip.
The early storyline today is that the Bank of Japan, the Bank of England, the Central Bank of Brazil, and the ECB all held policy meetings and each one of them left their policy stance unchanged. As a reminder, their respective policy stances lean in the accommodative direction.
Other storylines of note include Spain holding a successful bond auction, an Italian court sentencing Silvio Berlusconi to one year in prison for his part in a wiretap case, and a batch of same-store sales results for February out of the retail sector that have been less than stellar.
Nothing so far, though, has gotten futures traders overly excited -- and that includes a better-than-expected initial claims report.
For the week ending March 2, initial claims declined by 7,000 to 340,000 (Briefing.com consensus 350,000). This is the second straight week claims have been below the 350,000-400,000 range where they held for the better part of the last year. We are not aware of any special factors influencing the level of claims, so this can be viewed as an encouraging factor as it relates to the job market.
That last thought may be why the futures market has reacted with guarded enthusiasm since participants are mindful that improvement in the labor market is a precondition for the Fed to pull back on its accommodative stance.
The 10-year note is down 9 ticks, pushing its yield up to 1.97%.
The other economic releases this morning included the trade balance and fourth quarter productivity reports. The latter was revised slightly higher to show a 1.9% decline versus a 2.0% decline that was previously reported. Unit labor costs were revised up to show a 4.6% increase versus the prior reading showing a 4.5% increase.
In terms of the trade balance, the deficit widened to $44.4 bln in January from $38.1 bln in December. The Briefing.com consensus expected the deficit to be $43.0 bln.
January exports were $2.2 bln less than December exports while January imports were $4.1 bln more than December imports. Petroleum product demand played a leading role in both instances. Exports of fuel oil declined by $1.7 bln while imports of crude oil increased by $2.96 bln.
The wider-than-expected deficit is apt to be a negative factor in many economists' forecasting models for Q1 GDP.
Another item that will be on the market's radar today is the release of the first round of the Fed's CCAR report (i.e. bank stress test) after the close. This phase will provide insight on bank capital levels and will not include the authorization for capital return plans.
This could act as a restraint on the bank stocks today, but consistent with the market's default attitude, it is not being seen ahead of time as something to fear.
