As expected trading was quiet as the bond market and banks were closed for Columbus Day. The dollar fell to a three week low as all are reassessing the probability of a change in monetary policy this year even as several Committee members are suggesting a 2015 increase is indeed plausible.
The Yuan jumped the most since March and speculation of additional stimulus boosted Chinese shares. Oil pared some of last week’s gains as OPEC reported its members pumped the most crude in three years.
Earning season returns today as over 35 S & P 500 companies post results this week including Johnson and Johnson, Intel and JP Morgan. All will scrutinize the results to determine the impact of higher dollar, slowing foreign markets and potential wage inflation that may erode margins.
Tomorrow there are several pivotal economic releases, including retail sales, the PPI and the Beige Book. Has the drop in oil translated into a boon for the consumer? Earlier in the year most had forecasted a rise in retail sales as oil plunged. It did not occur. Sales ex auto are expected to drop by 0.1%.
Continuing with the oil theme, Producer Prices are expected to decline by 0.2%, ex food and energy up 0.1%. And then there is the Beige Book or the statistical compilation utilized at the upcoming Fed meeting. How will the Executive Summary be interpreted?
Last night the foreign markets were down. London was down 0.78%, Paris down 1.23% and Frankfurt down 1.0%. China was up 0.17%, Japan down 1,11% and Hang Sang down 0.57%.
The Dow should open nominally lower after weaker than expected export data reignited growth concerns. Earnings released this morning indicate the negative impact of a rising dollar. The 10-year is up 8/32 to yield 2.07%.
A QUIET DAY BECAUSE OF COLUMBUS DAY…
Ken Engelke
Chief Economic Strategist Managing Director
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