Daily
Market Commentary
Commentary prepared by Balance Sheet Solutions,
LLC, Member FINRA/SIPC
Thursday, March 18, 2010 at 9:00 a.m. CST |
The price action continues sideways despite some firmer data and no new information vis-a-vis the Fed. Of course, the fact that there are no auctions may be the single most important consideration when judging the price action.
Yesterday, it was reported that wholesale prices (PPI) fell more steeply than expected in February, declining by 0.6 % (consensus forecast: 0.2%). It was, in fact, the largest decline in seven months. Year-over-year producer prices increased 4.4% (consensus forecast: 4.9%) but slowed from a 4.6 % rise in January. Energy was the primary driver of lower price pressures as gasoline prices plummeted 7.4 %. Stripping out volatile food and energy costs, core producer prices edged up 0.1% last month, slowing from January's 0.3% increase.
This morning, consumer prices (CPI) were reported at 0.0% (consensus forecast: 0.1%). Excluding food and energy, core CPI came in at 0.1%. Year-over-year CPI at the consumer level has dropped to 1.3% versus 1.6% last month. This represents the lowest year-over-year increase in consumer prices since 2004. Thus the inflation data received over the past two trading days confirms the Fed’s view that inflation remains well under control.
On a possibly important political note, in terms of the market, we draw your attention to the healthcare vote. At any moment, the Congressional Budget Office (CBO) will announce how it ‘scores’ the plan. If it is very rich, it could lose votes; if within boundaries, it will gain some. We have no bias as to how the thing will conclude, but are fairly confident that if it fails, or looks like it will fail, stocks will not like that, bonds will.
The Treasury is scheduled to announce auctions for $44 billion in twos, $42 billion in fives, and $32 billion in sevens to be held next week.
In early morning trade, Treasuries are trading higher as the yield curve continues its flattening trend. Equities are unchanged.
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