March 12, 2010
STOCK INDEX FUTURES
Follow through gains from yesterday helped futures to firm in the overnight trade.
There were additional gains when the much stronger than anticipated U.S. retail sales report was released.
Advance February retail sales were up .3%, which compared to an estimate of a .2% decline and retail sales, excluding autos, were up .8%, when a .1% advance was anticipated.
The 8:55 Central Time March University of Michigan Index is expected to be 74.
The 9:00 January business inventories report is guessed to be up .1%.
Our analysis continues to suggest that the majority of economic reports will be stronger than the analysts' estimates.
Futures have recently shown a tendency to only temporarily come under pressure on bearish news and to over react on the upside on bullish news.
S&P500 futures have advanced to 17 month highs.
Expect further gains today for S&P500, Dow and NASDAQ futures.
Our research continues to tell us that this bull market will continue through 2010.
CURRENCIES
The U.S. dollar is lower and the euro is higher due to press reports that Greece may get a $75 billion bailout from the European Union. The "Kurier" newspaper in Austria, that printed the story, did not cite sources for their report. The U.S. dollar was also hurt by the growing belief that the FOMC may not increase interest rates until next year.
The British pound gained after it was reported that U.K. home prices increased at their quickest rate in over seven years.
The Japanese yen came under pressure on the belief that the Bank of Japan will ease monetary conditions further when their policy committee meets on March 16-17. The yen was also undermined by threats of BOJ intervention against the yen.
In the long term, the Canadian dollar is likely to trade higher due to favorable interest rate differential expectations, along with prospects of higher commodity prices.
The Australian dollar was supported by the feeling that the Australian economy will continue to grow at above analysts' expectations and on the belief that the Reserve Bank of Australia will continue to increase interest rates.
In the longer term, the Australian currency is likely to be the strongest currency this year, followed by the Canadian dollar.
INTEREST RATES
The large amount of Treasury offerings this week has taken its toll on the market, especially for the longer dated Treasury issues.
A better tone to the international sovereign debt situation also tended to undermine the flight to quality status of U.S. Treasuries.
There are reports that President Obama will nominate San Francisco Fed Bank President Janet Yellen to be vice chairman of the Federal Reserve. She has a history of being dovish on interest rate policies, which is another reason why we believe the U.S. central bank will not raise interest rates until next year.
We also believe that we are in the early stages of a new bear market for Treasury futures and the thirty year Treasury bond is likely to be the weakest performer.
If you would like more information about this article, please contact us at 1.877.690.7303 or send an email to alan.bush@archerfinancials.com. Additional research can be found at www.archerfinancials.com/research.aspx.
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