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Overnight Developments

  • Global stocks this morning are mostly higher with the Euro Stoxx 50 up +0.20% and Jun S&Ps up +0.20 of a point. The dollar index slipped to a 3-week low and most commodities gained with Apr gold at a 1-week high before U.S. reports on house prices and consumer confidence later this morning. European stocks received a boost after the Mar French consumer confidence indicator unexpectedly rose +5 to 87, stronger than expectations of unchanged at 82 as it matched its 15-month high from July 2011. Stocks also were boosted from comments made late yesterday by ECB President Draghi who said governments should continue to take "decisive measures" after the ECB's liquidity measures helped restore investor confidence. Bunds rallied and the euro fell back from a 3-1/2 week high against the dollar on slack demand for European sovereign debt after Italy sold 3.82 billion euros of bonds, below the maximum target of 4 billion euros, while Spain sold 2.58 billion euros of debt, below the maximum target of 3 billion euros. The British pound rose to a 4-1/4 month high against the dollar after Mar U.K. CBI reported sales rose to 0, stronger than expectations of -5.
  • Asian stocks today closed mostly higher with Japan up +2.36%, China -0.32%, Australia +0.90%, SOuth Korea +1.23%, India +1.20%. Asian stocks rose after Fed Chairman Bernanke said accommodative monetary policy is still needed and Mar German business confidence unexpectedly gained, which improves the earnings outlook for Asian exporters. Japan's Nikkei 225 Stock Index posted a 1-year high and recovered all of its losses from last year's earthquake crisis as $241 billion of reconstruction spending and BOJ efforts to devalue the yen provided a bullish backdrop for Japanese equities. Chinese stocks closed lower after Jan-Feb China industrial company profits fell -5.2% y/y, the first decline since 2009 as slowing exports and government measures to cool housing dampened earnings. South Korean stocks finished higher after Mar South Korea consumer confidence rose +1 to 101, a 4-month high.

Overnight U.S. Stock News

  • June S&Ps this morning are trading up +0.20 of a point. The U.S. stock market Monday rallied right from the opening and settled sharply higher after Fed Chairman Bernanke said accommodative policies are still needed along with optimism the European debt crisis may be contained after German Chancellor Merkel hinted Germany may end its opposition to expanding the size of the European bailout fund: Dow Jones +1.23%, S&P 500 +1.39%, Nasdaq Composite +1.78%. The S&P 500 posted a fresh 3-3/4 year high and the Nasdaq rallied up to an 11-year high. Bullish factors Monday included (1) comments from Fed Chairman Bernanke which indicate the Fed will maintain its overly easy monetary policies when he said reducing the U.S. jobless rate further will probably require a quicker expansion of business production and consumer demand, which "can be supported by continued accommodative policies," (2) optimism the EU will increase the size of its bailout, which may help contain the European sovereign-debt crisis, after German Chancellor Merkel suggested Germany may drop its opposition to an expansion of the debt-crisis bailout fund when she said Germany may back plans to let the temorary and permanent rescue funds run in parallel, and (3) carry-over support from strength in the Mar IFO German business climate which unexpectedly rose to an 8-month high and bolsters confidence in the global economic outlook.
  • Bearish factors Monday included (1) weakness in homebuilders after the unexpected decline in Feb U.S. pending home sales (-0.5% m/m, weaker than expectations of +1.0% m/m) and (2) comments from Italian Prime Minister Monti who warned that Spain could reignite the European debt crisis as it struggles to control its finances.

Today's Market Focus

  • June 10-year T-notes this morning are up +1.5 ticks. T-note prices Monday recovered from early losses and settled little changed after dovish comments from Fed Chairman Bernanke offset reduced safe-haven demand for Treasuries as stocks rallied: TYM2 +0.5, FVM2 +2.0, EDU2 +2.0. Bullish factors Monday included (1) comments from Fed Chairman Bernanke who said reducing the U.S. jobless rate further will probably require a quicker expansion of business production and consumer demand, which "can be supported by continued accommodative policies," and (2) the unexpected decline in Feb U.S. pending home sales (-0.5% m/m, weaker than expectations of +1.0% m/m). Bearish factors included (1) the rally in equities which curbed the safe-haven demand for Treasuries, (2) comments from Philadelphia Fed President Plosser who said he sees "no need at the moment" for additional Fed stimulus, and (3) supply pressures ahead of the Treasury's $35 billion auction of 2-year T-notes on Tue.
  • The dollar index this morning is weaker and at a 3-week low with the dollar/yen +0.07 yen and the euro/dollar -0.06 cents. The dollar index Monday erased an early rally and fell to a 3-week low and settled lower after Fed Chairman Bernanke said accommodative monetary policy was still needed to reduce U.S. unemployment along with strength in the euro which posted a 3-week high against the dollar after Germany said it may back plans to increase Euro-Zone rescue funds: Dollar Index -0.363, USD/JPY +0.483, EUR/USD +0.00881. Bearish factors included (1) dollar negative comments from Fed Chairman Bernanke who said reducing the U.S. jobless rate further will probably require a quicker expansion of business production and consumer demand, which "can be supported by continued accommodative policies," (2) comments from German Chancellor Merkel which boosted the euro when she suggested Germany may drop its opposition to an expansion of the debt-crisis firewall when she said Germany may back plans to let the temporary and permanent rescue funds run in parallel, and (3) the unexpected increase in the Mar German IFO business climate to an 8-month high, which is euro supportive. Bullish factors included (1) comments from Philadelphia Fed President Plosser who said he sees "no need at the moment" for additional Fed stimulus and (2) euro negative comments from Italian Prime Minister Monti who warned that Spain could reignite the European debt crisis as it struggles to control its finances.
  • May crude oil prices this morning are up +19 cents a barrel and May gasoline is -1.28 cents per gallon. Crude oil and gasoline prices Monday gyrated on either side of unchanged and finally settled higher after comments from Fed Chairman Bernanke weakened the dollar and offset concern over contagion to the European debt crisis: CLK12 +$0.16, RBK +2.98. Bullish factors included (1) the slide in the dollar index to a 3-week low, which boosts investment demand in commodities, (2) comments from Fed Chairman Bernanke that boosted commodities when he said that continued accommodative monetary policy was needed to lower unemployment, and (3) the unexpected increase in the Mar IFO German business climate to an 8-month high, which is positive for economic growth and energy demand. Bearish factors included (1) the warning from Italian Prime Minister Monti who said that Spain could reignite the European debt crisis, which may lead to weakness in the European economy and energy demand and (2) the unexpected decline in Feb pending U.S. home sales, which signals ongoing weakness in the U.S. housing sector that may crimp economic growth and fuel demand.

Today's U.S. Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): WAG-Walgreen (BEST earnings consensus $0.77), MKC-McCormick (0.53), PVH-PVH Corp. (1.09), LEN-Lennar (0.05), RBN-Robbins & Myers (0.74), SNX-SYNNEX (0.92), NEOG-Neogen (0.23), OXM-Oxford Industries (0.55), CHRS-Charming Shoppes (-0.02).

Global Financial Calendar

Tuesday 3/27/12
United States
0745 ET ICSC (Int'l Council of Shopping Centers) weekly retailer sales.
0855 ET Redbook weekly retailer sales.
0900 ET Jan S&P/CaseShiller composite-20 home price index expected -0.3% m/m and -3.8% y/y, Dec -0.5% m/m and 4.0% y/y.
1000 ET Mar U.S. consumer confidence (Conference Board) expected -0.7 to 70.1, Feb +9.3 to 70.8.
1000 ET Mar Richmond Fed manufacturing index expected -2 to 18, Feb +8 to 20.
1000 ET New York Fed President William Dudley speaks at a Domestic Monetary Policy and Technology Subcommittee hearing entitled "Federal Reserve Aid to the Euro-Zone: Its Impact on the U.S. and the Dollar."
1130 ET Weekly 4-week T-bill auction.
1235 ET Boston Fed President Eric Rosengren speaks in London at the National Institute for Economic and Social Research.
1245 ET Fed Chairman Ben Bernanke delivers a lecture (3 of 4) at George Washington University School of Business on "The Federal Reserve and its Role in Today's Economy."
1300 ET Treasury auctions $35 billion 2-year T-notes.
1320 ET Dallas Fed President Richard Fisher speaks at a Dallas Fed community forum on Federal Reserve operations and an economic update.
2100 ET St. Louis Fed President James Bullard speaks at Tsinghua University in Beijing on "Monetary Policy in a Global Setting: China and the United States."
Germany
0200 ET Feb German import price index expected +1.0% m/m and +3.5% y/y, Jan +1.3% m/m and +3.7% y/y.
0300 ET Apr German GfK consumer confidence survey expected +0.1 to 6.1, Mar +0.1 to 6.0.
France
0245 ET Mar French consumer confidence indicator expected unchanged at 82, Feb +1 to 82.
Euro-Zone
0430 ET OECD Secretary-General Angel Gurria and EU Commissioner for Economic and Monetary Affairs Ollie Rehn speak at the presentation of the OECD Economic Survey of the Euro-Zone.
United Kingdom
0600 ET Mar U.K. CBI reported sales expected -5, Feb -2.

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