Markets declined early Tuesday as the German Investor Confidence Survey fell to 36.3 vs 40 expected, and prior 38.5. But take note that this indicator historically has not been a market-moving event. The decline then must be considered just an excuse to take some profits from overbought markets. Elsewhere, many BRIC markets are seeing central bank tightening as inflation worries and currency issues become more dominant. India has raised interest rates twice and Brazil three times. Further, China has been cracking down on bank lending, which is similar to tightening in their own unique way.
In the U.S. the headline CPI shot up (.5% vs exp .4% & prior .1%) while the silly “core” rate ex food and gas was stagnant (.2% vs .2% & prior .2%). It’s great none of us are eating or driving right? Industrial Production rose (.3% vs .2% exp & prior .0%) and the Home Price Index jumped (57 vs 52 exp & prior 52). Nevertheless, our realtor of the year here has relayed to us that activity in this New England area has slowed to a crawl. Is it possible potential home buyers are spoiled by previously ultra-low interest rates even though current rates are historically low.
Primary earnings announcements included a beat by Goldman Sachs (GS) and a disappointment from Coke (KO).
Stocks overall were marginally weaker in advance of Bernanke’s testimony even though it would be hard to imagine him changing his theme for a third time in a month.
Despite Goldman’s beat, financials (XLF) fell modestly while consumer discretionary (XLY) also fell given Coke’s heavy weighting. Leading sectors, while few, included solar (TAN), gold stocks (GDX), and bonds (TLT). Given our mention of GDX, you might wish to view our short public chart video on this market.
After the close of trading, Yahoo (YHOO) posted a very dismal report and outlook given poor display ad revenue among other things. Bulls lamely stated: “It could have been worse."
Volume overall remains light while breadth per the WSJ was slightly negative.
This is deliberately a short commentary given the light volume. There is some tension before the Bernank takes to testifying. Beyond him are Housing Starts, the Fed Beige Book and petroleum supply data.
Let’s see what happens.
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