Tuesday, February 14, 2006 - 3:15 pm MST
Retail sales surged 2.3% in January as consumers hit the stores eager to spend holiday gift cards and take advantage of clearance sales. Warm weather also brought consumers out to shop. Strength was broad based across many categories; it wasn't just vehicle sales and high gas prices driving spending gains. Excluding autos, sales rose 2.2%, excluding both autos and gas and sales still rose 1.8%. After soft spending in Q405, consumption will rebound strongly in Q106, lifting Q1 GDP.
Stocks rallied Tuesday on signs the American consumer is alive and kicking and as oil prices tumbled below $60 a barrel. Light crude for March delivery fell $1.67 to settle at $59.57 a barrel on the Nymex today. The recent build-up in oil inventories has eased supply concerns for now. Super strong retail sales last month left no doubt about consumers' ability and willingness to spend. Gains were across most sectors as the Dow topped 11k for the first time since January. The Dow gained 136.07 to 11028.39. The NASDAQ was up 22.36 to 2262.17.
MARKETS CLOSING CHANGE
DJIA 11028.29 136.07
S&P500 1275.53 12.67
RUSSELL 2000 719.70 9.17
NASDAQ 2262.17 22.36
SECTORS - GAINERS & LOSERS
Platinum & Precious Metals +3.99%
Travel & Tourism -4.05%
Stellar retail sales results in January triggered a sell-off in Treasuries Tuesday as the bond market braced for higher interest rates down the road. The Fed is more likely to continue tightening when economic conditions are robust. Also, investors are hoping for more information on the Fed's tightening plans when Bernanke testifies before House and Senate Committees Wednesday and Thursday. In late trading the 10-year note was down 9/32 to 99-3/32 to yield 4.61%.
SECURITY YIELD CHANGE
2-Year Note 4.68 0.01
5-Year Note 4.59 0.02
10-Year Note 4.61 0.04
30-Year Treasury Bond 4.59 0.04
We will hear Ben Bernanke's views on the economic outlook and monetary policy in the next couple of days when the new Chairman delivers his semiannual testimony to Congress. Uncertainty over the new leadership at the Fed and signs of a strong, first quarter economic rebound pushed rate expectations higher last week. Fed funds futures traders are pricing in an almost 100% chance the FOMC will tighten at their March meeting, bringing the fed funds target to 4.75%. Traders are pegging the probability of another rate hike in May at 55%. The Chairman's testimony and data results this week are quite likely to further firm rate hike expectations.
For the week ending 02/09/06
RATE LATEST CHANGE FEES
30-Yr Fixed (FHLMC) 6.24 0.01 0.6
15-Yr Fixed (FHLMC) 5.83 0.02 0.6
1-Yr Adj (FHLMC) 5.34 0.01 0.5
3-Mo Libor (FNMA) 4.75 0.01 n/a
RATE LATEST CHANGE
Fed Funds 4.44 -0.06
Prime Rate 7.50 0.00
Fed Discount 5.50 0.00
11th District COF 3.296 0.00
-Amanda
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