The Bernanke testimony to the Senate Banking Committee and the
revival of Euro-zone fears following the stalemated Italian
election provide the backdrop for today's trading action. Early
indications are suggesting stocks reversing the losses from
Monday. But a slew economic data coming out a little later,
ranging from Consumer Confidence to New Home sales and a host of
retail sector earnings reports will determine if the gains can be
sustained throughout the
day.
Bernanke's testimony in the Senate today is about the economic
outlook, but the market will be looking for clues to the future
of the Fed's $85 billion a month bond-purchase program.
Bernanke's goal will be to convey some sense of improvement in
the underlying economic fundamentals, but also point out the very
real downside risks, particularly from policy uncertainty. The
budget sequester about to take effect on Friday will also come
up, likely in the long-winded statements-cum-questions from the
senators. The Fed Chairman is likely to come across as reassuring
the markets about the ongoing QE program, whose future became
less than clear in investors' eyes following the release of last
month's FOMC meeting minutes. What the market's recent jitters
tell us is that the Fed was and is central to the stock market
gains.
The split Italian vote provides us with another reminder that
the Euro-zone mess is far from over. The stalemated election
result can be interpreted a number of different ways, but the
clearest interpretation is the Italians' rejection of the
sensible reformist course put in place by the technocratic
government of Mario Monti. Given the split mandate, the country
will most likely need to go through another vote in the not too
distant future. It may not be a full-blown re-enactment of the
Euro-zone crisis, but it does mean that we better brace ourselves
for headlines about rising government bond yields in Italy and
Spain all over again.
Today's data about New Home sales and the Case-Shiller home
price index are expected to further confirm the positive momentum
on the housing side. This morning's earnings report from
Home Depot
(
HD
) and from
Lowe's
(
LOW
) on Monday reflect the same trend. It will also be interesting
if the Conference Board's Consumer Confidence data rebounds as
expected, particularly given the backdrop of higher payroll taxes
and rising gasoline prices.
Today's economic releases include
Consumer Confidence
which is expected to increase to 61.3 and
New Home Sales
, both of which are scheduled for release at 10:00 AM EST.
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