A weaker looking Durable Goods reading this morning and
another day of Bernanke testimony provide the backdrop for
today's trading session. Italy related concerns will also be at
play, partly offset by positive earnings reports from
Target
(
TGT
) and
Dollar Tree
(
DLTR
) this morning and
Priceline.com
(
PCLN
) after the close on Tuesday.
Weakness in this morning's Durable Goods orders for January
came in weaker than expected, but the 'headline' softness was
primarily in the transportation sector. After all,
Boeing
(
BA
) took only two aircraft orders in January after orders for more
than 180 planes the month before. But 'core' capital good goods
orders officially known as nondefense capital goods orders
excluding aircraft came in surprisingly very strong. The 'core'
serves as a proxy for private sector capital expenditures in the
economy and is typically weaker in the first month of the
quarter. The inherent volatility of the Durable Goods report
limits its utility on a month-to-month basis, but the 'core'
strength is nevertheless positive and likely indicative of
improvement in business confidence in January following the
Fiscal Cliff headwind in at year's end.
We also have another day of testimony from the Fed Chief
today, but the market likely got enough reassurance from his
Tuesday comments. The bottom line on the Fed front is that there
is no imminent change in the central bank's bond purchase
program, which has served as a key driver of the market's recent
momentum. Bernanke was categorical in claiming that they are well
aware of the program's costs and benefits and that it made sense
for the Fed to continue with the open-ended QE program at this
end. He cautiously cited improvement in the underlying economy,
but also pointed towards policy risks, particularly from the
budget sequester. Barring a material improvement in the labor
market, meaning monthly job gains in excess of 200K for at least
3 months, I don't expect any changes to the Fed's current
monetary policy stance, particularly given the strong likelihood
of fiscal austerity getting underway as a result of the
sequester.
Pending Home Sales
is scheduled for release today at 10:00 AM EST, and is expected
to increase by 2.0% after decreasing by 4.3% in December to
101.7.
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