Stocks pointed south this morning as reports emerge that the Fed planning to scale back its asset purchases and retail sales data came up better than expected.
US sales rose 0.1% on a monthly basis, beating bearish forecasts. Economists expected to see a 0.3% fall in April sales after March's upwardly revised 0.5% drop as consumers belatedly feel the crunch from the broad-ranging payroll sales tax that went into effect on Jan. 1. Excluding gas and autos, sales rose 0.6%.
Over the weekend, the Wall Street Journal's Jon Hilsenrath, nicknamed the "Fed Whisperer," reported that the Federal Reserve is already making plans to wind down its $85 billion monthly asset purchase program.
"Officials are focusing on clarifying the strategy so markets don't overreact about their next moves," Hilsenrath wrote. "For example, officials want to avoid creating expectations that their retreat will be a steady, uniform process like their approach from 2003 to 2006, when they raised short-term interest rates in a series of quarter-percentage-point increments over 17 straight policy meetings."
The prospect that the Fed might turn off the tap weighed on stock futures this morning. Before the opening bell, Dow (INDEXDJX:.DJI) futures were down 0.22% at 15,035. S&P 500 (INDEXSP:.INX) futures slipped 0.27% to 1,625.20. Nasdaq (INDEXNASDAQ:.IXIC) futures fell 0.31% to 2,966.25.
European stocks are declining today while the Eurogroup of finance ministers meet to formally approve the first tranche of aid to Cyprus, worth 3 billion euros, and the next package of Greece's ongoing bailout. Meanwhile, figures released today showed that construction activity in Greece fell 42.9% year over year in February. The Eurogroup will hold a press conference at 11 p.m. British time, 8 p.m. EDT.
Italy had a successful bond auction, where it sold 8 billion euros of debt for various maturities at lower yields. Debt maturing in 2026 sold at 4.07% yield, down from 4.55% at a similar auction in February.
Fitch found that 41% of European fund managers surveyed felt that the European financial crisis is as good as over thanks to policy action, while 30% felt that the markets were irrationally exuberant.
Japan led Asian stocks, as the Nikkei (INDEXNIKKEI:.NI225) rose 1.20% to the highest level in more than five years as the G-7 finance ministers opted not to reprimand the country for its bold currency manipulation.
Chinese industrial production rose 9.3% on a yearly basis in April, just short of estimates. Retail sales in the country rose 12.8%.
In corporate news, shares of Corning ( GLW ) rose 1.9% after Barclays ( BCS ) raised its recommendation to overweight and MorganStanley ( MS ) raised it to equal weight. Last month, the company, which manufactures the Gorilla Glass found in smartphone screens, raised its dividend by 11%.
Dell ( DELL ) board members are entertaining the late offer from Carl Icahn and Southeastern Asset Management to take the computer company over, as an alternative to the $24.4 billion deal with Silver Lake Partners and founder Michael Dell. The board asked Icahn and company for more information about the offer. Last week, Icahn said that Mr. Dell should no longer lead his company.
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