With the Dow climbing for six consecutive days and breaking fresh 13-month highs, the 0.91% sell-off yesterday was prompted more by timely profit-taking rather than plunging sentiment. After a one-day break, investors are already back in buy-mode this morning, as all three indexes are looking modestly higher.
The question will be whether that confidence can last the morning. The trade balance is a never-too-pretty reminder of the nation’s growing debt, and consumer sentiment is unlikely to surge with the unemployment rate hitting double-digits for the first time in 26 years just two weeks ago.
Outside the US, the main economic news this morning is that the Eurozone has technically exited the recession with third-quarter GDP inching 0.4%. Annual GDP is down 4.1% but that’s an improvement from 4.8% year-to-year decline in Q2.
Two hours before the bell, Spot Gold is moving up $5.60 to $1109.40. The precious metal retreated earlier after saying hello to new peaks above $1123 yesterday. Meanwhile, WTI crude oil is up 37 cents but remains several dollars below the $80 mark at $77.31 per barrel.
Conversely, The US$ index is weaker this morning after two days of gains. But as Benjamin Reitzes from BMO notes, “most of the gains against it are mild.”
World Bank President Robert Zoellick, who earlier this week said the US cannot become complacent about the dollar’s decline, told an audience in Singapore earlier today that, in fact, there is little the U.S. can do to stall the “natural” depreciation of the U.S. dollar.
Key Events Today:
8:30 ― One debt figure just wasn’t enough this week. The Trade Balance is expected to show the monthly gap between imports and exports widening in September to -$32.5 billion from -$30.7 billion in August.
“The price of oil imports was probably little changed, but oil import volumes likely jumped sharply, reversing a dip in August,” said economists Brian Bethune and Nigel Gault from IHS Global Insight. “More broadly, we expect to see both export and import volumes rising, underlining that the declines in August were a temporary interruption of a new upward trend.”
Ian Shepherdson from High Frequency Economics has a different take, believing the deficit will drop to $29 billion, though the factors are temporary rather than, say, a surge in exports.
“An unexpected leap in Boeing aircraft deliveries raises the possibility of a significant, though temporary, drop in the headline deficit, though the core numbers remain volatile and anything can happen,” he said.
10:00 ― Consumer Sentiment fell in September despite expectations to the contrary. The 70.6 score is expected to inch up to 71.0 in this month’s survey from Reuters and the University of Michigan, but with unemployment numbers jumping into double-digits just as the survey calls were taking place, personally I wouldn’t be so confident.
“Recent increases in gasoline prices won't help strained household finances,” add economists from IHS Global Insight, who look for a dip to 68.0 in the survey. “We expect that real consumer spending growth will subside from an annual rate of 3.4% in the third quarter to 1.1% in the fourth quarter as a pullback in auto sales offsets gains in most other categories.”
