The world economy will probably expand 2.7 percent this year and 3.6 percent next year, instead of the 3.1 percent and and 4 percent predicted in May, the Paris-based Organization for Economic Cooperation and Development said in a semi-annual report today. Best Buy Co. (BBY) slid 9.5 %. The S&P 500 trades at 17 times reported operating profit, a 20 percent increase from the beginning of 2013, according to data compiled by Bloomberg. Ben Bernanke speaks at 7pm EST.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is up 1.75 points to 1790.50. We believe this market will remain somewhat quiet before a big day of data tomorrow, with CPI, Retail Sales, and the latest FOMC minutes. We believe the market is susceptible to a slight correction of literally around 1%. We have a downside target of 1774 from the current level of around 1790. This move could happen tomorrow if the data prompts a the market to think the Fed may taper sooner rather than later. We believe the 1792 prior target could serve as a key ceiling for this market.
Bonds: The DEC13 U.S. 30-year bond market (CBOT:ZBZ13) is down 10 ticks to 132’22. We believe this market had a short-covering rally post-Yellen testimony, BUT is STILL susceptible for a another big wave of selling over the near term future. World Bank President Jim Yong Kim has expressed his wish for the US Fed to taper gradually, bit by bit. We believe that tomorrow’s data may be a big driver of future bond movement, but also the December non-farm payrolls report is the next big data point to watch for the bond market. We still believe the bonds may approach 2013 lows before year’s end, especially if the data points to exceptional jobs growth.
Currencies: The DEC13 USD (NYBOT:DXZ13) is down 9 ticks to 80.74, while the DEC13 Aussie is the biggest winner of the major USD pairs, trading up 40 ticks to 93.98. The DEC13 Swiss Franc is up 22 ticks to 109.70, and we believe the 1.10 level could be a significant barrier to the Franc’s recent rally. Tomorrow’s data could be significant for the FX markets, with CPI being a highly watched inflation gauge. The DEC13 Yen/USD is below 100, and we believe this pair may decline further to 2013 lows.
Commodities: DEC13 gold (COMEX:GCZ13) is up $3 to $1275. We believe gold is susceptible to further downside action, possibly breaking $1250. However, we don’t see another large downmove coming soon, but would not be surprised to see gold approach 2013 lows sometime next year, especially if we do indeed get Fed tapering. FEB13 Live Cattle (CME:LCG14) has taken a two day dive on profit-taking after a sustained rally. We believe this contract can fall much further. DEC13 WTI crude oil is almost unchanged today from yesterday’s close. We would not be surprised to see another move down in crude, possibly to the $88 level.