U.S. initial jobless claims retreated last week to the lowest since November. Citigroup Inc. reported fourth-quarter earnings that fell short of estimates. Best Buy Co. tumbled 27% as the company said U.S. same-store sales fell during the holiday-shopping season. The CPI rose 0.3% in December on a seasonally adjusted basis.
Equities: The MAR14 E-mini S&P 500 (CME:ESH14) is down 2.75 points to 1838.75. We believe the 1840 level, as we have discussed, could serve as fairly significant resistance up until the next Fed meeting at the end of this month. It would not surprise us at all to see the market head back down to the mid-1820s soon, and possibly even 1800. With earnings coming out less than impressive this morning, AND with a potential taper coming up this month, we believe the S&P 500 has major headwinds against further gains.
Bonds: The MAR14 U.S. 30-year bonds (CBOT:ZBH14) are up 13 ticks to 130’30. The bonds might continue to move higher, or at least sideways until the end of the month FOMC meeting, which may or may not produce another taper. We believe we will see another taper. The bonds may be moving up today also because of weak earnings from Best Buy and Citigroup.
Currencies: The MAR14 USD (NYBOT:DXH14) is reversing some initial losses, but is still down on the day to 81.09. This is likely because of the inflation numbers today, and it seems like overall sentiment is that inflation in the U.S. could accelerate back to the Fed’s 2% target. We believe in the bullish story to the USD, and it could very well be much higher going into February, especially due to the potential results of the end of month FOMC meeting. The MAR14 Yen (CME:J6H14) is up 31 ticks to 95.95, after a two day reversal from the recent rally. The MAR14 Aussie dollar (CME:A6H14) tanked overnight, now down 112 ticks to 87.60, after a surprise fall in Australian employment raised the possibility of another cut in interest rates from the Reserve Bank of Australia.
Commodities: MAR14 sugar (NYBOT:SBH14) has tested the 15 cent level, but found some buyers before breaking it, now up to $.1543/lb on the day. FEB14 live cattle futures (CME:LCG14) have exploded higher, almost hitting $1.41. We believe this may be a “blow off top” for the near term, and we look for live cattle to retrace some recent gains. Heating oil spreads continue to move higher, with the MAR14/APR14 spread rocketing up to 267. MAR14 coffee (NYBOT:KCH14) seems to moving sideways recently, with a small rally this morning up to $1.1930. MAR14 copper (COMEX:HGH14) is down slightly to $3.35. We believe copper presents a bullish opportunity, and could rally to the $3.50 level this year.