Retail sales unexpectedly dropped and European equities snapped a six-day rally amid worse-than-forecast corporate results. U.S. retail sales fell in January by the most in 10 months and more Americans than forecast filed applications for unemployment benefits last week. Cisco lost 2.2% after saying revenue will decline 6% to 8% in the current period ending in April. Rolls-Royce sank 17 percent.
Equities: The March E-mini SP 500(CME:ESH14) is down 2.5 points to 1814.50, after hitting a low of 1802.25. The market has rallied off lows this morning, and even with the weak economic data coming in today, it is not backing down. The area of 1815-16 may serve as a first level of resistance before the next level at 1823. The market might be showing some strength because even though new Fed Chair Janet Yellen indicated that the taper would continue if data warranted it, she also expressed flexibility on pausing the taper as well. This seems to be providing some underlying support to energy markets and the SP 500.
Bonds: The March U.S. 30-year Treasury bond(CBOT:USH14) is up 20 ticks to 132’28, likely supported by the weaker than expected economic data. We believe Yellen’s flexibility on the taper issue is providing support to bonds, and could continue to do so until we see more important data such as CPI, and next month’s employment data. For now, we believe the bonds are in a neutral to bullish mode.
Currencies: The euro(CME:E6H14) is up 73 ticks to 136.67. We are actually starting to think the Euro could head higher. On the same token, the March U.S. dollar index is down 34 ticks to 80.40. We believe the USD could head below 80 very soon, and even approach the 79 level. The market may be starting to wonder if the Fed will pause their taper this year. The British pound seems incredibly strong, and is up another 38 ticks to 166.31. We see the pound headed towards 1.70.
Commodities: April gold(COMEX:GCJ14) continues its strength, up $2 to $1,297, which is a key resistance level for today’s trading. Our next upside target for gold is $1,307, and we believe it will get there. The March crude oil contract is down 15¢ to $100.22, still above the key $100 level, yet below today’s pivot of $100.58. We believe crude may head to at least $102. March sugar is down 22 ticks to 15.59¢. A contract we are watching is the near months of RBOB gas. We believe this market may be headed higher over this and next month.