Investors Taking Profits
A day after the S&P 500 recorded its second-best session of the year, markets
were sharply lower as investors took profits. Into early afternoon the Dow Jones
Industrial Average was down triple digits. Investors remain concerned over how
soon the Fed will begin to trim the stimulus program. During Friday, the dollar
extended losses against the yen, putting it on course for its worst week since
July 2009 as volatile stock markets had investors unwinding bets against the
yen. Investors are now focused on Federal Reserve policy meeting next week on
June 18 -19 and comments from Fed Chairman Ben Bernanke since he raised concerns
over near term stimulus cooling off period. Back on May 22nd Bernanke hinted
that the Fed is seriously considering winding down its market-friendly monthly
purchases of bonds that have kept interest rates low and helped inflate stock
prices. Earlier this week, Federal Reserve Bank of Philadelphia President
Charles Plosser said he wants the central bank to begin cutting back on its bond
buying as soon as its next policy meeting. “Labor market conditions warrant
scaling back the pace of purchases as soon as our next meeting,” Plosser said in
the text of a speech to be delivered in Stockholm. He added “unless we see a
significant reversal in current trends that jeopardizes my forecast of near 7%
unemployment rate by the end of this year, then I anticipate that we could end
the program before year-end.”
Eurostat - European Union's statistics agency - reported that during Q1, the
number of people working in the 17 nations that use the euro, fell 0.5% compared
with Q4 2012 for the biggest quarterly drop since Q2 2009. The decline left
145.1 million people employed for the lowest level since Q4 2005. Greece
reported the worst employment results where the number of people in work fell
2.3% quarter-on-quarter. Cyprus, Italy and Spain all saw declines in excess of
1%. Eurostat confirmed its inflation readings for May, showing the annual rise
in consumer prices across the euro zone accelerated to 1.4% in May from 1.2% in
Producer Price Index
Labor Department said Friday that U.S. wholesale prices rose a seasonally
adjusted 0.5% during May to mark the first increase in three months. The rise
was reportedly spurred by higher costs for eggs, gasoline and light trucks.
Excluding volatile categories of food and energy, so-called core wholesale
prices rose a much smaller 0.1%. Energy prices rose 1.3% and food costs rose
0.6%. Over the past 12 months wholesale prices have risen an unadjusted 1.7% and
core PPI rose 1.7%.
Current Account Deficit
The U.S. Commerce Department reported Friday that during Q1, U.S. current
account deficit rose by $3.8 billion to $106.1 billion or 2.7% of gross domestic
product on an annualized basis. During Q1 the deficit is much lower than
consensus due to a drop in surplus on income and an increase in outflows of net
unilateral transfers as these factors were partially offset by a narrowing in
the deficit on goods and services.
U.S. Industrial Output
The Federal Reserve announced on Friday that industrial production remained
unchanged during May for the second straight weak monthly report. Auto-related
production rose 0.7% in May and excluding the auto sector, output remained
unchanged. Industrial output has risen 1.6% over the past year. Capacity
utilization fell to 77.6% during May.
Treasury International Capital
During April, sum total of all net foreign acquisitions of long-term securities,
short-term U.S. securities and banking flows was a monthly net TIC inflow of
$12.7 billion. Net foreign private inflows were $42.1 billion and net foreign
official inflows were negative $29.4 billion. Foreign residents decreased their
holdings of long-term U.S. securities in April with net sales at $24.8 billion.
Net sales by private foreign investors were $17.8 billion and net sales by
foreign official institutions were $6.9 billion. U.S. residents increased their
holdings of long-term foreign securities, with net purchases of $12.6 billion.
Net foreign purchases of long-term securities were negative $37.3 billion when
taking into account transactions in both foreign and U.S. securities. The
overall net foreign acquisition of long-term securities is estimated to have
been negative $57.1 billion in April while including adjustments such as
estimates of unrecorded principal payments to foreigners on U.S. asset-backed
securities. Foreign residents decreased their holdings of U.S. Treasury bills by
$15.1 billion and, holdings of all dollar-denominated short-term U.S.
securities. Other custody liabilities decreased by $30.1 billion. Banks’ own net
dollar-denominated liabilities to foreign residents increased by $99.9 billion.
Michigan Consumer Sentiment
University of Michigan/Reuters preliminary June reading consumer-sentiment index
fell to 82.7 from a final May reading of 84.5.
We take this time to wish all Fathers out there, a very Happy Fathers Day,
Sunday June 16!
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June 14, 2013