Stock futures are sharply lower this morning after strong gains yesterday.
The negative turn is in part due to overseas news as the central bank in China hiked reserve ratios by 50 basis points ― for large banks the ratio is now 16.5% and for smaller banks it is 14.5%.
The dollar rallied on the news but equities and commodities sank.
The New York Times noted this was the second time China has raised reserve ratios in five weeks and that this decision “came earlier than most economists had expected.” The move could slow inflation, the report said, but could also trim consumer spending as heavy borrowing has been allowing for rapid development and sales.
90 minutes before the opening bell, Dow futures are down 62 points to 10,048 and futures on the S&P 500 are off 7.50 points to 1,069.00. Also, WTI Crude oil is trading $1.39 lower to $73.89 per barrel and Spot Gold is off $14.51 to $1,080.89.
Today’s schedule is busy as the retail sales index, originally slated for yesterday, will be released an hour before the bell.
Key Events Today:
8:30 ― The week’s biggest release, Retail Sales, could bring some comfort to markets. Although auto sales were weak in the month and will pull the back the headline figures, economists are still predicting a 0.5% gain in the month, based on positive results from department stores and rising oil prices.
“Chain store sales registered a moderate gain in January, with notable strength at apparel and high-end department stores,” said analysts at IHS Global Insight. “Rising gasoline prices (up nearly 4% in January) should inflate service station sales.”
Taking a broader view, economists from BMO added: “Consumer spending in Q1 will likely match the prior quarter’s modest 2% annualized gain. This is probably the best we can hope for considering the triple-whammy of high unemployment, crushing debts and tight credit.”
10:00 ― In January, Consumer Sentiment moved up by 1.9 points to 74.4, the highest level since in 12 full months. Economists expect some marginal advance to 75.0 this month, but those hopes―while tepid―should be tempered considering last week’s employment report and the recent dread in financial headlines. Still, the index is looking favorable compared to the cyclical low of 56.3 seen last February.
“We expect confidence to continue to gradually recovering along with the broader economy over the coming months,” said analysts from Nomura. “If the slide in the stock market continues, however, the steady improvement in confidence could stall for a time.”
As for the index hitting a 12-month high, economists from BMO remind us: “Keep this in mind: January 2008 was the first full month of official recession after the peak of the business cycle was established in December 2007. Confidence has much more room to improve.”
