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Pre-Market Primer: Consumer Spending and Income Mark Tepid Rise


Now with a government, Italy's borrowing costs are markedly lower.

Gold and stocks rallied this morning as the dollar weakened and consumer spending figures came in slightly better than expected.

Consumer spending, the heartbeat of the American economy, grew by 0.2% in March. Personal income rose 0.2%. The savings rate remained steady at 2.7%. Economists forecast that the growth of consumer spending slowed to 0.1% in March after rising 0.7% in February. A 0.4% rise in incomes was predicted for March.

Stock futures advanced this morning amidst light trading volume. Dow (INDEXDJX:.DJI) futures are up 0.39% at 14,706 and S&P (INDEXSP:.INX) futures climbed 0.40% to 1,582.80. Futures on the Nasdaq (INDEXNASDAQ:.IXIC) index rose 0.44% to 2,843.00.

At 10 a.m., the National Association of Realtors is expected to report that that pending home sales rose 6.1% from last year. Contracts to buy homes were up 5% annually last month.

Precious metal futures rose after Friday's GDP report came in worse than expected and sent the dollar lower, making gold and other commodities cheaper for investors outside of the United States. Before the market open gold futures were selling for $1,474.40, up 1.43%

In corporate news, merger talks between Valeant Pharmaceuticals (NYSE:VRX) and Actavis Inc. (NYSE:ACT) are falling apart because the two parties cannot agree on a price. The two generic drug companies were expected to announce a merger today before talks stalled. Both companies rallied in pre-market trading with Valeant up 4% and Actavis shares gaining 6%.

Herbalife (NYSE:HLF) could see heavy trading today before it reports earnings after the closing bell. The multi-level marketing has served as a battlefield between activist investors Bill Ackman and Carl Icahn. Ackman revealed a massive short on the company late last year, with a price target of zero as he sees it as an illegal pyramid scheme. The company is expected to report $1.07 per share in earnings for the first quarter.

Italian stocks rose today as Italy's center-left/center-right coalition government was sworn in over the weekend. The country's borrowing costs fell as investors welcome the new government. Yields on Italian 10-year bonds fell to 3.94% at an auction today, 72 basis points lower the last similar auction. Continental European stocks followed Italy upward, despite a report from the European Commission which showed that consumer confidence in the region fell 1.5 points to 88.6 in April. The eurozone business climate indicator dropped to -0.93 from -0.75 in March.

Asian stocks were mixed as Chinese industrial profits rose only 5.3% on a yearly basis in March, down from the 17.2% pace over January and February.

This week will see major news from central banks. The US Federal Reserve will release the minutes of its Federal Open Market Committee meeting on Wednesday afternoon. While several members have suggested scaling back the bank's $85 billion monthly asset purchases, the lackluster growth in the first quarter might discourage the Fed from making any changes. The European Central Bank is expected to announce an interest rate cut for the first time since July 2012 at a press conference on Thursday.

Twitter: @vincent_trivett
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