Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Hawkish Fed Minutes Cause a Vicious Stock Sell-Off


Today's financial recap and tomorrow's financial outlook.

Morning economic data in the form of housing starts showed a sharp increase, but this was mainly attributed to an erratic month-to-month decline in multi-family housing starts. Housing starts declined 8.5% MoM to a seasonally adjusted annual rate of 890,000 in January from a revised higher 973,000 in December. Building permits, on the other hand, showed a nominal 1.8% MoM increase to a seasonally adjusted annual rate of 925,000 from 909,000 last month.

Early in the day, precious metals and commodities as a whole sold off sharply with palladium reaching a low of -4.2%. The drop was attributed to negative comments from BHP Billiton (BHP) regarding moderating commodity demand from China following the Chinese New Year. Trading volume in precious metals on the COMEX exchange was more than double its daily average.

The minutes from the January FOMC meeting were the highlight of the day. The minutes showed dissension amongst the committee members and unease over the costs and results of further asset purchases. Committee members also explored the potential for tapering monthly purchases as economic conditions improved. The takeaway from the minutes was a more hawkish Fed, and the stock market reacted accordingly. Precious metals and stocks sold off sharply in response to the minutes while Treasuries and corporate bonds remained relatively unchanged.

In the morning, Office Depot (ODP) finalized its purchase of OfficeMax (OMX) at $13.50 per share. OfficeMax shareholders will receive 2.69 shares of Office Depot in the acquisition.

Tomorrow's Financial Outlook

Tomorrow we expect more economic data. The weekly jobless claims data will be released in the morning with economists expecting a rise to 356,000 from last week's 341,000. For the YoY change in the Consumer Price Index (read: consumer inflation), economists are expecting a slight decline to 1.6% in January from 1.7% in December. The regional Philadelphia Fed manufacturing survey is expected to show an expansion reading of 1.0 in February, up from January's decline of -5.8. Lastly, existing home sales should continue the string of disappointing home sales data, declining to an annual rate of 4.90 million in January from 4.94 million in December.

Globally, the eurozone is set to release the first estimate of its February services PMI in the morning as well as public sector net borrowing in the UK. The eurozone index is expected to show a small increase to 49.0 from last month's 48.6.

It will be a very busy day in earnings tomorrow. The notable reports include Carlyle Group (CG), Chesapeake Energy (CHK), Wal-Mart (WMT), Linn Energy (LINE), Hewlett-Packard (HPQ), AIG (AIG), Newmont Mining (NEM), and Aruba Networks (ARUN).

Twitter: @Minyanville

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos