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Pre-Market Primer: Stocks Flat After Fed Announcement; Retail Sales Disappoint

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Jobless claims are back to pre-Hurricane Sandy levels.

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MINYANVILLE ORIGINAL

After yesterday's historic Fed announcement, and a worse-than-expected reading on retail sales, futures are showing little change in the main indices.

Dow (INDEXDJX:.DJI) futures inched up 0.02% to 13,233 before the opening bell. Futures contracts on the S&P 500 (INDEXSP:.INX) fell 0.04% to 1,426.60 and Nasdaq (INDEXNASDAQ:.IXIC) futures were dead flat at 2,670.25.

After October's 0.3% decline in retail sales, this measure of consumer behavior bounced back by 0.3% last month, missing estimates of a 0.6% gain. The month-over-month increase was 0.7%, excluding auto and fuel purchases. Initial claims for unemployment insurance fell to 343,000 last week from the prior week's upwardly revised 372,000. Economists expected claims to stay elevated at 370,000. A separate report showed that producer prices shrank 0.8% in November, a steeper fall than economists expected.

Yesterday, the Federal Reserve announced that it will keep the target for the federal funds rate below 0.25% "as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2% longer-run goal, and longer-term inflation expectations continue to be well anchored."

While this is pretty much what the Fed was doing all along, this is the first time that the central bank succinctly tied policy to certain economic indicators. In a sense, this is the dual mandate in a nutshell. The Fed also committed to expanding its balance sheet even faster, buying another $45 billion in Treasuries every month.

Sprint (NYSE:S) shares fell after it offered to acquire the rest of Clearwire (NASDAQ:CLWR), which provides 4G wireless broadband service. Clearwire shares jumped 11.6% on the news.

Google (NASDAQ:GOOG) released its stand-alone application for Apple (NASDAQ:AAPL) iOS devices. Apple ditched the popular map application an released its own offering. Apple Maps was met with awful reviews and even a warning from Australian officials that it can get you lost in the Outback without water or fuel. Apple CEO Tim Cook even personally apologized to users for the botched app and fired Scott Forstall for his mishandling of the situation.

At 4:30 a.m. in Brussels today, euro-area finance ministers finally approved the disbursement of 49.1 billion euros of aid to Greece and agreed to a deal to allow the European Central Bank to be a banking supervisor for all 17 countries in the currency union. This is a crucial step toward a true banking union. Starting in 2014, the ECB will oversee the eurozone's 150 largest financial institutions.

The establishment of the ECB as a supranational banking regulator apparently increased the markets' trust in Spanish and Italian debt. Italy's three-year borrowing costs fell to 2.5% at an auction today, the lowest yield in over two years. Spain was also able to sell longer-term debt as the demand for its bonds exceeded their borrowing needs and yields fell.

Republicans in the House of Representatives hinted that there will probably be no agreement on spending cuts and tax increases until at least after Christmas.

Twitter: @vincent_trivett
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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.
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