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Trading Radar: Tough Week for US Markets; March Retail Sales Estimates Look Dire

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Economics, earnings reports, and market events for the week ahead.

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US markets finished the week sharply down on the back of weak payroll data. March nonfarm payrolls only rose 88,000, well below the 190,000 forecast. The prior month's payrolls were revised up to 268,000 from 236,000. Equally negative was the household employment report, which fell by 206,000, down from a gain of 170,000 last month. However, due to a sharp decline in the labor force participation rate, the unemployment rate ticked down to 7.6% from the prior 7.7%. This drop is due to a continued secular decline in the labor force as Baby Boomers continue to leave the workforce.

Stocks sold off sharply after the E-mini was down nine points in the pre-market to a low of 1533.25 (-21.50pts), but gradually regained this level throughout the day. Notably strong was financials, with domestic money center and investment banks peeking into the green by the early afternoon. However, the action in fixed income markets was a polar opposite. The long bond rallied sharply, gaining a bit more than 2.5 points in the day's session. The curve also took a much flatter, negative position. The most outsized move of the day was the 3s30s curve, which tightened by 12.5bps, an extreme move. In the middle of March, the Treasury curve had reached the steepest level in the past few years and now has begun to swing back sharply in the other direction.

The only notable activity in economic data next week in the US is March retail sales. Economists are expecting a decline in the monthly rate to 0.0%, down from 1.1% the month prior. From the first two months of personal spending data in 2013, we know that consumers have continued to spend at similar levels from the year prior at the expense of their savings. However, the notable outlier has been a decrease in restaurant spending, a caution sign that consumers are cutting back in select areas.

The preliminary University of Michigan/Reuters consumer confidence statement for April is due out on Friday, but this one is a head-scratcher. March consumer confidence from the Conference Board saw a drop to 59.7 from 68.0 the month prior while the UofM survey showed an increase to 78.6 from 77.6. Lastly, the smoothed Bloomberg Consumer Comfort index is down from -32.8 to -34.1 at the end of this past week. So, we are skeptical that this survey is truly reflecting what's going on in the US.

On the Fed-speaking circuit, Ben Bernanke will be leading the opening remarks at the Atlanta Fed's conference on Monday. He will also make a similar speech in Washington on Friday, but it is unlikely the two will have any great differences. The markets will be looking for reassuring, dovish commentary as the Fed's main target, the job market, took a body blow in the month of March.

Globally, the standout reports are from the UK and German industrial production. This past week's data showed mild improvement in Germany's manufacturing sector, the same for the UK. Follow-through will be needed. In China, new yuan loans and trade balance data are on the table. As the Chinese official sector has been tightening monetary controls over the past month, any reflection in the official data will be met with a negative response. The Shanghai composite index was down 5.45% in the month of March.

First quarter earnings will begin to heat up with Alcoa (NYSE:AA). On Friday is JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC).

Monday, April 8

US Economics (Time Zone: EDT)

No major economic data
11:00 Fed buying $1b-$1.5b TIPS in 4 to 30-year range
11:30 Treasury selling $35b 3-month bills, $30b 6-month bills

08:30am Pianalto speaking on economy in FL
7:15pm Bernanke speaking at Atlanta Fed

Global Economics (Time Zone: GMT)

04:30 JPY Bankruptcies
07:15 CHF Industrial Production
08:30 EUR Eurozone Sentix Investor Confidence
10:00 EUR German Industrial Production
14:30 CAD Business Outlook Future Sales

Earnings

After:
Alcoa (AA)


Tuesday, April 9
US Economics (Time Zone: EDT)

07:30 NFIB Small Business Optimism – consensus 90.8, prior 90.8
10:00 Wholesale Inventories – consensus 0.5%, prior 1.2%
10:00 JOLTs Job Openings – prior 3693
11:00 Fed to buy $1.25b-$1.75b notes in 23 to 30-year range
11:30 Treasury selling 4-week bills
1:00 Treasury selling $32b in 3-year notes
9:30am Lacker speaking in VA
1:00pm Lockhart gives welcoming remarks at Atlanta Fed conference

Global Economics (Time Zone: GMT)

01:30 AUD NAB Business Confidence
01:30 CNY CPI
01:30 CNY PPI
05:45 CHF Unemployment Rate
06:00 EUR German Trade Balance
06:00 JPY Machine Tool Orders
07:15 CHF CPI
08:30 GBP Industrial and Manufacturing Production
08:30 GBP Trade Balance
12:15 CAD Housing Starts
14:00 GBP NIESR GDP Estimate
9:30 UK selling GBP3.5b 10-year bonds

Earnings

No major earnings


Wednesday, April 10

US Economics (Time Zone: EDT)

07:00 MBA Mortgage Index
2:00 Treasury Budget Statement
2:00 FOMC Minutes, March Meeting
1:00 Treasury selling $21b 10-year notes (2nd reopening)
7:30am Lockhart speaks at Atlanta Fed
8:30am Kocherlakota moderates panel at Atlanta Fed
5:00pm Fisher speaks on economy in TX

Global Economics (Time Zone: GMT)

CNY Trade Balance
CNY New Yuan Loans
06:45 EUR French Manufacturing Production
23:50 JPY Machine Orders
11:30 Germany selling EU5b 2-year notes

Earnings

Before:
Family Dollar (FDO)
Constellation Brands (STZ)
After:
Bed Bath & Beyond (BBBY)


Thursday, April 11

US Economics (Time Zone: EDT)

08:30 Initial Claims – consensus 360K, prior 385K
08:30 Continuing Claims – prior 3063K
08:30 Import Price Index MoM – consensus -0.5%, prior 1.1%
11:00 Fed purchasing $2.75b-$3.5b notes in 7 to 10-year range
1:00 Treasury selling $13b in 30-year notes (2nd reopening)
6:00am Plosser speaks on monetary policy in Hong Kong
8:30am Bullard gives welcoming remarks in Washington

Global Economics (Time Zone: GMT)

01:00 AUD Consumer Inflation Expectations
01:30 AUD Employment Change
06:00 EUR German CPI
12:30 CAD New Home Price Index
9:30 UK selling GBP1.6b inflation linked 12-year notes
10:00 Italy selling bonds

Earnings

After:
Rite-Aid (RAD)

JB Hunt Transport (JBHT)


Friday, April 12

US Economics (Time Zone: EDT)

08:30 Retail Sales – consensus 0.0%, prior 1.1%
08:30 Retail Sales Less Autos – consensus 0.1%, prior 1.0%
08:30 Retail Sales Ex Auto & Gas – consensus 0.3%, prior 0.4%
08:30 Producer Price Index MoM – consensus -0.1%, prior 0.7%
08:30 Producer Price Index YoY – consensus 1.3%, prior 1.7%
08:30 PPI Ex Food & Energy MoM – consensus 0.2%, prior 0.2%
08:30 PPI Ex Food & Energy YoY – consensus 1.7%, prior 1.7%
09:55 University of Michigan Confidence – consensus 78.3, prior 78.6
10:00 Business Inventories – consensus 0.4%, prior 1.0%
11:00 Fed buying $1.25b-$1.75b bonds in 23 to 30-year sector

8:45am Rosengren speaks in Boston
12:30pm Bernanke speaks at conference in Washington

Global Economics (Time Zone: GMT)

09:00 EUR Eurozone Industrial Production

Earnings

Before:
JPMorgan (JPM)
Wells Fargo (WFC)

Twitter: @MichaelSedacca

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No positions in stocks mentioned.

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