U.S. equity futures markets are trading lower as traders await key earnings reports from Well Fargo Bank and Morgan Stanley. Investors fear that these two banks will show losses from consumer and business loans like JP Morgan, Citigroup and Bank of America. Investors want to see improvements in earnings as well as stability in the bank balance sheets.
Treasury futures are called a slightly lower this morning. Yesterday’s weaker than expected U.S. housing and PPI reports showed that the U.S. economy was still sluggish. This led to a sell-off in the equity markets and greater demand for lower yielding assets.
December Treasury Bond and Treasury Note traders also reacted to comments from San Francisco Federal Reserve President Janet Yellen. She stated that the Fed was not likely to tighten its monetary policy during short run. In addition, she said the Fed has not decided how to drain excess liquidity from the financial system.
The U.S. Dollar is trading mixed against most major currencies this morning ahead of the New York session opening. Traders will be taking early cues from the equity markets as earnings continue to dominate the news. Later during the trading session, the markets are likely to react to the release of the Fed’s Beige Book.
December Gold is trading lower today based on the weaker Dollar. Yesterday’s failed rally could be an indication of lower prices to follow. A break through $1043.00 is likely to trigger an acceleration to a major 50% price at $1028.80.
Look for lower crude oil prices today. Late yesterday the American Petroleum Institute reported higher than expected ending stocks. In addition, yesterday’s technically based closing price reversal top is likely to weigh on the trade today. The recent rally showed that this market has divorced itself from the basic fundamentals and instead is being driven by speculation, higher equity prices and the lower Dollar. Yesterday’s weak U.S. economic data has forced traders to once again look at the short-term fundamentals. These still indicate sluggish demand and excessive supply. Look for today’s Energy Information Administration report to set the tone for the day.
