Though the currency market was casting its vote of confidence for the US dollar in the New York session, a strong run against the unit through the Asian and European hours had already set the tone. Now, with the day ahead set with little scheduled event risk, traders will have to decide whether todays Leading Indicators index offers enough promise for the economy to keep the greenback from a strong follow through the key anti-dollar breakouts.
For the benchmark EURUSD, the night-session run tallied a 115-point advance that tired just short of resistance seen around 1.3050; and so far, the retracement has been shallow. The same was true with USDCHF which finally broke its range in a 140-point dive to 1.2380. Alternatively, the pound rallied to a new 14-year high against the greenback to 1.9920, but has since almost fully retraced the impressive rally. Finally, the yen finally caught a break with a modest 75-point move against the dollar starting in the European hours, but the carry proved overriding as the pair moved back towards highs.
While there were no top market-moving releases available to traders this morning, the surprises the few indicators provided was more than enough to make up for their usually lack of potency. The headline number came from the pushed-back Leading Indicators index for December. Even though 7 of the 10 components are know before hand, the report still managed to beat expectations with a 0.3 percent rise last month. According to the Conference Board, this was the highest level for the indicator since September and further supports a rebound in economic growth in the coming three to six months. Dissecting data reveals promising numbers for a few key areas. Representing steady growth in labor trends, the average level for jobless claims last month slipped from 328,600 to 316,500 for a generous contribution to the index. Accounting for the biggest percentage of the overall composite, the money supply sub-gauge adjusted for inflation added its own 0.08 percent addition. From there, the rest of the changes were a little more controvertible. The gauge following stocks proved helpful as the S&P 500 averaged 1,416.4 through December, 28.8 points better than the previous month. However, as stocks struggle for further gains to new highs, there are a greater number of analysts and equity traders trying to catch the market on its turn. Elsewhere, the 5.5 percent jump in building permits also steered the Leading Indicators higher; but this number is also being argued as a fluke spurred by favorable weather rather than a bottom in housing.
Compared to the leading indicators print, the Richmond Feds manufacturing index was a little more straightforward. At -11, Januarys headline read was the worst in over three years. Putting this indicator in context, the two regional factory reports released before the Richmond number were evenly split. The Empire dove to a new low while the Philly Fed bested the markets consensus. With todays number, the balance sheet is clearly calling for another contraction in the nationwide ISM report; a decline perhaps more severe than Novembers. Furthermore, breaking down the Richmond Feds numbers offered little hope for an improvement in regional factory activity moving ahead. New orders and backlogs each sank to three year lows as factory heads tried to salvage profits through selling off built up inventory. Looking to the days ahead, worries over the manufacturing sector will be put on the back burner; and housing will step up once again as the top concern for dollar bulls.
Stocks set off with a strong morning, though early morning gains on earnings announcements could not keep the indices at its highs. By 17:25 GMT, the tech-heavy NASDAQ Composite rose 0.43 percent to 2,441.45. Following closely behind, the Dow put up a 0.36 percent gain to 12,522.03 while the S&P climbed slightly less in a 0.35 percent move to 1,427.93. From the top of the pile, United Technologies quarterly numbers put the companys name in the headlines. After releasing better-than-expected number, shares of UT rose $2.34, or 3.7 percent, to $66.43. Elsewhere, Alcatel-Lucent wasnt enjoying the broad rebound in the tech sector. Shares for the freshly minted merger dropped 8.3 percent on a $1.18 dive to $13.01 after execs reported the firm failed to make profit in the fourth quarter as sales plunged.
For treasuries, local investors took the Leading Indicators numbers to mean the economy was on a firm footing for the first half of 2007. By 17:25 GMT, the ten-year note was of 6/32nds to 98-24 while its yield slipped 3 basis points to 4.785. Extending the maturity, bonds lost 15/32nds in face value to 94-04 as its own yield advanced 3 basis points to 4.879.
