A renewed selling effort has sent stocks to fresh session lows. Most of the push has come against energy stocks (-1.5%), materials stocks (-1.4%), and financials (-1.0%). Consumer discretionary stocks (+0.5%) and telecom stocks (+0.3%) are still the only sectors sporting any kind of a gain.
Strong results from an auction of 10-year Notes spurred a rally in Treasuries, but they have started to drift back a bit. The yield on the benchmark 10-year Note is now at 3.66%.
The dollar fell for a third day against the currencies of major U.S. trade partners as Federal Reserve Chairman Ben S. Bernanke said the unemployment rate is likely to remain high “for some time.”
The euro extended an advance, rising against all of its 16 most-traded counterparts, as Bernanke told the House Budget Committee that high U.S. unemployment will persist even after the biggest two-month drop in the jobless rate since 1958.
“Although the growth rate of economic activity appears likely to pick up this year, the unemployment rate probably will remain elevated for some time,” the Fed chief testified. “With output growth likely to be moderate for a while and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level,” he said.
Bernanke and the policy-setting Federal Open Market Committee are waiting for further proof of a durable pickup in the job market as they press forward with their plan to buy $600 billion in Treasury securities to spur the pace of recovery. In a Jan. 26 statement, policy makers said the recovery “has been insufficient to bring about a significant improvement in labor market conditions.”
U.S. unemployment dropped to 9% last month, the lowest level since April 2009, a report showed on Feb. 4. It fell to 9.4% in December, from 9.8% in November.
"His general tone seems to be quite dovish,” said Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG in New York. “The market is getting used to the idea that even with the improvement in the U.S. data, the Fed’s going to be very slow to respond with tightening and therefore the dollar is not going to be that responsive to strong economic data.”
A flurry of recent selling has sent the stock market to a fresh session low. The retreat has been relatively broad, but pressure has been most pronounced against natural resource plays like energy and materials stocks.
The energy sector is now down 1.6%. At the moment there isn't a single name in the 41-member sector that has managed to preserve any kind of gain. Oil and gas drillers and explorers are among the hardest hit; both groups are currently down 2.0%.
Materials stocks are collectively off by 1.0%, but it's diversified metals and mining plays (-2.9%) that are having the heaviest drag on the space.
The S&P 500 recently worked its way to the neutral line, but it was met with resistance there. It has since drifted back to a slight loss. Meanwhile, the Nasdaq is lingering near the unchanged mark and the Dow has managed to put together a narrow gain. The Dow has finished higher in each of the past seven sessions.
Consumer discretionary stocks continue to distinguish themselves. The sector has ascended to a 0.8% gain, which comes on top of the sector's 1.2% advance in the prior session. What's more, consumer discretionary stocks have advanced in five straight sessions for a cumulative gain of 4.4%, whereas the broader market has gained 1.4% during the course of the last five sessions.
EUR/USD gets a quick pop to $1.3710 to print a session high on $1.3720, where offers and stops were mentioned. Bigger stops above $1.3720, with upside
targets at $1.3760 and $1.3860 being discussed.
EUR/USD continues to hold higher ahead of the option cut and the Bernanke appearance. Rate holds around $1.3680 with stops at $1.3690 to $1.3710. Above there, offers and stops are mixed.
U.S. stocks were set to open lower Wednesday, as investors awaited U.S. Treasury secretary Tim Geithner's comments on the economy and jobs, and Federal Reserve chairman Ben Bernanke's House testimony about the deficit.
Stocks posted another day of solid gains Tuesday, with the Dow climbing for its seventh straight day.
The Dow Jones industrial average (INDU) gained 72 points, or 0.6%, to close at 12,233.
Economy: Fed chairman Ben Bernanke, the nation's top monetary policy maker, is scheduled to testify before the House Budget Committee, with the focus on the budget deficit.
After markets open, a weekly government report on crude oil inventories is expected.
Companies: Dow component Coca-Cola (KO, Fortune 500) reported quarterly results before the market opened and matched analyst expectations. The soft drink maker reported that fourth-quarter earnings rose 9% to 72 cents per share. Coke shares gained more than 1% in premarket trading.
Cisco Systems (CSCO, Fortune 500) will report quarterly results after the closing bell.
Shares of Wells Fargo (WFC, Fortune 500) fell nearly 3% in premarket trading after the bank announced late Tuesday that chief financial officer Howard Atkins is retiring. The company said the retirement wasn't due to Wells' financial condition or reporting.
USD/JPY holds around Y82.50 after testing session high on Y82.67. Offers remain at Y82.60/70. Some stops placed through Y82.70 with resistance behind at Y82.95/00 and Y83.25.
EUR/USD edges up to $1.3650 from a better tone in EUR/GBP and also EUR/JPY. Both those pairs heading to the higher end of the day's range or beyond. Euro still expected to encounter supply at $1.3665 area.
March WTI Crude remains rangebound ahead of this afternoon's Dept of Energy inventory report. Last night's API data surprised a market looking for a build of approx 2mbl, when the report showed a 560,000 barrel draw, and the market will now be looking to the DOE data released at 1530 GMT for clarification. Crude
has ranged $87.07-72 today and current trades around $87.28.
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