The dollar dropped against the yen as Treasury yields fell on expectations President Barack Obama will propose a five-year freeze on non-security spending.
Ian Shepherdson of High Frequency Economists says consumer confidence, at 60.6 in January vs 53.3 in December, was above the 54.0 consensus reading and the highest reading in 8 months. "This report confirms that the recovery in stock prices and the beginnings of an improvement in the labor market are making people feel better about the economy," he says.
Stocks are down in the early going. There isn't a single major sector driving the decline. Instead, weakness is moderate widespread.
Commodities are also under broad pressure in the early going. That has left the CRB Commodity Index to trade with a 0.8% loss.
Treasuries have made a modest tick higher amid the weakness in the equity market and commodity pit. That has the yield on the benchmark 10-year Note back below 3.40% by a couple of basis points.
The index is expected to increase to 53.5 from last month's reading of 52.5.
U.S. stocks were set for a slightly lower open Tuesday, as investors weighed a fresh batch of earnings results and awaited reports on home prices and consumer confidence.
Stocks began the week with a solid start, with the Dow inching toward the 12,000 mark on Monday. The blue-chip index has been on an upward trend since Thanksgiving, and is now within a stone's throw of 12,000 -- a level last seen on June 18, 2008.
While economic reports may continue to be lackluster in the coming month, stocks are likely to remain in an upward march as investors focus on strong earnings.
Companies: Before the opening bell, DuPont (DD) logged quarterly results that widely beat expectations. The company also hiked its forecast for the current quarter. The results boosted shares slightly in pre-market trading.
Verizon (VZ)'s earnings missed by a penny, while revenue fell 2.6% from a year earlier. Shares of the phone service provider slumped 1%.
3M (MMM) posted earnings that were down slightly from a year ago, beating expectations by a penny. Shares of the company fell 1% in early trading.
Johnson & Johnson (JNJ)'s earnings met expectations, while revenue slipped 5.5%. Shares of the company fell 1.5% ahead of the market open.
After the bell on Monday, American Express (AXP) reported earnings of 94 cents per share on revenue of $7.32 billion. The numbers fell a hair short of analyst estimates. Shares fell about 1% in pre-market trading.
Yahoo (YHOO) is slated to report the market closes Tuesday, and is expected to report earnings per share of 22 cents on $1.19 billion in revenue.
Economy: The Conference Board, a business research group, will report its January report on consumer confidence shortly after the opening bell. The index is expected to increase to 53.5 from last month's reading of 52.5.
Oil for March delivery slipped $1.36 to $86.51 a barrel.
Gold futures for February delivery tumbled $18.50 to $1,326 an ounce.
The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 3.38% from 3.41% late Monday.
Touched a high of stg0.8635, as the reaction to release of weak GDP prompted a strong sell off in the pound. The rally held off a retest of 2011 highs at stg0.8645, with strong offers noted between stg0.8645/50 with stops noted above. Rate holds back at stg0.8623. Support seen back at stg0.8600, with stops placed on a break of stg0.8590.
EUR/USD $1.3725, $1.3650, $1.3550
USD/JPY Y81.75, Y82.50, Y83.00, Y84.00
EUR/CHF Chf1.2950, Chf1.3000
AUD/USD $99.25, $0.9880, $0.9850
USD/CAD C$0.9900 (lge)
AUD/USD hits a new low on the day of $0.9897 as euro falls back through $1.3600. Small rally in sterling aussie adding weight to the pair. Aussie trades $0.9899/01.
07:45 France Consumer spending (December) 0.6% 0.3% 2.8%
07:45 France Consumer spending (December) Y/Y 0.4% 0.5% 1.5%
09:30 UK GDP (Q4) preliminary -0.5% 0.4% 0.7%
09:30 UK GDP (Q4) preliminary Y/Y 1.7% 2.6% 2.7%
09:30 UK PSNCR (December), bln 25.5 17.0 16.8
09:30 UK PSNB (December), bln 16.8 18.1 23.3
12:00 Canada CPI (December) 0.0% 0.1% 0.1%
12:00 Canada CPI (December) Y/Y 2.4% 2.5% 2.0%
12:00 Canada CPI core (December) -0.3% -0.1% 0.0%
12:00 Canada CPI core (December) Y/Y 1.5% 1.6% 1.4%
Sterling tumbled on Tuesday as a surprise contraction in fourth-quarter UK GDP raised fears over a double-dip recession and doused expectations that the Bank of England would raise interest rates to fight inflationary pressures in the British economy.
Figures showed the UK economy shrunk 0.5% in the last three months of 2010, far worse than expectations for growth of 0.5%.
Howard Archer at IHS Global Insight said it was a stunningly bad outcome, far worse than even the most pessimistic of forecasts. He said even allowing for a very substantial hit to economic activity from December’s severe weather, the news was extremely disappointing and worrying.
“This weakness cannot be put down only to the weather,” said Mr Archer. “The data add major support to the argument that the Bank of England should keep interest rates down at 0.5% despite current elevated inflation levels.”
Analysts said the news raised serious concerns that the UK economy was in a strong enough position to withstand the coming fiscal tightening.
The pound, which last week hit a two-month high of $1.6059 after a sharp rise in consumer price inflation raised expectations that the Bank would raise interest rates, suffered its worst fall in a month.
EUR/USD fell from $1.3688 to $1.3578 before recovered to $1.3620.
GBP/USD fell more than 200 points from $1.5970 to the lows around $1.5750.
USD/JPY holds within Y82.25/54.
US data starts at 1355GMT with the weekly Redbook, which is followed at 1400GMT by the latest S&P/Case-Shiller Home Price Index.
EUR/USD continues to claw its way higher as it extends its recovery off pullback lows of $1.3573. Rate trades to $1.3627 with next resistance seen at $1.3644 (61.8% $1.3688/1.3573) ahead of $1.3660 (76.4%). A break of this latter level exposes the earlier high at $1.3688.
AUD/USD just eclipsed the post CPI Sydney low of $0.9626 as Europe sells to $0.9925, but pair protected from the euro and sterling falls by cross trades as rate picks up to $0.9951 before easing back to $0.9930.
The euro retreated from a two-month peak on Tuesday after a rally in the past two weeks, as climbing euro zone interest rates prompted speculators to bet on further gains in the currency.
The euro was also helped by buying against the Australian dollar.
The Australian dollar fell broadly after lower-than-expected consumer inflation data reinforced market expectations that Australia's central bank will be in no hurry to lift interest rates, though it cut much of its losses in late Asian trade.
Rising risk appetite helped to limit the fall in the Aussie dollar against the dollar.
Some market players remained sceptical about the chance of an ECB rate hike, thinking that concerns about highly indebted peripheral euro zone countries could tie the central bank's hands.
Still, as the euro continued to recover, the dollar index dangled near a 2-½ month low of 77.814 hit on Monday.
EUR/GBP breaks above resistance at stg0.8595/00 as sterling comes under general pressure following release of much weaker than expected UK GDP data. Rate extends recent recovery to stg0.8615, currently trading around stg0.8603. Resistance now seen at stg0.8620/25 ahead of stg0.8645/55.
Cable falls from $1.5925 to $1.5795 following release of much weaker than expected UK Q4 GDP data.
EUR/USD: $1.3725, $1.3650, $1.3550
USD/JPY: Y81.75, Y83.00, Y84.00
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