Wednesday, November 16, 2011
Europe remains in focus again, diverting attention from a host of U.S. economic releases. Yields on Italian government bonds remain in dangerous territory despite intervention by the European Central Bank. In fact, bond yields have been trending up in all of the European markets outside of Germany, heightening concerns about the crisis and distracting attention from the favorable economic readings on the U.S. front.
Among this morning's key U.S. economic reports, the October CPI number came in better than expected on the 'headline' basis, though the 'core' reading was inline with expectations. We have Industrial Production and Housing Starts data coming out a little later today.
Coming on the back of Tuesday's favorable PPI report, today's CPI reading provides further evidence that the inflationary uptrend of the last few months may have started to reverse. Contributing to this trend is the falling commodity prices and the easing of supply-chain disruptions due to Japan's disaster. This confirms Ben Bernanke's assessment that the earlier heightened inflation readings were of a transitory nature. Easing inflationary readings improve the Fed's flexibility in the conduct of monetary policy by countering the hawks' arguments.
On the earnings front, Target (TGT) came out with a positive earnings surprise this morning, though it modestly missed revenue expectations. We had an earnings beat and revenue miss from Dell (DELL) after the close on Tuesday. Autodesk (ADSK) came out with better than expected results as well.
Sheraz Mian
Director of Research
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