StreetSmartPost

Thursday, January 12, 2012. 9.30 a.m.

Late yesterday the United Kingdom seemed to soften its hard stance, saying it will boost its contribution to the IMF if other members of the G-20 developed nations agree to do so.

European markets were further encouraged this morning by positive bond auctions in Italy and Spain.

The yield on Italy’s benchmark 10-year bonds declined 27 basis points to 6.6%. Italy also sold $10.8 billion of 1-year bills, with the yield declining to 2.74% from the 5.95% level at the height of the fears in December.

Spain sold nearly $13 billion of assorted bonds, double its expectations, with the yield on its 10-year bonds declining 9 basis points to 5.23%.

Markets also received positive news from the Fed’s ‘Beige Book’ report yesterday in which the Fed districts were much more upbeat about the U.S. economic recovery which has been slowly taking over the global focus from the eurozone crisis in recent weeks.

There was even a separate comment from the president of the Philadelphia region Fed bank, of the economy perhaps growing this year at a pace that will not allow the Fed to hold interest rates down as long as it currently expects. He forecast annual GDP growth of 3.0% over the next two years and said the Fed may have to hike interest rates sooner than its current commitment to hold rates at current low levels until mid-2013.

But while markets in Europe are up on the relief provided by the bond auctions in Italy and Spain, two reports on the U.S. economy took some of the wind out of the pre-open indicators for the U.S. market this morning.

They were quite positive earlier on the back of the bond reports from Europe until data on weekly unemployment claims and retail sales were released.

The Labor Department reported new weekly unemployment claims jumped by 24,000 last week, to 399,000, and the more important four-week moving average therefore moved up  7,750 to 381,750.

And Retail Sales were up only 0.1% in December, less than the consensus forecast of 0.3%. Excluding strong auto sales, retail sales declined 0.2% in December, the first drop in core sales since last December.

Those are disappointing reports in two important areas, consumer spending and employment, that have been providing upside surprises in recent months.

So the pre-open indicators losing some of buoyancy, although remaining somewhat positive, is not surprising.

Meanwhile:

Headlines Mostly Remain Gloomy.

Just a few this morning:

Market Watch:

Decline in foreclosures last year won’t continue in 2012.

ECB economic outlook subject to high uncertainty.

Substantial downside risk to economic outlook.

Bull Markets, Past and Present. Is the Rally Over?

Wall Street Journal:

Output Slumps in Eurozone.

Talks Progress as Greek Deficit Worsens.

Are they clairvoyant or behind the curve?

To read my weekend newspaper column ‘Can The U.S. Economic Recovery Overcome Europe’s Drag? Click here.

Subscribers to Street Smart Report: Portfolio changes! The new issue of the newsletter is in the subscribers’ area of the Street Smart Report website from yesterday, and a new hotline from last evening with portfolio changes.

Yesterday in the U.S. Market.

The market closed mixed, with only fractional moves.

The Dow closed down 13 points, or 0.1%. The S&P 500 closed up 0.1%. The NYSE Composite closed down 0.1%. The Nasdaq closed up 0.3%. The Nasdaq 100 closed down 0.2%. The Russell 2000 closed up 0.5%. The DJ Transportation Avg. closed up 0.2%. The DJ Utilities Avg closed down 0.4%.

Gold closed up $12 an ounce at $1,643 an ounce.

Oil closed down $1.19 a barrel at $101.05 a barrel.

The U.S. dollar etf UUP closed up 0.4%.

The U.S. Treasury bond etf TLT closed up 1.3%.

Yesterday in European Markets.

Markets in Europe closed down fractionally yesterday. The London FTSE closed down 0.4%. The German DAX closed down 0.2%. France closed down 0.2%.

Asian Markets Mostly Down Fractionally Last Night.

The DJ Asia-Pacific Index closed down 0.1%.

Among individual markets:

Australia closed down 0.1%. China closed up 0.1%. Hong Kong closed down 0.3%. India closed down 0.9%. Indonesia closed unchanged. Japan closed down 0.7%. Malaysia closed up 0.2%. South Korea closed up 1.0%. Singapore closed down 0.1%. Taiwan closed down 0.1%. Thailand closed up 0.1%.

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In the premium content area today: Prospects for U.S. market rally. & Gold.

Markets This Morning.

European markets are up this morning. The London FTSE is up 0.5%. Germany’s DAX is up 0.5%. France’s CAC is up 0.3%

Oil is up $1.00 a barrel at $101.86.

Gold is up $15 an ounce at $1,654 an ounce.

This morning in the U.S. Market:

This is a very light week for potential market-moving economic reports, but they include the Small Business Confidence Index, the Fed’s Beige Book, Retail Sales, etc. To see the full list click here, and look at the left side of the page it takes you to.

There were no important economic reports Monday.

Tuesday’s only report is that the Small Business Confidence Index was up again in December, rising 1.8 points to 93.8, its 4th straight month of improvement.

Yesterday’s only report was the Fed’s ‘Beige Book’ in which it said the final weeks of 2011 were the economy’s best since last spring, that consumers bought more goods, so factories had to build more goods. People travelled more, and the auto industry had its strongest stretch in an already positive year for autos.

This morning’s reports were that new weekly unemployment claims rose an unexpected 24,000 last week to 399,000.  That lifted the more important four-week moving average of claims up average was up 7,750 to 381,750.

And Retail Sales were up only 0.1% in December, less than the consensus forecast of 0.3%. And excluding strong auto sales, retail sales declined 0.2% in December the first drop in core sales since last December.

The disappointing sales have taken the wind out of the earlier quite positive pre-open indicators.

Our Pre-Open Indicators:

Our pre-open indicators are now pointing to the Dow being basically flat in the early going.

To read my weekend newspaper column ‘Can The U.S. Economic Recovery Overcome Europe’s Drag? Click here.

Subscribers to Street Smart Report: Portfolio changes! The new issue of the newsletter is in the subscribers’ area of the Street Smart Report website from yesterday, and a new hotline from last evening with portfolio changes.

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I’ll be back Saturday morning with the regular Saturday morning post, as usual later than the weekday posts, probably around 11 a.m. eastern time. (This blog appears every Tuesday, Thursday, and Saturday morning!).

**** End of Today’s post*****

retail sales