smra- week ahead - june 14 2011

8/6/2019 SMRA- Week Ahead - June 14 2011

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The US Day Ahead - Calendar & Market Outlook for Tuesday, June 14 by John Canavan 13 June 2011

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-- Stone & McCarthy (Princeton) -- Treasuries were mostly a bit weaker Monday, giving back a portion of

Friday's gains. Following a very quiet overnight, Treasuries spiked lower as U.S. based players began to enter

the arena. A number of countries in Europe were closed for Whit Monday or the Queen's Birthday, so the

downdraft may have been a little exaggerated. Stocks were drifting higher at the time, contributing to the

selloff, and players were also taking profits following Friday's gains. European sovereign debt spreads were

still widening though, and both Portuguese and Irish yields rose to post-euro record highs. That helped

Treasuries quickly find their footing. Stock failed to hold their better early tone, and as stocks headed lower

through the early afternoon, Treasuries scrambled back to small gains. There were no U.S. data releases tooffer any direction and once stocks rebounded in the afternoon, Treasuries faded to small losses across most

of the curve into the close.

The data calendar was empty today, but it is very busy this week, and that begins with the PPI and Retail

Sales releases first thing Tuesday morning. We anticipate both releases will be slightly below expectations.

The weaker Retail Sales figures in particular would generally be supportive, but players have already been

pricing in a weakening economy, and it may take a number well below the median estimate to actually

generate a sustainable bid.

Public Appearances and Events:

The Bank of Japan Policy Board winds up a two-day meeting. The Bank is likely to maintain its bias towards

easing, but further measures to provide liquidity -- if any -- will probably be confined to the areas that directly

felt the impacts of the earthquake and tsunami.

14:30 ET - Chairman Ben Bernanke will give a speech on "Fiscal Sustainability" at the Committee for a

Responsible Federal Budget Annual Conference in Washington, DC. Bernanke will probably stay away from

the topic of monetary policy. Instead, he will reiterate the need for a credible plan to reduce long-term

The US Day Ahead - Calendar & Market Outlook for Tuesday, June 14

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problems the government's debt. He probably will also warn against making the increase of the statutory debt

limit a political issue, and of the dire consequences of markets losing confidence in the safety and soundness

of US securities.

Economic and Market Data:

07:45 ET - The ICSC/Goldman-Sachs Retail Activity Index for the week ended June 11 will probably

reflect demand for seasonal merchandise during a period of hot weather in much of the US, especially for

items like air conditioners. There may continue to be some regional impacts from flooding in the Midwest and

storms in the Northeast.

08:30 ET - The May data on Retail Sales is likely to look soft due to slowing rises in gasoline prices that will

moderate the pace service station sales. Declines in motor vehicle sales that were in part from limited

inventories of the most sought-after models should also moderate sales, although higher prices per vehicle

may cushion that a bit. Other types of retailers may have a somewhat better performance. At this time of year

sales generally increase for building materials and gardening equipment. Warm weather probably means that

seasonal merchandise did well at department and apparel stores. The release of some new games for the most

popular consoles should have helped at electronic specialty stores. Slow activity in housing probably

restrained sales of household appliances and furniture. SMR's forecast for retail sales is -0.6%. The latest


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Bloomberg survey has a median forecast of 0.5%, with a range of -0.4% to 0.0%

08:30 ET - The Producer Price Index for May promises to have a more benign cast after several months of

fairly sharp rises at the headline. Increases in energy and food costs were much more modest for the month.

At the core, a few categories will probably account for most of the upward pressure in prices. These should

include those for gold and other precious metals, and for passenger cars where disruptions in the supply chain

at a time of increased demand pushed prices up. SMR believes that the PPI will remain flat for the month of May. The latest Bloomberg survey has a median forecast of 0.1%, with a range of -0.4% to +0.6%.


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10:00 ET - The report Business Inventories in April will provide the final piece of the inventory puzzle with

the release of data on stocks at retailers. Increases were already reported for factories (+1.3%) and wholesalers

(+0.8%). This will feed into expectations for the change in inventories component of the second quarter GDP.

SMR's forecast for business inventories is +0.9%. The Bloomberg forecasting survey has a median of 0.9%,

with a range from 0.5% to 1.2%.


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Fixed Income and Other Market Activity:

For Andrew and John.

Contributors: John Canavan, Andrew Brodsky, Andrew Stone, and Terry Sheehan

© Stone & McCarthy Research Associates Inc., 2011


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smra- week ahead - june 14 2011

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