Two Fed officials out later today

http://globalhomefinance.com
at 12:45 Plosser from Philly and at 1:20 Fisher from Dallas. Yesterday Lockhart (Atl) didn’t directly address the Dec employment report but in his text he alluded to it, saying ….”The trend in jobs growth improved throughout most of 2013, notwithstanding the surprisingly soft initial reading for December…..” The key word in the line is initial; suggesting he expects the data to be revised higher.


Traders will be ...focused on any remarks from Plosser and Fisher on the employment report.
Retail sales better in December but November was weaker than originally reported; combine the two and sales were about what had been expected. Talk of better holiday sales is working through the stock market with a better open at 9:30. For all of 2013, retail sales rose 4.2% from the prior year, following a 5.4% gain in 2012. Hardly any reason to celebrate, sales in 2013 weaker than 2012, but that is only half the story; internet sales were up 10.3% for 2013. 

The 10 yr treasury will find strong headwinds at 2.80%, we do not believe the rate will decline below that. Nothing has changed other than the employment data that hardly anyone believes. Markets continue to expect the Fed will taper through 2014 at each FOMC meeting, almost every 2014 economic forecast out there is expecting increased economic growth this year. Those are not building blocks for lower interest rates. After the 10 tried to break above 3.00% on the tapering decision and couldn’t climb above it, traders were increasingly nervous that a rebound may occur. The employment report was all it took; it is not likely rates will fall much more. The decline in rates is a technical correction in a bear market, not a change in sentiment. Expecting interest rates will fall much more may lead to missing an opportunity especially to refinance for those that let the ship sale earlier this year.