Overnight weakness in stocks was attributed to a failure to form a coalition government in Italy, led by the election winner Pier Luigi Bersani. Bersani will either pass the mandate to form a government to Silvio Berlusconi or a new election will be necessary. The Italian government's auction of 5- and 10-year notes also saw rates tick up from last month as demand waned. European stocks and the euro remained under pressure as shareholders rotated out of European assets and into safer assets in countries such as the US and Switzerland. European bank stocks closed down 1.37% on the day.
The only economic data point today in the US was pending home sales. On an annual scale, the report left much to be desired: It only rose 5.0%, down from 9.6% the month prior -- well below the 8.7% estimate. On a monthly scale, sales fell 0.4% versus an estimated 0.3% drop. The MBA's weekly refinance index rose 7.7% from last week, driven by a large increase in refinancing activity.
On the Fed speech circuit, FOMC voting member Boston Fed President Rosengren continued the bullish status quo by stating that bond buying should continue through 2013 and potentially increase should economic conditions deteriorate. In terms of cutting asset purchases, Rosengren stated that substantial improvement in the labor market would be necessary, along the lines of 200,000 added nonfarm payrolls per month for a sustained amount of time.
The Treasury sold $35 billion of 5-year notes at a high yield of 0.760%. Indirect bidders took more than the average amount at 46.1% of the issue. Demand was light with bid-to-cover ratios at 2.73 versus the 2.84 10-auction average.
Tomorrow's Financial Outlook
Tomorrow morning the US will release the third and final estimate of 4Q GDP. Annualized GDP is expected to tick up to 0.5% from the prior 0.1% and -0.1% readings. Personal consumption, Core PCE, and the GDP Price Index are all expected to remain unchanged from last month's estimate. The regional Chicago PMI report is expected to trend down marginally to 56.5 from last month's 56.8, but remain in expansionary territory. Lastly, the weekly jobless claims report is expected to remain near the 4-week moving average of 340,000, up from last week's 336,000.
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Overnight, China will release YTD industrial profits and Germany will report unemployment figures. In January, Chinese industrial profits had clocked in at 5.3%. In Germany the unemployment rate is forecast to remain unchanged at 6.9%. Lastly, German retail sales are expected to decline 0.6% MoM from last month's gain of 3.0%.
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