An 8.9 magnitude earthquake has hit the coast of Japan overnight with aftershocks as big at 7.1. The quake hit right at the close of the Japanese stock market and is now the worst earthquake that has hit Japan in over 140 years. To make things worse, a Tsunami then swept over parts of Japan following the quake. The death toll is believed to already be in the hundreds and climbing. Hawaii was expecting a surge of up to six feet to hit this morning between 7:00 a.m. and 7:45 a.m. CT, but reports are coming in that the Tsunami affect in Hawaii was insignificant. There is also a warning for Alaska and the entire West Coast down to Mexico throughout the afternoon hours. In US market news this morning, Retail sales for February rose in-line with expectations 1.0%. This is best pace of growth in atleast four months, and is partly due to the large weather-related impact on sales in January. One of the larger components of the sale figures, vehicle and parts sales, rose 2.3%. The “Day of Rage” in Saudi Arabia has not played out into anything of substance so far. The day is almost over and there are no reports of massive protests or violence. The markets have been shaken by the thoughts of social unrest arising in Saudi Arabia and a quiet day will most likely encourage investors. Crude has traded below $100 this morning and the Japanese quake seems to take sentiment for the rest of today’s events. Potential economic affect in Japan is believed to be what is driving Crude prices down almost $3 this morning. The new 2011 high price today has forced early signs of a bullish trend to form. A close above 120-05( below 3.33%) would be the best way to boost the new signal. Dailies studies are still bullish, maintaining the same signals that began back in late Feb. Key support is now around 119-15 and any close below (above 3.42%) would neutralize our market and the bullish trend. Current levels are 3.36% on the 10yr, along with mortgage backs up a few ticks in the lower coupons.
PART TWO:
Just another update on some more economic numbers and current levels. Univ. of Michigan Consumer Sentiment Falls more than expected to 68.2 in March, down from 77.5 in February, and the lowest level since October 2010. Inflation concerns rose as the one-year inflation expectation index rose to 4.6% from 3.4% and the 5-to-10-year inflation outlook rose to 3.2% from 2.9%. Business inventories rose 0.9% in January to their highest level in two years and sales increased at their fastest pace in nine months. Sales for all businesses at the manufacturing, wholesale and retail level increased 2%, the seventh consecutive gain and the largest since March. The 10yr yield had slid down to 3.33%, the lowest since Jan. 31, however the 10yr has moved lower now with the yield back up to 3.39%. Stocks are off from lower levels and Crude has now slipped back over $100/barrel. Mortgage backs are off their highs as well and are currently trading down 2-3 ticks on lower coupons.
Joe Webb
VP, Trading/Pipeline Management
PrimeLending, A PlainsCapital Company
18111 Preston Road, Suite 900
Dallas, Texas 75252
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