Market Wrap Up - Feb 15

Enjoy your fresh coffee with our summary and analysis of the market activity of the day and a medley of important information you should find useful. U.S. markets inched higher today, as the Fed chief concluded his two-day testimony to Congress.

OVERSEAS MARKETS

As was reported earlier this week, Ecuador missed a $135 million payment on foreign bond debt, but the nation said it expects to make the payment during its 30-day grace period. The Venezuela Stock Market Index fell 2.29%, as Hugo Chavez threatened to next take control of food suppliers. Ironically, Venezuelan shares might have been impacted by a new al Qaeda threat to target America's oil suppliers. The confused Chavez promised to step up security, while commenting that it was illogical for Venezuela to be targeted. Sure, why would Iran's ally be a target...

Chinese stocks were hot today, as the Hang Seng jumped 1.63% and the Shanghai and Shenzhen 300 Index soared 3.1%. The Chinese markets are often buoyed by positive economic news from their most important export market, the United States. Thus, yesterday's favorable testimony of Fed Chief Bernanke likely boosted Chinese shares today, in our opinion.

The FTSE/JSE Africa All Share Index rose 0.8% today, after the South African Reserve Bank kept its benchmark interest rate unchanged after concluding a two-day meeting. The Ukraine PFTS Index rocketed 8.4% higher today. The move may have something to do with Vladimir Putin's promotion of Sergei Ivanov to First Deputy Prime Minister today, but we admittedly do not know why. Ivanov does not seem like he would be any softer a Russian PM than Putin has been, sharing the same KGB background. Ivanov served as Putin's Defense Minister, and is a trusted regime member.

ECONOMIC DATA & ANALYSIS

U.S. Trade Representative Susan Schwab discussed the Bush administration's trade agenda before the Senate Finance Committee today. However, most of the nation's attention was focused on the House of Representatives, as Fed Chairman Ben Bernanke addressed the Financial Services Committee in the second day of his testimony to Congress. Committee Chairman, Barney Frank of Massachusetts, said he found it troubling that the Fed was focused on inflation while only forecasting moderate economic growth. He managed to flush out a bit of hawkishness from the Fed Chief, as Bernanke stated that if inflation were to run higher than he expected, he would have to act to raise rates. Still, I want to make it clear that the Fed expects inflation to moderate this year and next. You already know our concern that food and energy prices could rise, creating a dilemma for the Fed.

January import prices decreased 1.2%, due to lower imported petroleum prices. Expectations were for a decline of 1.0%. In December, prices rose by 1.1%, due to higher energy prices. Excluding petroleum, prices were unchanged. The Treasury reported on net foreign purchases of U.S. securities in December, indicating that foreign investment decreased to the lowest level in nearly five years. Earlier today, we theorized that this may have had something to do with the weaker previous outlook for the American economy, and that investment may prove better in January and February as a result of recent GDP data and Fed commentary.

January industrial production fell 0.5%, versus Bloomberg consensus expectations for a rise of 0.7% and a Reuters consensus view for no change. Capacity utilization came in at 81.2%, versus expectations for a reading of 81.7%, and compared to 81.8% in December. The New York state manufacturing index came in higher than expected, and the outlook was encouraging as well. However, the Philly Fed manufacturing index was reported down to 0.6, versus a Bloomberg consensus expectation for 4.1, and compared to 8.3 in January. Also, the Mid-Atlantic region reported only modest growth.

COMMODITY MARKETS

Belarus' scheduled 30% increase in transit fees for Russian oil seemed to pass without any trouble, and crude oil futures pricing was relatively unchanged today. Natural gas surprisingly rose 1.64% on the day, despite a weather forecast for normal temperatures in the week ahead. The natural gas inventory draw reported today was relatively in line, but high. Still, in line draws and normal weather are expected to be negative factors for nat gas now that we are so far into the winter, after such a slow start to it.

Nickel led all commodity futures, up 4.67% today, followed by sugar, which rose 3.92%. On the downside, gasoline slipped 1.19%, followed by gas oil, down 0.84%.

STOCK SPECIFIC NEWS
The Hershey Company (HSY) announced it would lay off 1,500 employees and move some production to Mexico. The three-year restructuring plan is expected to save the company $190 million a year. HSY was up 1.6% today on the news.

The earnings schedule for the week concluded with reports from Biogen, Terex Corp. Laboratory Corp. of America, Ameren, Molson Coors Brewing Co., Agilent Technologies and Allied Waste Industries.

(disclosure)