Morning Call For Thursday, Feb. 22

OVERNIGHT MARKETS AND NEWS

Mar E-mini S&Ps (ESH18 +0.32%) this morning are up +0.12% as they recovered from a 1-week low in an overnight trade. Stocks rebounded on upbeat Fed commentary after Fed Governor Quarles said the U.S. economy is in the “best shape” since the crisis. The 10-year T-note stabilized below Wednesday’s new 4-year high after St. Louis Fed President Bullard warned the Fed needs to be careful not to increase interest rates too quickly this year. European stocks are down -0.56% after the German Feb IFO business climate fell more than expected. A downward revision to UK Q4 GDP also undercut European stocks and knocked GBP/USD down -0.24% to a 1-week low. Asian stocks settled mostly lower: Japan -1.47%, Hong Kong -1.48%, China +2.17%, Taiwan -0.49%, Australia +0.12%, Singapore -0.79%, South Korea -0.73%, India -0.07%. Chinese markets reopened after the week-long Lunar New Year holiday and rallied to a 2-week high. Other Asian markets did not fare as well as weakness in technology stocks weighed on the markets as did U.S. interest rate concerns after the 10-year T-note yield on Wednesday rose to a 4-year high of 2.95%.

The dollar index (DXY00 +0.05%) is up +0.07% at a 1-week high. EUR/USD (^EURUSD) is up +0.02%. USD/JPY (^USDJPY) is down -0.45%.

Mar 10-year T-note prices (ZNH18 +0.09%) are up +3 ticks.

Fed Governor Quarles said, the U.S. economy is in the “best shape” since the crisis and “with a strong labor market and likely only temporary softness in inflation, I view it as appropriate that monetary policy should continue to be gradually normalized.”

St. Louis Fed President Bullard said the Fed needs to be careful not to increase interest rates too quickly this year because that could have a restrictive effect on the economy.

The German Feb IFO business climate fell -2.2 to a 5-month low of 115.4, weaker than expectations of -0.6 to 117.0.

UK Q4 GDP was revised downward to +0.4% q/q and +1.4% y/y from the previously reported +0.5% q/q and +1.5% y/y.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) weekly initial unemployment claims (expected unch at 230,000, previous +7,000 to 230,000) and continuing claims (expected -7,000 to 1.935 million, previous +15,000 to 1.942 million), (2) Jan leading indicators (expected +0.7%, Dec +0.6%), (3) Feb Kansas City Fed manufacturing activity (expected +2 to 18, Jan +3 to 16), (4) EIA weekly Petroleum Status Report, (5) Treasury auctions $29 billion 7-year T-notes, and (6) USDA Jan Cold Storage.