The tone was firmly “risk off” this morning as much of the price action that has dominated trading in the last week continued, but U.S. stocks are rallying back this afternoon.
The S&P 500 is now down only 0.1%. Despite the small rally, U.S. Treasuries are holding on to gains as well.
The charts below show moves in various markets. Across the top from left to right are the S&P 500 index, the dollar-yen exchange rate, and the euro-dollar exchange rate. Across the bottom are gold futures, 10-year U.S. Treasury futures, and the dollar-lira exchange rate.
Major economic data releases this morning included unemployment out of the eurozone, which remained unchanged at 12.0%, and eurozone consumer price inflation, which came in at 0.7% year over year in December, below consensus expectations for a 0.9% rise. The big surprise, however, was a 2.5% drop in German retail sales from the previous month in December, which is being cited as one driver of bearish sentiment this morning.
In the United States, personal incomes were flat in December (below estimates calling for a 0.2% rise) while consumer spending growth slowed to 0.4% from 0.5% (besting estimates calling for a slowdown to 0.2%). The year-over-year change in the price index of personal consumption expenditures — the Fed’s preferred measure of inflation — rose to 1.2%, in line with estimates. Chicago PMI unexpectedly rose to 59.6 from 59.1, and the final results of the University of Michigan’s consumer confidence survey were better than expected, revealing a smaller drop in confidence in January than the preliminary estimate published by the University of Michigan earlier this month.