Yesterday’s release of the minutes from the Jan 30th meeting provided some interesting insights into the internal discussions at the Federal Reserve. On the one hand the committee seemed comfortable with the rate of growth in U.S. economic activity, the U.S. labor market, and inflation. However, the shift to a more dovish stance appears to be primarily driven by concerns of worsening economic conditions in Asia and Europe and the strong negative reaction in U.S. markets following the December meeting. In total though, markets appeared to have correctly forecast the overall tone of the meeting minutes, as U.S. treasuries and the yield curve remained little changed at the end of the trading session with the 10 yr. closing to yield 2.64%. U.S. equities closed higher with the Dow up 63 points (+0.24%)and the S&P up 5 points (+0.18%).
Europe gets their turn in the spotlight today with the ECB releasing their minutes from their January meeting this morning. There are a number of economic releases today, including Philadelphia Fed Business Outlook, Jobless Claims, Durable Goods, and Existing Home Sales. The claims numbers will be monitored to determine how much of last week’s increase was a temporary reaction to the gov’t shutdown. Existing Home Sales for January will be watched closely to see if any of the optimism seen in last week’s NAHB Housing Market Index flows through to existing sales. You may recall that December Existing Home Sales unexpectedly fell sharply, down -6.4% to 4.99 million.