Back To Business

Attention turned away somewhat from the situation in Ukraine yesterday, a trend that continued today as soft U.S. economic data came in and converted a losing day into a winner.

Activity in the non-manufacturing sector in the United States dropped sharply in February and employment contracted, according to data released Wednesday by the Institute for Supply Management. The ISM's non-manufacturing index among purchasing managers clocked in below expectations of a 53.5 reading.

Precious metals prices also received a boost after private sector hiring gained at a much slower pace than predicted for February.

"In the short term, the data raise questions about whether this recovery has legs," said Peter Hug, global trading director at Kitco Metals.

Hug, however, warned investors and traders not to be too pessimistic about the U.S. economy, saying that the sinking data of the past few months may be the result of severe cold weather.

The Fed "Beige Book" said as much. And, by any reckoning, it has been a long, harsh winter. A lot of the shrinkage in the economy appeared in New York and Philadelphia, not coincidentally two of America's most pedestrian-orienting cities. No one is saying to family and friends, hey, let's stroll around midtown Manhattan or Chestnut Street toIf there are any signs in the tea leaves,  shop and eat when the windchill is below zero. 

The dollar was also weakened a bit by the data, helping gold rise about $2.70 at 4PM New York time.

Part of the dollar weakening and the rise in precious metals is due to a reconsidering by analysts about what will happen at the next FOMC meeting coming up on March 18th and 19th. Will tapering continue without a pause? Will the tapering itself be tapered? What reassurances will be given about future interest rate levels?

Fed chairwoman Janet Yellen gave us some clarity today in prepared remarks in which she said:

"The economy continues to operate considerably short of these objectives," Ms. Yellen said during a ceremonial swearing-in held more than a month after she took over as Fed chief. "I promise to do all that I can, working with my fellow policymakers, to achieve the very important goals Congress has assigned to the Federal Reserve." 

As always, wishing you good trading,