The equity markets consolidated today as a large snow storm hit the north eastern seaboard of the United States keeping many market participants on the sidelines for the trading session. The petroleum markets where relatively quiet with crude oil rising 76 cents while gasoline decline slightly. The S&P 500 Index declined slightly to 1068, down 2 points on the day. The dollar again was able to gain some ground today, as market participants await news on Greece’s debt situation.
France and Germany are working together on a possible plan to help Greece resolve its budget problems, according to a person close to French President Nicolas Sarkozy. The Franco-German collaboration comes ahead of a summit of leaders from the European Union’s 27 countries which is schedule for Thursday. Euro-zone finance ministers held a conference call Wednesday with European Central Bank President Jean-Claude Trichet to discuss the Greek debt crisis amid growing speculation that a bailout is being planned.
On the economic front, the US deficit widened in December and by more than expected. The deterioration was largely a function of oil imports. Simply put, the US imported for oil products and at higher prices. The non-energy deficit was largely steady at $16.7 bln from $16.5 in November. One important implication of the wider real trade deficit is that the 0.5% the net exports contributed to US Q4 GDP will likely be revised down. On top of that, the wholesale inventory figure out earlier this week also points to a modest downward revision to Q4 GDP’s preliminary 5.7% annual growth pace.
Federal Reserve Chairman Ben Bernanke outlined the likely path the Fed would take to tighten credit once the economy has recovered enough. In another step toward unwinding its crisis-lending programs, he said the Fed could soon begin raising its discount rate, charging more for emergency loans it makes directly to banks. In testimony prepared for a House Financial Services Committee hearing that was called off because of a blizzard in Washington, Mr. Bernanke said that another interest rate might for a time replace the federal-funds rate as the main policy tool. That’s the rate the Fed pays to banks on excess reserves they leave at the central bank.