How Gold Is Mined: Jul 25, 2013

A few minutes ago, credit rating agency Standard & Poor's revised the outlook on its U.S. sovereign credit rating up to stable from negative.

The news has caused a spike in S&P 500 futures and the U.S. dollar versus the yen.

Futures are now trading around 1648, up 0.6%, versus levels around 1641 prior to the release. The dollar-yen exchange rate has just broken through ¥99.00 to the upside, and is now up 1.5%.

Meanwhile, after turning positive earlier, gold is negative again after the S&P release. Right now, the shiny yellow metal is trading around $1379 an ounce, down 0.3%, versus levels around $1386 prior to the release.

10-year Treasury futures are down 0.2%, trading at their lows of the day. The yield on the 10-year Treasury is 3 bass points wider to 2.20%.

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MONDAY SCOUTING REPORT

This post is part of the "Monday Scouting Report" series, a weekly look at the stories and issues that most affect mid-market businesses. "Monday Scouting Report" is sponsored by GE Capital.See more Monday Scouting Reports >>

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Last week saw a crazy full schedule of economic data accompanied by market volatility. This week has much quieter calendar.

"The first important data release does not arrive until Thursday, when we get May retail sales," said Deutsche Bank's Joe LaVorgna.

Talks of a "taper" have also been put off giving investors and traders a few days to gather their thoughts and reposition their portfolios before the news flow picks up again.

Top Stories

Talks Of A "Taper" Are On Hold: The big buzzword in the markets and the economy lately has been "taper." This is the prospect that the Federal Reserve could soon start reducing, or "tapering," its bond-buying program, which would potentially cause interest rates to rise and pressure the economy. However, Friday's good May jobs report was just bad enough to put any speculation of a near-term taper on hold.

Economic Calendar

Retail Sales (Thursday): Economists estimate that retail sales climbed by 0.5% month-over-month in May. Excluding autos and gas, they estimate sales climbed by 0.3%. "Like nonfarm payrolls, retail sales are prone to substantial revision, so the May results will have to be taken into the context of what changes might occur to March and April," said Deutsche Bank's Joe LaVorgna.Jobless Claims (Thursday): Economists estimate that weekly initial unemployment claims climbed to 350,000 from 346,000 last week. "At 353,000, the four-week average is up from a low of 338,000 five weeks ago, although that level included two sub-330,000 readings that were probably exaggerated on the low side," said High Frequency Economics' Jim O'Sullivan.Producer Price Index (Friday): Economists estimate producer prices climbed by 0.2% month-over-month in May and 0.1% excluding food and energy. "In PPI, we expect a flat (0.0%) reading in the headline and 0.1% growth in core finished goods," forecasts Morgan Stanley's Vincent Reinhart. "This comes after wholesale gasoline prices flattened out between mid-April and mid-May, but this should appear negative in seasonally adjusted terms."Industrial Production (Friday): Economists estimate that industrial production increased by 0.2% month-over-month in May. "Overall production will likely get a small boost from utilities output as the weather normalized last month," said Wells Fargo's John Silvia. "However, manufacturing output will likely remain weak as soft global growth and a strengthening dollar weigh on foreign demand for U.S. produced products."Consumer Sentiment (Friday): From LaVorgna: "The preliminary reading on June consumer sentiment (87.0 vs. 84.5) should benefit from several developments: The first is rising home prices—they were up 12.1% in April from their year earlier level according to CoreLogic. Another development is rising stock prices—they were up over 14% year-to-date through May. Lastly, the job market continues to mend."

Market Commentary

Big swings have returned to the stock market as economic data continues to be weak or disappointing.

"[W]e continue to believe that most institutional investors are not prepared for a potential period of market weakness," said BMO Capital's Brian Belski who sees the S&P 500 falling to 1,575 by the end of the year..

"[T]he market is likely stuck in a frustrated and choppy trading range for at least several more months, unless the economic environment (and job growth in particular) begins to pick up more steam and quick."

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