11:45 AM NY – The Fed chairman said in his testimony that inflation is ‘uncomfortably high’.

In a prepared testimony to the Joint Economic Committee of Congress the Fed chairman Bernanke issues cautious guidance for the economic growth and inflation. He said that his business scenario counts on businesses to increase their capital spending at a moderate pace in the months to come and consumer spending is likely to remain solid. The outlook for housing market remains uncertain and sub-prime lending related issues appear to be contained and are not spreading in the economy.

He expects the economy to continue to grow at moderate pace in the coming quarters despite slow capital spending from businesses. Mr. Chairman also struck optimistic view on consumer spending and added, “the continuing increases in employment, together with some pickup in real wages, have helped sustain consumer spending, which increased at a brisk pace during the second half of last year and has continued to be well maintained so far this year. Growth in consumer spending should continue to support the economic expansion in coming quarters.”

Real economic growth has slowed in the last five quarters and in the second half of the year 2006 the rate of growth had declined to 2% and is likely to be repeated at the similar pace in the current quarter. Housing market is likely to a drag on the economy in the coming quarters as lending standards are tightened.

The chairman noted that the overall inflation as measured by Consumer Price Index has declined to 2.4% last year ending in February from 3.6% a year ago. Core inflation during the same period was 2.7% compared to 2.4% a year ago. He said that core inflation slowed modestly in the second half of last year, but recent readings have been somewhat elevated and the level of core inflation remains uncomfortably high. Increase in rent paid for real estate account substantial part of core inflation growth.


10:30AM NY – U.S. stocks trade lower led by another decline in housing sector.

U.S. market averages after thirty minutes of trading are in the negative territory. Oil is trading $1.20 per barrel higher to $64.20 and trades indicate oil may trade higher in the coming days. Last week U.S. reported less than expected decline in oil and gasoline inventory. Tensions in the middle-east remain high and U.K. releases what they claim to be evidence that British sailors were seized by Iran in international zone.

Tech stocks fell at the opening along with broader market averages but managed to rebound after fifteen minutes of trading. Google, Yahoo, Accenture and Motorola gained.
Accenture rose on better than expected earnings.

ADRs of China related stocks fell in the morning trading but Chinese tech stocks rose along with the U.S. stocks. Asian markets slumped sharply in the overnight trading. China, India, Singapore and Japan closed lower.

Oil complex stocks rose mildly on the higher oil prices. Norfolk Southern (NS: chart) traded higher on the news that the company is planning to buyback shares. The company raised its buyback program to 75 million shares from 50 million and reduced its buyback time to Dec 31, 2010 from Dec 31, 2015.

9:45AM NY – 2:45PM Frankfurt – U.S. stock futures decline on rise in oil and less than expected gain in durable goods orders.

U.S. stock-index futures fell thirty minutes before the official trading on several negative trends in the market. Oil traded up $1.10 to $64.10 per barrel, after rising as much as $5 on rumors that Iran had fired a missile at a U.S. ship. Oil backed-off after trading above $68.

Durable goods orders in February rose 2.5%, less than expected. Spending by businesses on equipment and technology fell in 9.3% in January triggering a sharp sell-off of more than 400 points. Manufacturing sector appears to be still struggling and market was expecting a larger rebound in the orders.

Home builders may come face another day of sell-off. FBI said that it is investigating Beazer Homes (BZH: chart) for aggressive selling of mortgages to buyers who may not be able to afford it. U.S. Attorney’s office said that it will investigate the matter and has requested the documents from the company.

Accenture Ltd (ACN: chart) gained $1.05 in early trading on second quartet earnings report of 47 cents vs. 11 cents a year ago. Caterpillar and Boeing fell.


9:30AM London advances Wednesday morning on a rise in commodities.

The UK market was higher on Wednesday morning. The FTSE 100 gained 2.1 points to 6.294.8.

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