Investors were initially thrilled by encouraging US economic data and the Fed's policy statement which unveiled implementation of QE3 was under consideration. Gains were, however, pared later in the day amid profit taking. Wall Street closed lower with DJIA and S&P 500 losing -0.18% and -0.57% respectively. In the commodity sector, gold surged as the US dollar declined. The benchmark Comex contract rose to a 7-week high of 1731.5 before settling at 1726.7, up +1.56%. Oil traded with great volatility, soaring earlier in the day but most of the gains were then pared after a survey suggested that the embargo on Iran would have little impact on oil prices. The front-month contract for WTI crude oil ended the day almost flat at 99.74 while the equivalent Brent crude contract settled at 110.79, up +0.89% , after rising to as high as 111.89.
The EU approved a plan to embargo oil imports from Iran from July in an attempt to pressure the country over nuclear development. In response, the Iranian parliament is discussing a bill to immediately stop oil shipment to Europe. While oil prices were boosted over the past few weeks by tensions over Iran. The impacts of the sanctions are expected to be less than significant than previously anticipated. It's believed that Iranian oil would be more than replaced by other countries such as Saudi Arabia.
US' durable goods orders gained +3.0% m/m in December. While the growth decelerated from +3.8% in November, it came in higher than market expectations of +2.0%. Durable goods orders excluding transportation surprisingly rose +2.7% m/m in December, following a modest gain of +0.3% a month ago. The market had anticipated a rise of +0.9%. Initial jobless claims, however, missed expectations and rose +25K to 377K in the week ended January 21. New home sales also slipped to 307K in December while November's reading was revised -1K lower to 314K.
The US GDP probably expanded +3.0% in 4Q11, after gaining +1.8% in the prior quarter. Moreover, the University of Michigan Confidence Index might have been revised higher, by +0.2 points, to 74.2 in January. In Asia, the Japanese government reported another month of deflation in January. Core CPI slipped -0.1% y/y after a drop of -0.2% in December. The leading Tokyo core CPI dropped -0.4% y/y, following a -0.3% dip in December.