Warsh Appointment Kyboshes the "Debasement" Trade

Markets correct, speculation retreats, and key reports await.

Key Takeaways

• Froth Shaved from Precious Metals Amid Broader Risk-Off Tone: We kick off the day and week with markets still in risk-off mode and the froth still being shaved off the precious metals complex, which is a healthy development. The action in the commodity pits remains negative, and the U.S. dollar is finding its legs… ditto for the oversold Treasury market.

• Housing Market Deflation: As for inflation, what the bears are missing in their analysis is the deflationary cracks underway in the U.S. residential real estate market. Don’t just take our word for it — have a look at Housing Market Is Shifting Back Toward an Advantage for Buyers on the front page of today’s Wall Street Journal.

• Guidance Takes Center Stage: The week ahead is a busy one — about one-quarter of S&P 500 companies report, we will also be on the receiving end of the January nonfarm payroll report, and there are the twin central bank policy meetings on Thursday to digest — the ECB and the BoE. While markets are priced for no change, what will be most important is the forward guidance, especially over at the Bank of England, where dissents are likely to come to the fore; as for the ECB, what commentary, if any, Lagarde will provide over the euro’s strength.