Market commentary

U.S. Treasuries are falling in price, rising in yield, again this morning as producer prices rose more-than-expected in November. Prices jumped 0.8% after two consecutive months of 0.4% increases. Higher energy and food prices pushed the headline increase in prices, so excluding food and energy prices, finished goods rose 0.3%. This illustrates the problem producers and/or retailers are having in increasing prices of finished goods, as competitive pressures keep the lid on price increases to the consumer, so the majority of the higher costs reduce profit margins.

Speaking of consumers, Retail Sales rose more-than-expected in November rising 0.8%, and October sales figures were also revised higher from 1.2% to 1.7%. One of the biggest drivers of headline growth was the increased sales of gas stations, which translated means we are paying higher prices for gas. Analysts will be watching to see if the increased consumer spending continue through the beginning of 2011 before they will be comfortable that it is sustainable, i.e., related to the holiday season.

Finally today, the FOMC is holding its final meeting of 2010 and is expected to release its official statement at 2:15 p.m. ET. The statement is expected to be little changed from November, and the markets will be watching closely to see if the recent improvement in some of the economic figures or the unexpected rise in interest rates will cause the Fed to make any minor alterations to their verbiage.