1. That piece of data was the NAHB Housing Market Index for February.

It dropped to 46 from 56, marking the biggest drop on record. The crazy thing about the report is that the biggest drop from a regional standpoint was seen in the West (to 57 from 71), which wasn't exactly the epicenter or even the periphery of the polar vortex that impacted the Northeast, Midwest, and South. 2. From our vantage point, we think the housing starts report suggests weather did have some undue impact, but that the weakness was not all weather-related. In that sense, this report strikes us as falling in-line with other data of late that has left the same impression (eg. retail sales, durable goods orders, industrial production, and nonfarm payrolls). 3. Separately, the newly-configured PPI report didn't create any real shockwaves. That could be owed partially to the unfamiliar nature of the report, as well as to the headlines that were largely in-line with expectations. 4. The PPI for final demand increased 0.2%, as expected, while core PPI for final demand, which excludes food and energy, jumped 0.2% (Briefing.com consensus +0.1%). 5. Over the last 12 months, the index for final demand is up 1.2% while core PPI is up 1.3%. Neither will ring inflation alarm bells for the Fed. In that context, today's report fits with the thinking that the first hike in the federal funds rate is still some time away.

6. The U.S. stock market began Wednesday on a sour note after a bigger-than-expected fall in housing starts in January, though severe weather contributed to the decline in construction. Wholesale prices nudged up above expectations. Investors are awaiting minutes from the Federal Reserve's policy-setting meeting in January, due to be released at 2 p.m. 7. Particularly poor weather hit construction last month, according to economists polled by MarketWatch, who had forecast a starts rate of 945,000 for January, compared with an originally estimated rate of 999,000 for December. On Wednesday, the U.S. Commerce Department upwardly revised Decembers starts rate to 1.05 million. 8. Construction on new U.S. homes has pulled back since soaring in November to the fastest pace since 2008. Januarys rate was the lowest since September, and was down 2% from the year-earlier period. 9. But there may be better news in coming months: Residential projects delayed during a particularly tough winter could show up in the spring, economists say. Unfortunately, the

poor weather, which analysts think has also hit retail sales, makes it too difficult to clearly identify trends that underlie the monthly volatility. Declining affordability may also be behind some recent sputtering in the housing market. Other challenges for 2014 are recent weak reading for job growth 10. The construction data follow a Tuesday report that showed sentiment among home builders plunged this month, thanks to worries over current home sales. Indeed, government data released Wednesday showed that building permits, a sign of future demand, fell 5.4% in January to an annual rate of 937,000, the lowest since August. Permits dropped for single-family homes and apartments. 11. Looking longer term, housing starts are far higher than a post-bubble rate that hit a bottom of less than 500,000 in 2009. Indeed, high affordability and a rebounding economy have encouraged builders and buyers, and last year saw the most sales of new singlefamily homes since 2008. 12. Still, home-construction rates remains relatively low. Economists estimate that roughly 1.7 million starts per year are needed to keep up with population growth and meet demand for replacement and second homes. During the bubble, starts soared above that level, hitting a peak rate of almost 2.3 million in early 2006.

MINUTES 13. At the moment, the Fed has said it will not raise rates until well past the point where the unemployment rate drops below 6.5%, as long as inflation remains tame. 14. Some economists had expected the Fed to rework its forward guidance at the January meeting, but Fed officials made no changes in the language. 15. Despite weak job growth, the unemployment rate fell to 6.6% in January. 16. There might have been some discussion at the January meeting of dropping the threshold to 6%, economists said. 17. Other Fed officials have said they favor scrapping the unemployment rate as a threshold and switching to more qualitative description of economic conditions that would necessitate a tightening.

CURRENCIES 18. Data showed U.K. unemployment rose to 7.2% in the three months to December from 7.1% in the three months to November. Economists had expected the jobless number to drop to the 7% threshold that the Bank of England said in August would trigger talks about raising interest rates. Minutes from the BOE also showed all committee members voted to keep rates low and make no changes to the bond-buying program. 19. Interest-rate hikes tend to be supportive for that countrys currency. 20. On Tuesday, data showed the U.K. inflation rate fell to 1.9% in January, slowing from Decembers 2%. 21. The BOE raised its growth forecast of the U.K. economy last week. Governor Carney said decisions on a rate increase would be linked to a broader range of factors instead of unemployment level only, and bank rates may need to stay at low levels for some time until spare capacity in the economy has been absorbed further. 22.

Volatility 23. Investor sentiment has improved during the past couple of weeks, and the U.S. stock market has recovered much of the losses suffered during January and early February. However, sentiment may still be fragile after the big gains in equities over the past year and a half. Therefore, we continue to believe that the U.S. equity market is likely to be more volatile this year than last year, and further price volatility is likely in the weeks and months ahead. 24. Recent economic data shows that the U.S. economy may be experiencing a period of economic weakness because of the severe winter weather this year. For example, last weeks report on consumer spending indicated that retail sales declined in January for a second consecutive month. The good news is bad weather will not last for much longer, and the economy is likely to strengthen again this spring after the weather improves. This may be why investor sentiment has improved. Unfortunately, investor sentiment could deteriorate again if there is other negative news. 25. The decline in the U.S. equity market in January and early February was very similar in magnitude to the modest market pull backs during the past year and a half. If we are

correct and market volatility this year is likely to be greater than last year, we would expect periods of market weakness this year to be more substantial than the recent market decline. Looking ahead, we believe volatility risk remains high for several reasons. 26. First, the U.S. stock market is still substantially higher today than it was a year ago. Consequently, investors may be reluctant to jump into the market at these elevated levels. In fact, the recent bounce in the stock market may have been due to short-covering rather than a surge in new buying. At least this is what relative sector performance suggests. 27. Second, new Federal Reserve Chairwoman Janet Yellen indicated in testimony before the House Financial Services Committee last week that the Fed was likely to continue its program of reducing its bond purchases. Policymakers do not appear to be ready to alter current policy because of its possible impact on emerging markets. Thus, we believe the risk to emerging markets persists. 28. Third, many investors appear to be concerned that the pattern of the U.S. stock market advance during the past year resembles a previous period that ended in a substantial drop in the U.S. equity market. 29. We remain longer-term positive on the U.S. economy and the U.S. stock market. However, we also believe that the financial markets are likely to be more volatile this year than last year because investor sentiment is probably still fragile after the big market gains during the past year and a half.

Poltica Monetaria, liquidez Sector Vivienda Crecimiento Eurozona Comparacin PMI China PMI Exportaciones Importaciones BOE Communication Strat Divisas Libra Dlar Intereses (steeper)

Emerging-market stocks dropped for a second day after the International Monetary Fund said risks of turmoil in developing nations threaten the global economy. Ukraines bonds plunged the most on record amid deadly protests.

Treasury 10-year note yields rose from the lowest in more than a week as minutes of the Federal Reserves last meeting signaled little likelihood of a pause in the central banks reduction of bond purchases. U.S. government securities fell as the minutes said several policy makers favored cutting monthly bond purchases by $10 billion at each meeting. Ten-year yields fell earlier as a report showed U.S. housing starts slowed more than forecast in January, adding to speculation the economy may be stumbling. Due to all the disruptions and the geopolitical issues taking place now, the expectation was for more of a dovish tone to the comments than what really came out Treasuries remain attractive versus their Group of Seven counterparts. The extra yield 10-year Treasuries offer over their G-7 peers was 52 basis points, the most since Jan. 22. The average for the past year is 19 basis points.

Policy makers also plan to change their guidance soon for the path of interest rates as unemployment declines toward a threshold for considering an increase in borrowing costs, the minutes showed. Federal Reserve policy makers plan to soon change their guidance for the path of interest rates as unemployment declines toward a threshold for considering an increase in borrowing costs, minutes of their January meeting showed.