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Stocks Likely To Move Sharply Lower At The Open - U.S. Commentary

4/23/2012 8:58 AM ET

Stocks are likely to come under pressure in early trading on Monday in reaction to some troubling news from overseas. The major index futures are currently pointing to a sharply lower open for the markets, with the Dow futures down by 127 points.

Disappointing economic data from overseas is likely to contribute to the early weakness on Wall Street, with a report from HSBC Holdings and Markit Economics showing a continued contraction in Chinese manufacturing activity in the month of April.

While the manufacturing purchasing managers' index for China climbed to 49.1 in April from 48.3 in March, a reading below 50 indicates a contraction.

A separate report from Markit showed that its index of private sector activity in the Eurozone dropped to a five-month low of 47.4 in April from 49.1 in March.

Markit Chief Economist Chris Williamson said, "The flash PMI signaled a faster rate of economic contraction in the Eurozone during April, extending what appears to be a double-dip recession into a third consecutive quarter."

Traders have also reacted negatively to news that French President Nicolas Sarkozy came in second in a first round of voting, losing to socialist Francois Hollande.

Sarkozy is expected to face an uphill battle in a run-off election against Hollande on May 6th, raising concerns about a setback to efforts to diffuse the European debt crisis.

Among individual stocks, shares of ConocoPhillips (COP) are likely to come under pressure after the energy company reported first quarter adjusted earnings that came in below analyst estimates amid a drop in oil production.

Cereal maker Kellogg (K) is also likely to see early weakness after lowering its full-year 2012 financial guidance based on a weaker-than-expected first quarter performance.

Pfizer (PFE) may also be in focus after the drug giant announced that it has entered into an agreement to sell its Nutrition business to Nestlé for $11.85 billion in cash.

While upbeat earnings news helped to drive stocks higher in early trading on Friday, buying interest waned over the course of the trading day. Traders subsequently sold into the rally, resulting in a mixed close for the markets.

The major averages ended the day on opposite sides of the unchanged line, with the Nasdaq posting a modest loss. The Nasdaq slipped 7.11 points or 0.2 percent to 3,000.45, while the Dow rose 65.16 points or 0.5 percent to 13,029.26 and the S&P 500 edged up 1.61 points or 0.1 percent to 1,378.53.

For the week, the major averages also turned in a mixed performance. While the Nasdaq fell by 0.4 percent, the Dow advanced by 1.4 percent and the S&P 500 rose by 0.6 percent.

In overseas trading, stock markets across the Asia-Pacific region moved to the downside during trading on Monday. Japan's Nikkei 225 Index edged down by 0.2 percent, while Hong Kong's Hang Seng Index tumbled by 1.8 percent.

The major European markets have also come under considerable selling pressure. While the U.K.'s FTSE 100 Index is down by 1.7 percent, the French CAC 40 Index is down by 2.2 percent, and the German DAX Index is down by 2.8 percent.

In commodities trading, crude oil for June delivery is down $1.09 at $102.79 a barrel in its first day as the front month contract. Crude for May delivery edged up 0.2 percent to $103.05 a barrel last week. Gold futures, which fell $17.40 or 1.1 percent to $1,642.80 an ounce last week, are sliding $16.40 to $1,626.40 an ounce.

On the currency front, the U.S. dollar advanced 0.7 percent against the Japanese yen to 81.53 yen in the week ended April 20th, while the greenback lost 1.1 percent against the euro before ending the week at $1.3219. The dollar is currently trading at 81.08 yen and is valued at $1.313 versus the euro.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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