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Stocks May See Early Weakness On European Election Results - U.S. Commentary

5/7/2012 8:56 AM ET

After seeing notable weakness last week, stocks could see some further downside in early trading on Monday. The major index futures are currently pointing to a lower open for the markets, with the Dow futures down by 42 points.

The downward momentum for the markets reflects a negative reaction to election results in France and Greece, which some consider a setback to the progress achieved thus far on the European debt crisis.

Francois Hollande won a run-off election against French President Nicolas Sarkozy and will become France's first Socialist president since 1995.

Hollande has expressed significant opposition to using austerity measures to address the European debt crisis, arguing that the focus should be more on economic growth than cutting government spending.

Additionally, the results of Greek parliamentary elections pointed to a hung parliament, with no single party getting adequate votes to form a government. Many Greek voters turned to anti-bailout parties.

The focus on the developments in Europe comes amid a light day on the U.S. economic front, although the Federal Reserve is scheduled to release its monthly consumer credit report later this afternoon.

Among individual stocks, Cognizant Technology (CTSH) is likely to come under pressure after the information technology services provider reported first quarter earnings growth but lowered its full-year guidance. Shares of Cognizant are down by 11.9 percent in pre-market trading.

Tyson Foods (TSN) is also likely to be in focus after reporting second quarter earnings that exceeded analyst estimates but on weaker than expected revenues.

Meanwhile, shares of Vertex Pharmaceuticals (VRTX) are moving sharply higher in pre-market trading after the biotech company released preliminary data showing that its cystic fibrosis combination therapy resulted in significant improvements in lung function.

With disappointing jobs data generating broad based selling pressure, stocks moved sharply lower over the course of the trading day on Friday.

After moving sharply lower in morning trading, the major averages remained firmly negative throughout the afternoon. The Dow slid 168.32 points or 1.3 percent to 13,038.27, the Nasdaq plunged 67.96 points or 2.3 percent to 2,956.34 and the S&P 500 fell 22.47 points or 1.6 percent to 1,369.10.

The losses on the day resulted in steep losses for the week. The Dow fell by 1.4 percent, while the Nasdaq tumbled by 3.7 percent and the S&P 500 dropped by 2.4 percent.

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Monday. Japan's Nikkei 225 Index tumbled by 2.8 percent, while Hong Kong's Hang Seng Index plummeted by 2.6 percent.

Meanwhile, the major European markets have turned mixed on the day, with the U.K. markets closed for a holiday. While the French CAC 40 Index is up by 0.4 percent, the German DAX Index is down by 0.6 percent.

In commodities trading, crude oil futures are sliding $0.85 to $97.64 a barrel after falling $6.44 or 6.1 percent to $98.49 a barrel in the week ended May 4th. Gold futures, which fell $19.60 or 1.2 percent to $1,645.20 an ounce last week, are slipping $7.60 to $1,637.60 an ounce.

Among currencies, the U.S. dollar fell 0.4 percent against the Japanese yen last week to 79.85 yen, while it rose 1.3 percent against the euro before ending the week at $1.3083. The greenback is currently trading at 79.93 yen and is valued at $1.3023 versus the euro.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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