The major U.S. index futures are pointing to a higher opening on Monday, with sentiment remaining cautious despite the bounce indicated by the futures. Risk currencies are continuing to see weakness, which is an indication that risk aversion is still ruling high in the markets. Though there is a possibility for a bargain hunting-induced rebound, underlying sentiment is still cautious even as the markets grapples with fundamental concerns amid oversold levels. The markets may also digest some deal news announced during the day.
U.S. stocks continued their downtrend in the week ended May 18th, with the major averages ending the week sharply lower at 4-month closing lows. Lackluster domestic economic data and fears concerning weak eurozone nations served as overhangs, sapping investor risk appetite.
The markets started the week on a negative note, with the major averages all losing about 1 percent or more on Monday due to the eurozone debt crisis. The averages closed moderately lower on Tuesday after Greece confirmed its inability to resolve the political deadlock, forcing the Mediterranean nation to go to polls yet again. The release of mixed domestic economic data did little to improve sentiment.
Despite the release of positive U.S. industrial output data, stocks closed lower yet again on Wednesday amid fears over Greece and the Spanish banking system. A downgrade of Greece by Fitch and a disappointing regional manufacturing report weighed on markets on Thursday, sending the major averages sharply lower. The major averages fell yet again on Friday despite the frenzy surrounding Facebook's (FB) listing.
After declining in all five sessions of the week, the Dow Industrials fell 3.52 percent for the week. Meanwhile, the S&P 500 Index and the Nasdaq Composite Index receded 4.30 percent and 5.28 percent, respectively.
Among the sector indexes, the Philadelphia Housing Sector Index fell 9.36 percent for the week, while the NYSE Arca Airline Index receded 8.69 percent. The KBW Bank Index, the Philadelphia Oil Service Index, the Dow Jones U.S. Basic Materials Average and the Philadelphia Semiconductor Index all fell over 7 percent.
Currency, Commodity Markets
Crude oil futures are rising $0.12 to $91.60 a barrel after declining $4.65 or 4.84 percent to $91.48 a barrel in the week ended May 18th. The commodity declined in all five sessions of the week, as heightened risk aversion kept investors away from the oil space.
Gold futures, which added $7.90 or 0.50 percent to $1,591.90 in the previous week, are currently slipping $4.30 to $1,587.60 an ounce.
Among currencies, the U.S. dollar firmed up against the euro in the week ended May 18th, adding 1.05 percent on top of the 1.27 percent gain it recorded in the week ended May 11th. The eurozone's travails battered the common currency, sending it down to $1.2782 last Friday.
The yen also rode on its safe haven status and added 1.2 percent last week before settling at 79.02.
The U.S. dollar is currently trading at 79.30 yen and is valued at $1.2747 versus the euro. The Japanese currency has pulled back on market expectations of the Bank of Japan announcing further quantitative easing when its monetary policy board meets this week.
The major Asian markets closed mixed, with the Hong Kong, Indonesian and New Zealand markets closing lower, while the rest of the markets advanced. Although bargain hunting supported a bounce, an uneasy mood prevailed on account of the European debt crisis that remains unresolved.
Japan's Nikkei 225 average closed 22.58 points or 0.26 percent higher at 8,634 and Australia's All Ordinaries added 25.60 points or 0.62 percent before closing at 4,124. Material stocks lifted sentiment in the Australian market. Meanwhile, Hong Kong's Hang Seng ended down 29.53 points or 0.16 percent at 18,922.
European stocks are currently trading higher after they declined to 5-month closing lows last Friday. Traders are expected to exercise restraint ahead of a key European summit in Brussels this week.
In corporate news, Irish low cost airline Ryanair reported a 25 percent increase in its full year profits but forecasts lower earnings for the next fiscal due to higher fuel costs. The company also said it would pay its shareholders a second special dividend of 34 euros per share in November.
U.K.-based REIT Land Securities reported a 58 percent decline in its pre-tax profit for the full year ended March 31st to 515.7 million pounds.
U.S. Economic Reports
Housing readings are due to dominate proceedings on Main Street in the unfolding week, with the National Association of Realtors' existing home sales report for April and the Commerce Department's new home sales report also for April among the key readings for the week. The Commerce Department's durable goods orders report for April, the final reading of the Reuters and the University of Michigan's consumer sentiment index for May and the weekly jobless claims report could also sway the markets.
The economic calendar of the week also features the Federal House Finance Agency's housing market index for March and Treasury auctions of 2-year, 5-year and 7-year notes.
Going by the increase in the pending home sales index for March and positive commentary on the housing market outlook by homebuilders, one can expect a bounce in existing home sales for April. That said, high inventory levels of distressed properties remain an overhang on the housing market.
Durable goods orders should see a rebound in April, thanks to a strong performance by business equipment orders, which took a hit in the first quarter due to scaled-back depreciation allowance. The strength in this space is expected to offset the weakness seen in commercial airplane orders. Boeing (BA) reported on its website merely 4 commercial airplane orders for April.
Stocks in Focus
Yahoo (YHOO) announced that it has entered into a definitive agreement with Chinese e-commerce company Alibab Group to gradually divestYahoo's stake in Alibaba in stages. To start with, Yahoo will sell a 20 percent stake in Alibaba for $7.1 billion. Subsequently, Yahoo will sell some of its remaining stake in Alibaba through an IPO. Concurrently, Yahoo also announced an increase in its buyback authorization by $5 billion.
Intuit (INTU) announced the completion of its acquisition of Demandforce, a provider of online tools to help attract and retain customers, for $423.5 million in cash. Intuit expects the deal to add one or 2 points to its revenue growth in fiscal year 2013 and to be neutral to modestly dilutive to its earnings per share in fiscal years in 2012 and 2013.
American Eagle Outfitters (AEO) announced that its CFO Joan Hilson is resigning. The company also said its VP and controller Scott Hurd will lead its finance team, effective immediately. Separately, the company announced plans to exit its children's business, 77kids.
DaVita (DVA) announced a deal to buy HealthCare Partners for about $4.42 billion in cash and stock.
Lowe's (LOW) said its first quarter earnings rose to 43 cents per share on revenues of $13.15 billion. The results were better than expected. However, the company lowered its full year earnings guidance.
BlackRock (BLK) announced a secondary offering of its common stock held by Barclays (BCS) through an underwritten public secondary offering. Following the offering, BlackRock intends to buy back $1 billion of its common stock directly from Barclays.
Nordson (NDSN) and Urban Outfitters (URBN) are among the companies due to report their quarterly results after the markets close.
by RTT Staff Writer
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