The major U.S. index futures are pointing to a mixed opening on Thursday, with sentiment getting a lift from the weekly jobless claims report, which showed a decline in claims for the recent reporting week. The markets may also be encouraged by the fact that Spain succeeded in raising debt above its target. The focus now shifts to a housing and a manufacturing data due to be released after the markets open. Commodities are seeing weakness, while risk currencies are also moving to the downside, reflecting the risk aversion in play in the markets.
The Eurogroup and the Economic and Finance Ministers Council are scheduled to meet for 2 days beginning today in Luxembourg. Among the issues to be discussed in the meeting are Greece, financial assistance to Spain and developments in other euro members such as Cyprus, Portugal and Ireland.
U.S. stocks ended a lackluster session on Wednesday on a narrowly mixed note, as the Fed decision did not offer much relief.
The major averages nervously clung to the unchanged line until the afternoon. The release of the post-meeting policy statement initially generated some selling pressure, but the averages pared their losses and traded flat amid the release of the economic forecasts and the Chairman's press briefing. Subsequently, the averages pulled back, but they cut back their losses in late trading and closed on a mixed note.
The Dow Industrials ended down 12.94 points or 0.10 percent at 12,824 and the S&P 500 Index closed 2.29 points or 0.17 percent lower at 1,356, while the Nasdaq Composite Index edged up 0.69 points or 0.02 percent before closing at 2,931.
Despite the Dow's decline, the breadth among the Dow components was in favor of the advancers, with sixteen stocks closing higher, while the remaining fourteen stocks retreated. JP Morgan Chase (JPM) rose over 3 percent, while Cisco Systems (CSCO), Wal-Mart (WMT) and Hewlett-Packard (HPQ) also advanced. On the other hand, Procter & Gamble (PG) fell close to 3 percent on its earnings warning. Verizon (VZ) and McDonald's (MCD) also retreated notably.
Airline and semiconductor stocks advanced, while utility stocks retreated.
The FOMC statement showed that the central bank assesses the economy having expanded moderately. The Fed acknowledged the slowing of employment compared to its view in April that labor market conditions have improved. The Fed also said household spending was rising at a somewhat slower pace than earlier this year.
The Committee decided to extend the Operation Twist program till the end of the year in a bid to put downward pressure on longer term interest rates.
Updating its economic forecasts, the Fed lowered its GDP forecast and increased its unemployment rate forecast while also seeing slower inflation. The central tendency GDP forecast for 2012 was lowered to 1.9-2.4 percent from 2.4-2.9 percent and the unemployment rate forecast was upwardly revised to 8-8.2 percent from 7.8-8 percent. The inflation forecast was lowered to 1.2-1.7 percent. The growth estimates for 2013 and 2014 were also lowered. In the press briefing that followed, Ben Bernanke persisted with his assurance of additional stimulus if conditions warranted.
Currency, Commodity Markets
In the first day of trading as the front month contract, crude oil futures for August delivery are slipping $1.17 to $80.28 a barrel. The July futures expired at $81.80 on Wednesday, down $2.23. The decline came amid the FOMC decision and the release of the weekly oil inventory report, which showed that crude oil inventories rose by 2.9 million barrels to 387.3 million barrels in the week ended June 15th. Inventories were above the upper limit of the average range.
Gasoline inventories edged up by 0.9 million barrels, remaining in the lower limit of the average range. Distillate stockpiles climbed by 1.2 million barrels and were in the lower limit of the average range. Refinery capacity utilization averaged 91 percent over the four weeks ended June 15th compared to 90 percent over the previous four weeks.
Gold futures, which declined $7.40 to $1,615.80 an ounce in the previous session, are currently slipping $28 to $1,587.80 an ounce.
Among currencies, the U.S. dollar is trading at 80.07 yen compared to the 79.54 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2664 compared to yesterday's $1.2707.
Most Asian markets closed lower, with the exception of Japan, which saw notable gains. The Fed disappointment along with apprehensions concerning a bond auction by Spain due later in the global trading day kept sentiment subdued. The retreat by commodities in the wake of rising risk aversion also impacted the markets.
Australia's All Ordinaries opened modestly lower and declined steadily throughout the session before closing down 43.10 points or 1.03 percent at 4,134. Energy and material stocks slumped, serving as drags on the index.
Hong Kong's Hang Seng closed at 19,265, down 253.78 points or 1.30 percent.
Meanwhile, Japan's Nikkei 225 average hovered in positive territory throughout the session before closing up 71.76 points or 0.82 percent at 8,824. The weakening of the yen supported export stocks. Financial stocks also advanced notably.
New Zealand reported 1.1 percent GDP growth in the March quarter based on the production approach. The growth was much stronger than what economists expected and was more broad based. Business services, manufacturing and agriculture contributed to the bulk of the upside.
After seeing some weakness in early trading in reaction to the Fed decision, the European stocks are currently mixed. Spain borrowing costs rose sharply at a government debt auction today, although it was able to raise 2.2 billion euros, ahead of the 1-2 billion euro-target. Demand was better than at an earlier auction.
Eurozone private sector output shrank at the steepest pace in three years in June, a survey by Markit Economics showed. The flash composite output index remained at 46, unchanged from May's 35-month low. The purchasing managers' index for the manufacturing sector dropped to a 36-month low of 44.8 in June from 45.1 in May, in line with expectations. Meanwhile, the service activity index improved to 46.8 from 46.7 in May.
Meanwhile, U.K. retail sales volume, including automotive fuel, rose 1.4 percent month-over-month in May, reversing some of April's 2.1 percent drop. Economists had expected a more modest 1.2 percent drop.
U.S. Economic Reports
The weekly figure for new for unemployment claims fell slightly but remained higher than the expectations of most economists, according to Labor Department figures. The Department of Labor estimated that for the week ending June 16, new unemployment claims came in at a seasonally adjusted level of 387,000, a decrease of 2,000 from the previous week's revised level of 389,000.
The decrease comes in part because revised figures put the previous week's level of new unemployment claims up from the 386,000 initially reported. As a result, the current level of 387,000 is higher than the 383,000 predicted by most economists.
The four-week moving average of new unemployment claims, a figure that reduces some of the week-to-week fluctuations in the data, ticked up 3,500 to 386,250 from the previous week's revised average of 382,750.
The National Association of Realtors is scheduled to release its report on existing home sales for May at 10 am ET. Economists estimate existing home sales of 4.57 million for the month.
Existing home sales rose 3.4 percent month-over-month to a seasonally adjusted annual rate of 4.62 million units in April compared to expectations of 4.66 million units.
Inventories of existing homes rose 10 percent month-over-month, while inventories measured in terms of months of supply also rose to 6.6 months from 6.2 months. Nevertheless, the median house price rose 10 percent from last year.
The results of the Philadelphia Federal Reserve's manufacturing survey are due out at 10 am ET. Economists expect the diffusion index of current activity to show a reading of 0.5 for June.
The manufacturing index based on the survey came in at -5.8 in May compared to 8.5 in April. The new orders and unfilled orders indexes slipped into negative territory to -1.2 and -9.4, respectively, while the shipments index rose 1.7 points to 3.5. The employment indexes also worsened.
The Federal House Finance Agency, or FHFA, is set to release its house price index for April at 10 am ET. The index is a weighted, repeat-sales index that measures average price changes of single-family houses in repeat sales or refinancings on the same properties. Economists expect a 0.6 percent increase in the house price index compared to a 1.8 percent increase in March.
The Conference Board is scheduled to release a report on the U.S. leading economic indicators index for May at 10 am ET. The consensus estimate calls for an unchanged reading for the month.
The U.S. leading economic indicators index fell 0.1 percent month-over-month in April, marking the first drop since September. Meanwhile, the lagging and coincident indicators indexes rose 0.5 percent and 0.2 percent, respectively.
Stocks in Focus
UPS (UPS) announced a recommended cash offer for TNT Express at an offer price of 9.50 euros per share. The company said it would commence the tender offer on June 22nd.
P.F. Chang's China Bistro (PFCB) said that Centerbridge Partners extended the expiration of its tender offer to buy the company for $51 per share in cash to June 28th from the June 20th expiry date announced earlier.
Apogee (APOG) reported first quarter earnings of 6 cents per share compared to a loss of 8 cents per share last year and revenues rose 1 percent to $154.1 million. The earnings were in line, while the revenues missed estimates. The company raised its 2013 earnings per share guidance to 48-58 cents per share from 40-50 cents per share on mid-single digit revenue growth.
CLARCOR (CLC) reported second quarter earnings of 65 cents per share, up from 64 cents per share last year. Net sales fell 1 percent to $284.9 million. The results trailed expectations. The company reduced its full year earnings per share guidance to $2.50-$2.65 from $2.55-$2.70.
Murphy Oil (MUR) announced the appointment of Steve Cosse as president and CEO, effective immediately following the retirement of David Wood from the positions.
Apartment Investment and Management (AIV) announced the commencement of a public offering of 11.04 million shares of its common stock. Of the offering, 9 million shares will be sold by Aimco, while 2.04 million shares will be sold by selling stockholders.
Bed Bath & Beyond (BBBY) reported first quarter earnings of 89 cents per share compared to 72 cents per share last year, as sales rose 5.1 percent to $2.22 billion. The earnings were ahead of expectations, while the revenues were slightly shy of estimates. For the second quarter, the company expects earnings per share of 97 cents to $1.03 per share, while for the full year the company expects earnings to increase by a high single to low double digit percentage range. The second quarter guidance was below estimates.
Red Hat (RHT) announced first quarter non-GAAP earnings of 30 cents per share, up 25 percent year-over-year. Revenues rose 19 percent to $315 million. The results exceeded expectations.
Micron Technology (MU) reported a loss of 32 cents per share for its third quarter compared to a loss of 29 cents per share last year. The company's net sales climbed to $2.2 billion from $2 billion in the year-ago period. While the loss was wider than analysts had estimated, the revenues exceeded expectations.
Sonic (SONC) reported a profit of 24 cents per share for its third quarter compared to a loss of 8 cents per share in the year-ago period. On an adjusted basis, the company earned 21 cents per share in the same quarter last year. Revenues fell to $149.43 million from $152.10 million in the year-ago period.
ConAgra Foods (CAG) slipped to a loss in its fourth quarter. However, the company's adjusted earning per share from continuing operations improved 9 percent, and topped Wall Street view. The company said it expects expect good earnings growth in fiscal 2013.
Rite Aid said its first quarter loss narrowed from the year-ago period. Revenues improved from the year-ago quarter and topped the consensus estimate. Same store sales for the quarter rose 2.5 percent.
by RTT Staff Writer
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