The major U.S. index futures are pointing to a lower opening on Monday, with sentiment weighed down heavily by the deepening turmoil in Europe. Earnings news has largely been mixed. Traders across the markets are seen fleeing from risky bets and consequently, commodities, equities and risk currencies are all trading sharply lower. With no other major economic catalysts to digest in the session, traders are likely to be pre-occupied with these worries.
U.S. stocks ended the week ended July 20th higher despite economic worries continuing to drive traders away from risky bets. Some lackluster domestic economic data and insipid earnings reports marred the economic picture and accentuated economic worries.
Last Monday, the major U.S. averages ended modestly lower after U.S. retail sales fell unexpectedly and comments from Chinese premier Wen Jiabao amounted to continuing economic turmoil. The averages reversed course on Tuesday, advancing moderately, encouraged by positive builder sentiment and industrial production data and some encouraging earnings.
The upward momentum was sustained on Wednesday despite Federal Reserve Chairman Ben Bernanke offering nothing new in Congressional testimony offering nothing new. Notwithstanding some gross disappointments in the tech sector, technology stocks rallied strongly, supporting the upside. Stocks advanced yet again on Thursday, taking cues from some positive earnings reports and a spike in the price of oil in the wake of supply concerns. Meanwhile, earnings disappointment and concerns about the Spanish banking system kept sentiment subdued on Friday, sending stocks sharply lower.
For the week ended July 20th, the Dow Industrials rose 0.36 percent and the S&P 500 Index declined 0.43 percent, while the Nasdaq Composite Index moved up 0.58 percent.
Among the major sector indexes, the NYSE Arca Oil Index and the Philadelphia Oil Service Index rose 2.13 percent and 4.76 percent, respectively. Additionally, the Philadelphia Semiconductor Index gained 2.24 percent. On the other hand, the KBW Bank Index and the NYSE Arca Securities Broker/Dealer Index fell 2.27 percent and5.18 percent, respectively. The Dow Jones Transportation Average receded 2.30 percent compared to a 6.98 percent drop by the NYSE Arca Airline Index.
Currency, Commodity Markets
In the first day of trading as the front month contract, crude oil futures for September delivery are trading down $3.53 to $88.30 a barrel. The August futures expired at $91.44 last Friday, up $4.34 or 4.98 percent for the week ended July 20th.
The commodity rose in the first four sessions of the week, extending its gains for seven straight sessions, before slipping $1.22 a barrel on Friday.
Gold futures, which declined $9.20 or 0.58 percent to $1,582.80 in the previous week, are currently moving down $14.10 to $1,568.70 an ounce.
Among currencies, the dollar became the beneficiary of risk aversion in the week ended July 20th. Growth worries amid the release of some sore domestic data points and lukewarm earnings drove traders to the safe haven. The lingering European debt worries also gave the buck a shot in the arm.
The greenback added 0.74 percent against the euro to $1.2158, as the common currency settled last week at a fresh 2-year low. At the same time, the dollar retreated against its fellow safe haven the yen, losing 0.91 percent against the Japanese unit to 78.48 yen.
The U.S. dollar is currently trading at 78.24 yen and is valued at $1.2079 against the euro.
Asia
The major Asian averages retreated sharply as worries concerning peripheral Eurozone nations intensified. Spanish bond yields were hovering around new euro area record highs, reflecting the risk aversion among investors.
Japan's Nikkei 225 average opened lower and moved roughly sideways for the much of the session before pulling back further in late trading. The Nikkei closed down 161.55 points or 1.86 percent at 8,508, its lowest closing level since June 8th, 2012.
A majority of stocks declined, with Sumco, Pioneer, Ricoh, Furukawa, Denki Kagaku and Nippon Light Metal leading the slide. The yen's climb to a nearly 12 year high against the euro sent traders scurrying from export stocks.
Australia's All Ordinaries showed a steep decline in early trading and moved steadily lower thereafter until the afternoon. Subsequently, the index moved sideways before closing 71.40 points or 1.69 percent lower at 4,159. The declines were spearheaded by energy and material stocks, which slumped in reaction to the sharp retreat in oil and metal prices.
Hong Kong's Hang Seng Index closed at 19,054, down 587.33 points or 2.99 percent. China's Shanghai Composite Index slid 1.26 percent and South Korea's Kospi ended down 1.84 percent.
The monthly report published by Japan's Cabinet Office showed that the government is committed to working the Bank of Japan to prevent the adverse impacts of the yen appreciation and a deflationary environment.
Producer prices in Australia rose more than expected in the June quarter, according to a report released by the Australian Bureau of Statistics. The monthly producer price inflation came in at 0.5 percent compared to the 0.3 percent expected by economists. The annual rate was also more than expected at 1.1 percent.
Europe
European stocks are also retreating sharply amid fears about the collapse of the euro union. The fiscal situation in Spain is worsening, giving rise to speculation that the nation, which recently received a part of the aid for its ailing banking system, may be forced to seek a full-fledged bailout. Meanwhile, the troika is expected to visit Athens tomorrow to review the progress Greece has made with respect to "to enacting reforms and austerity measures to improve fiscal discipline.
Earnings from Dutch consumer electronics giant Philips (PHG) came as a welcome relief, as the company reported profit growth for all of its units in the second quarter. The company's June quarter profit increased to 167 million euros, as it countered the weakness in Europe with strong performances in the U.S. and the emerging markets.
U.S. Economic Reports
A trio of housing market reports, the first read on second quarter GDP, the results of a consumer sentiment survey and the weekly jobless claims report are among the key economic reports due for the unfolding week.
Traders may stay tuned to the Commerce Department's new home sales report for June, the National Association of Realtors' pending home sales index for June, the Commerce Department's durable goods orders report for June, the advance estimate of seond quarter GDP and the final reading of the consumer sentiment survey by Reuters and the University of Michigan. The Federal House Finance Agency's house price index for May, a few regional manufacturing reports and the Treasury auctions of 2-year, 5-year and 7-year notes round up the economic events/data of the week.
New home sales are expected to have remained nearly flat in June, as the positive impact of record low mortgage rates and a resurgence in demand is offset by tight lending standards and weak labor market conditions.
Higher aircraft orders for Boeing bode well for durable goods orders for June. However, excluding transportation, order growth may have slackened, as the eurozone debt concerns and domestic fiscal concerns have dented business confidence and spending.
The results of a survey by the Chicago Federal Reserve are due to be released at 8:30 am ET. The national activity index compiled based on the survey is expected to improve slightly to -0.33 in June from -0.45 in May.
Stocks in Focus
AT&T (T) announced that it has reached tentative agreements with the Communications Workers of America in core wireline contract negotiations for the AT&T Midwest region and AT&T Corp. The company also clarified that it is continuing to negotiate with the CWA workers in the East and West regions.
McDonald's (MCD) reported second quarter profit that declined 4 percent from the year-ago quarter and earnings per share were below Wall Street view. Consolidated revenues were flat and were below the consensus estimate. The company said it expects global comparable sales for July to be positive, but less than second quarter.
Halliburton's (HAL) second quarter profit declined slightly from the previous year period. Revenue surged from the year-ago quarter and were above Wall Street view.
Baidu.com (BIDU), Crane (CR), CTS Corp. (CTS), Fidelity National (FNF), Health Management (HMA), J&J Snack Foods (JJSF), Owens & Minor (OMI), Rent-A-Center (RCII), Sanmina-SCI (SANM), Steel Dynamics (STLD), Texas Instruments (TXN), Vmware (VMW), Volterra Semiconductor (VLTR), Waste Connections (WCN) and Zions Bancorp. (ZION) are among the companies due to release their results after the markets close.
by RTT Staff Writer
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