The major U.S. index futures are pointing to a higher opening on Monday, with sentiment shaky in the absence of any major catalysts. Risk appetite is on the wane, as reflected by the pullback by commodities and risk currencies. Given the overbought levels, the markets may face difficulty in taking a leg up unless influenced by a very compelling catalyst. That said, traders may look ahead to a speech by Federal Reserve Chairman Ben Bernanke.
U.S. stocks advanced modestly in the week ended August 3rd, helped by stronger than expected job gains reported by the Labor Department for July.
Last Monday, the major averages moved about in a lackluster manner as traders exercised caution amid the overbought levels, ending lower for the session. The indecision and caution kept sentiment subdued for a second session running on Tuesday ahead of key central bank decisions, sending stocks moderately lower.
Unimpressed by the FOMC policy statement, the major averages turned lower yet again on Wednesday. The Fed's European counterpart, the European Central Bank, also failed to announce any concrete measures on Thursday despite ECB President Mario Draghi coming out strongly in support of the euro in the previous week. The averages ended the session moderately lower. The non-farm payrolls report came as welcome relief for the markets on Friday, helping the major averages embark on a strongly rally and erase all of the week's losses.
For the week ended August 3rd, the Dow Industrials added 0.16 percent, while the S&P 500 Index rose 0.36 percent and the Nasdaq Composite gained 0.33 percent. The Dow Industrials and the S&P 500 Index reached their highest closing levels in 3 months.
Among the sector indexes, the Philadelphia Semiconductor Index rose over 1.53 percent for the week, while the NYSE Arca Securities Broker Dealer Index and the NYSE Arca Biotechnology Index fell 6.23 percent and 5.56 percent, respectively. Additionally, the Philadelphia Housing Sector Index slipped 2.53 percent.
Currency, Commodity Markets
Crude oil futures are slipping $0.38 to $91.02 a barrel after advancing $1.27 or 1.41 percent to $91.40 a barrel in the week ended August 3rd.
Last Monday, oil declined modestly amid a lack of risk appetite. The commodity declined by more than $1.70-a-barrel on Tuesday amid some disconcerting manufacturing data from the U.S.
Oil rebounded moderately on Wednesday amid the release of the inventory report, which showed a steep draw in crude oil inventories. However, the mood soured on Thursday after the ECB disappointment, sending the commodity sharply lower. Oil jumped over $4-a-barrel on Friday after the U.S. employment number came in better than expected and ended the week higher.
Gold futures, which declined $13.40 or 0.83 percent to $1,609.30 an ounce in the previous week, are currently adding $2.20 to $1,611.50 an ounce.
The U.S. declined against the euro in the week ended August 3rd, losing 0.52 percent against the euro to $1.2387. Meanwhile, the dollar was little changed against the yen, ending the week at 78.46 yen. The yen, which was higher for most of last week, retreated last Friday after the U.S. non-farm payrolls report was released.
The U.S. dollar is currently trading at 78.32 yen and is valued at $1.2379 versus the euro.
The major Asian markets advanced strongly on the encouraging lead from Wall Street last Friday. The Japanese and the South Korean markets led the gainers in the region. Additional encouragement came from a statement from the inspectors of the Troika that Greece has made progress in its spending cut program, which is essential for securing additional financing.
Japan's Nikkei 225 average opened higher and moved roughly sideways for the rest of the session. The index closed up 171.18 points or 2 percent at 8,726. A majority of stocks advanced, with Asahi Glass, Isuzu Motors, Mazda Motors, Fuji Heavy Industries and Ricoh among the biggest gainers of the session. Auto stocks were reacting to robust quarterly results from Toyota Motors (TM) and Isuzu Motors.
Meanwhile Pacific Metals plunged close to 12 percent. Sharp retreated 5.73 percent after Taiwan-based Hon Hai Precision said it would renegotiate the price for purchasing a stake in the Japanese consumer electronics maker.
Australia's All Ordinaries closed 49.90 points or 1.18 percent higher at 4,293, with material stocks leading the advance. Energy stocks also found buying interest.
Meanwhile, Hong Kong's Hang Seng added 332.54 points or 1.69 percent before closing at 19,999.
On the economic front, inflation in Australia rose 0.2 percent in July from the previous month amid a rise in energy costs due to the imposition of the carbon tax from July 1, according to a survey by TD Securities and the Melbourne Institute.
The major European markets have moved into positive territory in late morning trading after a lackluster open.
In corporate news, luxury goods maker Richemont reported a 24 percent increase in its sales for the first four months of its fiscal year. The company said it expects first half profits to increase by 20-40 percent. U.K. low cost carrier easyJet reported an increase in its traffic and load factor for July.
On the economic front, U.K. house prices fell 0.6 percent month-over-month in July, according by a survey by Lloyds Banking Group's Halifax division. Prices were down 0.6 percent compared to the previous year.
Eurozone investor confidence declined for the fifth consecutive month in August to the lowest level in more than three years, according to data released by the Sentix Group. That said, the investor sentiment index fell by a smaller than expected 0.7 points to -30.3 in August. Economists had expected the index to drop to -31.
U.S. Economic Reports
Relative calm dawns on Main Street, as the unfolding week's calendar has very little market moving economic news. Speeches by Federal Reserve Chairman Ben Bernanke and the weekly jobless claims report are among the few market moving economic events of the week.
Traders may also focus on the Federal Reserve's consumer credit report for June and the Commerce Department's trade balance report for June. The Labor Department's import and export price indexes for July, the preliminary second quarter productivity & costs report, the Commerce Department's wholesales inventories report for June, the Treasury Budget for July and Treasury auctions of 3-year and 10-year notes and 30-year bonds round up the economic events of the week.
Productivity is expected to have rebounded in the second quarter, although it is expected to stay soft compared to the levels witnessed in early 2010. BMO Capital Markets points out the fact that businesses strive to bolster their bottom lines by boosting productivity and extracting other efficiencies in early stages of the economic recovery, as revenue growth remains tepid.
The trade deficit may have narrowed slightly in June, as crude oil prices pulled back sharply. Additionally, aircraft deliveries could have boosted exports. Given the weak global economic outlook, near term prospects do not look bright for both exports and imports.
Bernanke is due to speak via recorded video to the 32nd General Conference of the International Association for Research in Income and Wealth at 9 am ET.
Stocks in Focus
Changyou (CYOU) reported second quarter non-GAAP earnings of $1.35 per ADS on revenues of $147.3 million. For the second quarter, the company expects non-GAAP earnings of $1.31-$1.35 per ADS on revenues of $153 million to $157 million. The results as well as guidance were above estimates. Separately, the company announced a special one-time cash dividend of $3.80 per ADS.
Sohu.com (SOHU), the parent of Changyou, reported second quarter non-GAAP earnings of 42 cents per ADS on revenues of $256 million. The results exceeded estimates. The company expects third quarter non-GAAP earnings of 50-55 cents per ADS on revenues of $272 million to $277 million. While the third quarter earnings guidance was soft, the revenue guidance surrounded the consensus estimate.
AIG (AIG) announced that the Treasury has priced an offering of 163.93 million shares of its common stock at the public offering price of $30.50 per share.
Berkshire Hathaway (BRKA) reported second quarter operating earnings of $2,252 per Class A shares compared to $1,640 per Class A share a year ago. The earnings were ahead of expectations. Revenues edged up to $38.5 billion.
Chesapeake Energy (CHK), Goodrich Petroleum (GDP), Manitowoc (MTW), Plantronics (PLT), Power Integrations (POWI), THQ, Inc. (THQI), Time Warner Tcom (TWTC), Vornado Realty Trust (VNO) and WMS Industries (WMS) are among the companies due to release their quarterly results after the markets close.
by RTT Staff Writer
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