The major U.S. index futures are pointing to a lower opening on Wednesday, with markets continuing to struggle for direction amid the economic uncertainties. A report released earlier in the day showed an unexpected contraction by the manufacturing sector of the New York region, while a separate report showed tame consumer price inflation. Slower growth and tamer inflation are pre-requisites for monetary policy relaxation.
The markets could now turn their attention to the industrial production data and a homebuilder confidence reading. The overbought levels of the markets pose a risk even in the face of weak data, which otherwise strengthens stimulus hopes.
U.S. stocks closed mixed on Tuesday despite remaining above the unchanged line for much of the session following the release of robust retail sales data for July.
The major U.S. averages opened higher after the Commerce Department said retail sales rose 0.8 percent, ahead of estimates. Subsequently, the averages consolidated for much of the session before pulling in late trading and closing on a mixed note.
The Dow Industrials added 2.71 points or 0.02 percent before closing at 13,172, while the S&P 500 Index closed down 0.18 points or 0.01 percent and the Nasdaq Composite Index ended at 3,017, down 5.54 points or 0.18 percent.
Seventeen of the thirty Dow components closed lower, with Alcoa (AA) and Hewlett-Packard (HPQ) leading the declines. On the other hand, Home Depot (HD) rose over 3 percent in reaction to its quarterly results and Pfizer (PFE) added 1.10 percent.
On the economic front, U.S. retail sales rose 0.8 percent month-over-month, marking the first increase since March. June's decline was downwardly revised to -0.7 percent from -0.5 percent. Auto sales rose 0.8 percent despite unit sales drop in unit sales. Excluding autos, retail sales growth was 0.8 percent. Core retail sales, which strip off autos, gasoline and building materials and are used for GDP calculations, climbed 0.9 percent. All categories saw sales growth in July compared to the previous month.
Meanwhile, producer prices rose 0.3 percent month-over-month in July, while on a year-over-year basis, prices were up an unadjusted 0.5 percent. Core producer prices climbed 0.4 percent, the biggest increase since the start of the year. Food prices were up 0.5 percent but energy prices fell 0.4 percent.
The Commerce Department said business inventories at the end of June were up 0.1 percent from the previous month, while business sales slipped 1.1 percent. On a year-over-year basis, business inventories and business sales were up 5 percent and 3 percent, respectively. The business inventories to sales ratio was at 1.29 compared to 1.26 in the year-ago period.
Currency, Commodity Markets
Crude oil futures are trading down $0.41 to $93.02 a barrel after surging up $0.70 to $93.43 a barrel on Tuesday. The inventory report released by the American Petroleum Institute late Tuesday showed that crude oil stockpiles rose by 2.78 million barrels to 367.1 million barrels in the week ended August 10th.
An ounce of gold is currently fetching $1,596.90, down $5.50 from the previous session's close of $1,602.40. Gold fell $10.20 on Tuesday.
On the currency front, the U.S. dollar is currently trading at 78.73 yen compared to the 78.74 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.2283 compared to yesterday's $1.2322.
Asia
The major Asian markets closed on a mixed note, tracking the mixed lead from Wall Street overnight. The Japanese, Australian, Hong Kong, Chinese, Singaporean and Taiwanese markets closed lower, while the India, Indonesian, South Korean, Malaysian and New Zealand markets ended in positive territory.
After opening higher, Japan's Nikkei 225 average surrendered its gains and tumbled throughout the afternoon, reaching its intra-day low by late afternoon trading. The index pared its losses in late trading but still closed down 4.84 points or 0.05 percent at 8,925.
Export and resource stocks led the declines, while defensive stocks bucked the downtrend. Sharp plunged 12.44 percent on warnings by analysts that the company is likely to report a much wider than projected loss for the full year. Other notable decliners included Kobe Steel, Japan Tobacco, Sumitomo Mitsui, Ricoh and JFE Holdings.
Australia's All Ordinaries remained mostly below the unchanged line, barring a brief spell in positive territory in the morning. The index closed down 10.40 points or 0.24 percent at 4,307. Material and energy stocks came under selling pressure, while healthcare stocks advanced strongly.
Hong Kong's Hang Seng Index closed at 20,052, down 239.39 points or 1.18 percent.
A report released by Westpac and the Melbourne Institute showed that Australian consumer confidence deteriorated in August. The index measuring consumer sentiment fell 2.5 percent to 96.6 in August.
Europe
The major European averages are moving to the downside after advancing strongly on Tuesday.
In corporate news, Danish beer maker Carlsberg reported an increase in its adjusted second quarter earnings. However, the company reiterated its full year guidance.
Hennes &Mauritz reported an 11 percent year-over-year increase in total sales, including VAT, in July. Comparable unit sales were up 2 percent. Swiss cement maker Holcim reported a 9.2 percent increase in its second quarter net income, as sales rose 2 percent. The company also announced the streamlining of its organizational structure and announced some management changes in this regard.
The minutes of the Bank of England's August monetary policy meeting showed that the nine-member monetary policy committee unanimously decided to maintain interest rates unchanged at 0.50 percent and also hold the size of its quantitative easing at 375 billion pounds.
The number of U.K. individuals claiming jobless benefits fell by 5,900 in July, according to a report released by the U.K. Office for National Statistics. Economists expected the claimant count to increase by 6,000. The unemployment rate calculated based on ILO standards fell 0.1 percentage points to 8 percent in the three months ended June.
U.S. Economic Reports
With a continued drop in energy prices offset by higher prices for shelter and medical care, the Labor Department released a report showing that U.S. consumer prices unexpectedly came in unchanged in the month of July.
The Labor Department said its consumer price index for July showed that prices were unchanged for the second consecutive month. Economists had been expecting prices to edge up by about 0.2 percent.
Excluding food and energy prices, the core consumer price index crept up by 0.1 percent in July after rising by 0.2 percent in each of the four previous months. The core index had been expected to show another 0.2 percent increase.
Conditions for New York manufacturers have unexpectedly deteriorated in the month of August, according to a report released by the Federal Reserve Bank of New York, with the index of regional manufacturing activity turning negative for the first time since October of 2011.
The New York Fed said its general business conditions index dropped to a negative 5.9 in August from a positive 7.4 in July, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to show a much more modest decrease to a positive 7.0.
The employment indexes were mixed, with the employment index rising 6 points to 18.5, while the average workweek index slipping 3 points to zero. The futures general business conditions index declined 3 points to 20.2.
The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for June at 9 am ET.
The Federal Reserve's industrial production report is due out at 9:15 am ET. Economists estimate a 0.5 percent increase in industrial production for July, while manufacturing output is estimated to have increased by 0.5 percent. Capacity utilization is expected to edge up by 0.3 percentage points to 79.2 percent.
The industrial production report for June showed a 0.4 percent month-over-month increase in output following a 0.2 percent decline in May. Manufacturing output climbed 0.7 percent, with motor vehicle and parts production rising 1.9 percent and business equipment output improving by 1.6 percent. Mining output rose 0.7 percent, while utilities output declined by 1.9 percent.
The National Association of Home Builders is scheduled to release the results of its August survey on homebuilders' confidence at 10 am ET. The consensus estimates call for the index to remain unchanged at 35.
Homebuilder sentiment improved to 35 in July from 29 in June, according to the results of a survey by the National Association of Home Builders. The reading represented the best level since March 2007. The present conditions index rose 6 points and the sales expectations index jumped 11 points, while the index measuring prospective buyer traffic was up 6 points.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended August 10th at 10:30 AM ET.
Crude oil stockpiles fell by 3.7 million barrels to 369.9 million barrels in the week ended August 3rd. Nevertheless, inventories were above the upper limit of the average range.
Gasoline inventories fell by 1.8 million barrels and were in the lower half of the average range. Distillate stockpiles edged down by 1.8 million barrels, remaining below the lower limit of the average range. Refinery capacity utilization averaged 92.4 percent over the four weeks ended August 3rd compared to 92.5 percent over the previous four weeks.
Minneapolis Federal Reserve Bank President Narayana Kocherlakota is due to speak in Minot, North Dakota, at 8 pm ET.
Stocks in Focus
Target (TGT) reported higher second quarter profit and better than expected revenues, while it also raised its earnings forecast for the full year.
Deere's (DE) third quarter earnings increased from the last year quarter, but were below analysts' expectation. In addition, the company noted that global economic conditions and dryness in several key markets warrant some caution in coming months.
Jack Henry & Associates (JKHY) reported fourth quarter earnings of 50 cents per share compared to 42 cents per share last year. Revenues rose to $266.6 million from the year-ago quarter's $249.3 million. The results were ahead of estimates.
Photronics (PLAB) said its third quarter non-GAAP earnings per share fell to 16 cents per share from 23 cents per share last year. Sales fell 14.2 percent to $116.6 million. The earnings were ahead of estimates, while the sales were about in line.
Fidelity National (FNF) said with the purchase of 1.183 million additional shares in Remy, its stake in the company has increased to 50.2 percent. Consequently, the company said it would begin consolidating Remy's financial results and include those results in its third quarter.
Bob Evans (BOBE) reported first quarter adjusted earnings of 58 cents per share on revenues of $409.7 million. The earnings were below estimates. The company raised its 2013 earnings outlook to $2.67-$2.73 per share, which is above the $2.66 per share consensus estimate. The company's board approved a 10 percent increase in its quarterly dividend.
JDS Uniphase (JDSU) said its fourth quarter non-GAAP earnings fell to 15 cents per share from 23 cents per share last year. Net revenues fell to $439.3 million from the year-ago quarter's $472.3 million. The results exceeded estimates. The company also said it expects first quarter non-GAAP net revenues to be in the range of $415 million to $435 million, which surrounds the consensus estimate.
Pacific Ethanol (PEIX) reversed to a loss of 3 cents per share in its second quarter from a profit of 3 cents per share last year. However, net sales improved to $205.4 million from $214.6 million last year.
Myriad Genetics (MYGN) reported fourth quarter earnings of 34 cents per share, up 14 percent year-over-year, and revenues of $133 million, up 24 percent. The earnings were in line, while the revenues beat expectations. For 2013, the company expects earnings of $1.44-$1.48 per share on revenues of $550 million to $565 million. The earnings guidance trailed expectations, while the revenue guidance surrounded the consensus estimate.
La-Z-Boy (LZB) announced its intention to buy nine La-Z-Boy furniture galleries stores and a supporting distribution center in Southern Ohio.
VimpelCom (VIP) reported second quarter pro forma earnings of 30 cents per share compared to 17 cents per share last year, while operating revenues fell 4 percent to $5.75 billion.
New York Times (NYT) announced the appointment of BBC Director-General Mark Thompson as its next president and CEO.
Agilent (A), Applied Materials (AMAT), CACI International (CACI), Cisco Systems (CSCO), Hot Topic (HOTT), Limited Brands (LTD), NetApp (NTAP), Netease.com (NTES), PETsMART (PETM) and SINA (SINA) are among the companies due to release their quarterly earnings after the markets close.
by RTT Staff Writer
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