The major U.S. index futures are pointing to a higher opening on Tuesday, with risk appetite improving as the FOMC meeting draws closer. Reports that the German constitutional court will not delay its verdict on the ESM beyond tomorrow have also served to support risky bets. Commodities and risk currencies are higher. The Dow could get a lift from positive comparable store sales reported by McDonald's (MCD).
Earlier in the day, the Commerce Department released a report on the U.S. trade balance for July, which widened by less than expected. Despite all these, the underlying sentiment is likely to remain cautious, given the fluid economic situation and the overbought levels of the markets.
U.S. stocks retreated on Monday, as the stimulus expectations-boosted rally of the previous week lost steam amid a lack of any major catalysts. The major averages opened lower and moved with nervousness, mostly below the unchanged line with modest losses. Selling accelerated in late afternoon trading, sending the averages notably lower.
The Dow Industrials ended down 52.35 points or 0.39 percent at 13,254 and the S&P 500 Index closed at 1,429, down 8.84 points or 0.61 percent, while the Nasdaq Composite Index ended 32.40 points or 1.03 percent lower at 3,104.
Nineteen of the thirty Dow components closed lower, with Intel (INTC), Boeing (BA), Bank of America (BAC), Cisco Systems (CSCO), 3M Co. (MMM), JP Morgan Chase (JPM), United Technologies (UTX) and Caterpillar (CAT) leading the declines.
Semiconductor, financial, energy and gold stocks were among the worst performers of the session.
On the economic front, a Federal Reserve report revealed that outstanding consumer credit fell by $3.3 billion in July following an upwardly revised $9.8 billion increase in June. Economists expected an increase of $9.8 billion. Revolving credit tied to credit cards fell by $4.8 billion compared to a $1.6 billion increase in non-revolving credit.
Currency, Commodity Markets
Crude oil futures are gaining $0.22 to $96.76a barrel after advancing $0.12 to $96.54 a barrel on Monday. Gold futures are currently adding $2 to $1,733.80 an ounce. In the previous session, the precious metal fell $8.70 to $1,731.80 an ounce.
Among currencies, the U.S. dollar is trading at 77.93 yen compared to the 78.29 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.2782compared to yesterday's $1.2759.
The Asian markets meandered around, showing a lack of direction, before closing on a mixed note. The 2-day FOMC meeting that gets underway tomorrow and the German constitutional court's judgment on the ESM also due tomorrow rendered the mood cautious.
Japan's Nikkei 225 average opened moderately lower and moved roughly sideways for the rest of the session. The index closed down 61.99 points or 0.70 percent at 8,807. Export stocks retreated, as the yen firmed up in the Asian session.
Chipmaker Sumco was the biggest loser among the index components, tracking the weakness in Intel shares on Wall Street overnight. Toyobo, Shinsei Bank, Mitsumi Electric and JTEXT also showed notable weakness. On the other hand, Unitika and Nisshin Steel added over 5 percent each.
Australia's All Ordinaries languished below the unchanged line throughout the session amid some volatility before closing down 9.70 points or 0.22 percent at 4,348. Most sectors, barring defensive healthcare stocks, came under selling pressure.
Hong Kong's Hang Seng Index closed at 19,858, down 30.71 points or 0.15 percent.
On the economic front, a survey by the National Australia Bank showed that business confidence in Australia deteriorated in August. The business confidence index fell to-2 in August from 3 in July. Meanwhile, the business conditions index rose to 1 from -3 in July.
European stocks are trading lower for the second straight session amid doubts about whether the Federal Reserve will deliver in line with expectations.
In corporate news, Philips (PHG) announced the elimination of 2,200 additional jobs in a bid to save an additional 300 million euros.
U.K. luxury retailer Burberry lowered its full year profit guidance toward the low-end of its earlier forecast. The company also said that its same store sales remained flat year-over-year in the 10 weeks ended September 8th.
A monthly survey by the Royal Institution of Chartered Surveyors showed that its index measuring the average asking price for a home in the U.K. came in at -19 in August, up from July's revised balance of -23. This beat forecasts for a score of -22.
German wholesale price inflation accelerated for the second straight month, according to a report released by the Federal Statistical Office. The wholesale price index rose 3.1 percent year-over-year in August compared to expectations for a 2 percent increase.
A report released by INSEE showed that payroll employment in France fell by 22,400 in the second quarter following an increase of 28,000 in the first quarter.
U.K.'s visible trade deficit declined to 7.1 billion pounds in July from a deficit of 10.1 billion pounds in June. Economists expected a more modest drop to 10 billion euros.
U.S. Economic Reports
Falling imports and exports both contributed to a slight growth in the U.S. trade deficit in July, though revised figures for June put the overall level below the expectations of most economists. According to figures released by the Commerce Department, the U.S. economy exported $183.3 billion in goods and services in July, compared to imports of $225.3 billion for the month. The difference marks a trade deficit of $42 billion, up from the June trade deficit level of $41.9 billion.
The July deficit, though increased, is well below the $44.3 billion mark projected by most economists, likely in part because of the revision of June deficit figures from the $42.9 billion initially reported.
As a percentage measure, the changes are relatively minor, with the deficit increasing 0.2 percent as exports, a positive to the economy, fell 1.0 percent, while imports fell at a slower 0.8 percent rate.
Stocks in Focus
McDonald's reported global comparable sales for August that improved 3.7 percent. The company's U.S. comparable sales rose by 3.0 percent.
Sonic Automotive (SAH) said its Vice Chairman and CFO David Cosper has revealed his intention to retire effective at a yet-to-be-determined date sometime during the first quarter of 2013.
H.B. Fuller (FUL) announced that it has finalized the purchase of Engent, a provider of manufacturing and R&D services to the electronics industry. General Dynamics (GD) said it has acquired automation virtualization solutions company Open Kernel Labs.
Sonoco (SON) lowered its third quarter non-GAAP earnings guidance to 51-53 cents per share from 62-66 cents per share, citing operating problems at several of its North American uncoated recycled paperboard mills. Analysts estimate earnings of 62-66 cents per share. The company also said it has removed its non-GAAP earnings guidance for the full year.
Shuffle Master (SHFL) said its third quarter earnings rose 6 percent to 18 cents per share on revenues that rose 9 percent to $63.4 million. The results trailed expectations.
Casey's General (CASY) reported first quarter earnings of $1.01 per share compared to $1.03 per share last year. Total revenues were almost flat at $1.87 billion. The earnings exceeded estimates, while the revenues were below expectations.
Federated Investors (FII) said it has acquired about $4.4 billion in assets from Fifth Third Asset Management.
AIG (AIG) announced that the Treasury has priced an offering of about 553.8 million shares of the company at a price of $32.50 per share.
by RTT Staff Writer
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