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Markets Preoccupation With Fiscal Cliff Continues

The major U.S. index futures are pointing to a lower opening on Wednesday, with sentiment weighed down by worries concerning the fiscal cliff. As Congress continues to wrangle over an agreement concerning measures to avert the fiscal cliff, traders are increasingly becoming nervous over the potential ramification a lack of agreement can have on growth. Risk assets are recoiling in reaction to the fears concerning a return to recession. The new home sales report and the Beige Book may also have an impact on the markets.

The Dow Industrials is precariously placed, as it settled below its 21-day moving average of 12,910 on Tuesday. On the downside, the index has support around 12,755, 12,682 and 12,582. Meanwhile, on the upside, if the index succeeds in challenging its 21-day MA, it could make an attempt at its 200-day MA of 12,993.

U.S. stocks moved about in a listless manner on Tuesday, as traders reacted to some positive economic data and a forecast for bleaker times ahead by the Organization of Economic Co-operation and Development. The major U.S. averages opened lower but began moving back and forth across the unchanged line until late afternoon trading. Thereafter, the averages pulled back decisively into negative territory before closing moderately lower.

The Dow Industrials ended 89.24 points or 0.69 percent lower at 12,878 and the S&P 500 Index ended down 7.35 points or 0.52 percent at 1,399, while the Nasdaq Composite closed at 2,968, down 8.99 points or 0.30 percent.

Twenty-three of the thirty Dow components closed lower, with American Express (AXP), Bank of America (BAC), Cisco Systems (CSCO), Hewlett-Packard (HPQ), UnitedHealth Group (UNH), Chevron (CVX) and Exxon Mobil (XOM) leading the decliners.

Bank, gold and energy stocks came under selling pressure.

On the economic front, among the results of the two house price surveys released yesterday, S&P/Case-Shiller reported that its house price index rose 0.4 percent on a seasonally adjusted basis in September. Annually, prices were up 3 percent, with 18 of the 20 cities surveyed showing price gains.

The Federal House Finance Agency's survey showed a 0.2 percent increase in house prices on a seasonally adjusted basis in September. House prices were 4.4 percent higher from a year-ago.

The Conference Board's consumer confidence index rose to 73.7 in November from 73.1 in October, reaching the best level since February 2008. The present situation index remained almost flat at 56.6, while the expectations index rose 1.1 points to 85.1.

Durable goods orders were flat in October, according to a report released by the Commerce Department. The unchanged reading contrasted expectations for a decline and came about due to strength in electrical equipment, computer/electronics, machinery and metal orders. Excluding transportation, orders were up 1.5 percent.

On a more positive note, non-defense capital goods orders, excluding aircraft, considered a proxy for capital spending, climbed 1.7 percent after declining for three straight months. However, shipments of this category of goods fell 0.6 percent.

Currency, Commodity Markets

Crude oil futures are slipping $0.74 to $86.44 a barrel after declining $0.56 to $87.18 a barrel on Tuesday. An ounce of gold is fetching $1,735.20, down $3.70 from the previous session's close of $1.742.30. On Tuesday, gold fell $25.50.

On the currency front, the U.S. dollar is trading at 81.84 yen compared to the 82.16 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.2887 compared to yesterday's $1.2943.

Asia

Most Asian markets closed lower, although the Indian, New Zealand, Taiwanese and Malaysian markets ended in positive territory. The overnight negative close on Wall Street weighed on the averages, stirring up risk aversion in the markets.

Japan's Nikkei 225 average snapped a 4-session rally and ended near the lows of the session. The index closed down 114.95 points or 1.22 percent at 9,308. Resource stocks led the retreat, while export, finance and marine transportation also witnessed selling pressure.

Australia's All Ordinaries opened lower and declined sharply in early trading. After declining steadily till the mid-session, the index pared some of its losses before ending down 10.80 points or 0.24 percent at 4,463. Energy and material stocks were the worst hit.

Hong Kong's Hang Seng closed at 21,709, down 135.05 points or 0.62 percent. Meanwhile, China's Shanghai Composite languished below the unchanged line throughout the session before closing down 17.64 points or 0.89 percent at 1,974.

Europe

European stocks opened lower and are continuing to see weakness amid fears about the regional economy and the looming U.S. fiscal cliff.

In corporate news, Swiss Life said it expects an adjusted profit in the double-digit millions for the year, as it writes down the value of its German brokerage unit AWD Holding by 576 million francs. The company expects adjusted profit of over 850 million francs for the year.

U.K. travel company Thomas Cook reported a pre-tax loss for the year ended September as revenues slipped slightly. Meanwhile, United Utilities reported that its first half pre-tax profits rose to 135.6 million pounds from 124.4 million pounds last year.

U.S. Economic Reports

The Commerce Department is set to release its new home sales report for October at 10 am ET. Economists expect new home sales to come in at a seasonally adjusted annual rate of 387,000 for October compared to 389,000 in the previous month.

New home sales rose a bigger than expected 5.7 percent to a seasonally adjusted annual rate of 389,000 in September, the highest level since April 2010. Inventories measured in terms of months of supply fell to 4.5 months, while the median price of a new home rose 11.7 percent year-over-year but fell 3.2 percent month-over-month to $242,400.

Federal Reserve Governor Daniel Tarullo is due to deliver the Yale School of Management Leaders Forum Lecture on the "Regulation of Foreign Banking Organizations," in New Haven, Connecticut at 12:15 am ET.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended November 23rd at 10:30 AM ET.

Crude oil stockpiles fell by 1.5 million barrels to 374.5 million barrels in the week ended November 16th. Nevertheless, inventories were well above the upper limit of the average range for this time of the year.

Gasoline stockpiles declined by 1.5 million barrels and were in the lower half of the average range. Distillate inventories were down a steeper 2.7 million barrels and were well below the average range. Refinery capacity utilization averaged 86.7 percent over the four weeks ended November 16th compared to 86.6 percent over the previous four weeks.

The Federal Reserve is due to release its Beige Book, a compilation of anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts, at 2 pm ET. The report is normally released about two weeks before the monetary policy meeting is held.

Stocks in Focus

PVH (PVH) reported third quarter non-GAAP earnings of $2.34 per share compared to $1.89 per share in the year-ago quarter. Revenues fell 1 percent to $1.643 billion. The earnings beat estimates, while the revenues were in line. The company raised its full year non-GAAP earnings guidance to $6.37-$6.38 per share, while it expects 2 percent revenue growth for the year. The guidance was positive.

Analog Devices (ADI) reported fourth quarter earnings from continuing operations of 58 cents per share compared to 60 cents per share last year. Revenues fell to $694.96 million from $716.13 million in the year-ago quarter. The earnings beat estimates, while the revenues were shy of estimates. For the first quarter, the company expects revenues to decline by 6-12 percent and earnings of 40-48 cents per share. The guidance was weak.

Universal Technical Institute (UTI) reported fourth quarter earnings of 6 cents per share, lower than 23 cents per share in the year-ago period. Revenues declined 9 percent to $101.28 million. The results exceeded estimates. The company also said it expects full year new student starts to be close to flat year-over-year.

Green Mountain Coffee's (GMCR) fourth quarter profit and net sales improved from the year-ago quarter and were above Wall Street view. The company forecast first quarter earnings per share above analysts' estimate and also lifted its earnings projection for fiscal year 2013.

American Eagle Outfitters (AEO) reported third quarter earnings that increased from the same period a year earlier. Net sales increased 11 percent and topped the consensus estimate.

Costco Wholesale (COST) announced that November comparable sales for the total company went up 6 percent. In addition, the company declared a special cash dividend of $7.00 per share.

Ann's (ANN) third quarter earnings improved from the previous year period. Total net sales improved from the year-ago quarter and were above the consensus estimate. Meanwhile, the company forecast fourth quarter total net sales below analysts' estimate.

Copart (CPRT) reported first quarter earnings of 36 cents per share on revenues of $238.9 million. The earnings were in line, while the revenues were ahead of estimates.

Kirby (KEX) announced a deal to buy coastal transportation operator Penn Maritime and Maritime Investments for $295 million in cash and stock.

McCormick (MKC) said its board approved an increase in its dividend to 34 cents from 31 cents per share.

Gilead Sciences (GILD) said the European Commission has granted marketing authorization for new indications for once-daily Viread, permitting its usage in combination with other antiretroviral agents for the treatment of HIV-1 infected pediatric patients aged 2 to less than 18 years. The treatment has also been approved for treating chronic hepatitis B virus in adolescent patients aged 12 to less than 18 years.

Aeropostale (ARO), Coldwater Creek (CWTR), Guess (GES), La-Z-Boy (LZB), New York & Co. (NWY), Pall (PLL), Semtech (SMTC) and TiVo (TIVO) are among the companies due to release their financial results after the close of trading.

by RTT Staff Writer

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