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Economic Anxiety Evident Despite Encouraging Tidings

The major U.S. index futures are pointing to a lower opening on Tuesday, with sentiment still subdued despite the release of fairly robust earnings. The overbought levels of the market may make traders cautious as there is no surefire signal that the global economy is out of danger notwithstanding the recent promising economic data. A two-day FOMC meeting gets underway and traders may be anxious about what the Fed has to say about its bond purchase program. Some moderation in the upward momentum is likely, as the markets await some key economic events of the week.

U.S. stocks showed a degree of volatility on Monday before closing mixed amid the release of mixed economic data and earnings. The major averages opened on a mixed note, with the S&P 500 Index opening lower, while the Dow Industrials and the Nasdaq Composite opened higher. With the pending home sales data disappointing to the downside, the averages pulled back. While the Nasdaq Composite Index held above the unchanged line for the better part of the session, the Dow and the S&P 500 Index languished mostly in the red before closing lower.

The Dow fell 14.05 points or 0.10 percent before closing at 13,882 and the S&P 500 Index closed down 2.78 points or 0.18 percent at 1,500, while the Nasdaq Composite ended 4.59 points or 0.15 percent higher at 3,154.

Eighteen of the thirty Dow components closed lower, while the remaining stocks advanced. Alcoa (AA), Boeing (BA), Bank of America (BAC), JP Morgan Chase (JPM), Merck (MRK) and Travelers Companies (TRV) were among the worst performers of the session, while Caterpillar (CAT) and General Electric (GE) advanced notably.

Basic material, gold, retail and housing stocks came under selling pressure.

On the economic front, durable goods orders surged up 4.6 percent month-over-month in December, marking the fourth straight month of growth. The bulk of the upside came from transportation equipment, which jumped 11.9 percent. Stripping off transportation equipment orders, the order growth was still a decent 1.3 percent. Non-defense capital goods orders, excluding aircrafts & parts, considered a proxy for future capital spending, edged up 0.2 percent.

The National Association of Realtors reported that its pending home sales index fell 4.3 percent month-over-month in December following a 1.6 percent increase in November. Pending home sales fell sharply in the West and declined at a more moderate pace in the South and the Northeast, while the Midwest saw a small increase in pending home sales.

Currency, Commodity Markets

Crude oil futures are gaining $0.07 to $96.51 a barrel after advancing $0.56 to $96.44 a barrel on Monday. Gold futures are currently gaining $9.20 to $1,662.10 an ounce. In the previous session, gold fell $3.70 to $1,652.90 an ounce.

Among currencies, the U.S. dollar is trading at 90.59 yen compared to the 90.87 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.3446 compared to yesterday's $1.3453.

Asia

The Asian markets closed mixed as the lackluster sentiment on Wall Street overnight and the FOMC meeting that would get underway in the U.S. later in the day kept sentiment subdued. The Australian, Chinese, Indonesian, Japanese, Taiwanese and South Korean markets advanced, while the Hong Kong, Indian, Malaysian, New Zealand and Singaporean markets closed in the red.

Japan's Nikkei 225 average ignored a weak start and moved higher in late morning trading. After advancing till the afternoon, the index moved sideways before giving back some of its gains in late trading. The index closed up 42.41 points or 0.39 percent at 10,867. The market continued to be the beneficiary of a weaker yen.

Resource, financial and some export stocks advanced, while technology, real estate, construction and retail stocks lost ground. Inpex, Sumitomo Mitsui Trust, Sumco, Sumitomo Mitsui Financial, Nissan Motor and Pacific Metals were among the biggest gainers of the session.

The Australian market, which opened after Monday's public holiday, advanced solidly, with the All Ordinaries opening higher and jumping in early trading before moving steadily higher. The index closed up 51.90 points or 1.07 percent at 4,911. The markets witnessed broad based strength, with healthcare, consumer staple, energy, financial and utility stocks seeing significant buying interest.

Hong Kong's Hang Seng Index closed at 23,655, down 16.71 points or 0.07 percent.

On the economic front, the Reserve Bank of India lowered its benchmark interest rates to combat slowing growth. The repo rate, the reverse repo rate and the cash reserve ratio were all lowered by 25 basis points to 7.75 percent, 6.75 percent and 4 percent, respectively.

The results of a survey by National Australia Bank showed that business confidence as well as business conditions in Australia improved in December. The business confidence index rose 3 points to -9, while the business conditions index rose 2 points to -4. Nevertheless, the indexes remained at depressed levels, highlighting the risks the domestic economy is facing.

Europe

European stocks have had a lackluster start and are currently trading mixed despite the release of a couple of positive domestic consumer confidence readings and encouraging earnings. Meanwhile, easing worries concerning the eurozone debt crisis, European Commissioner for Economic and Monetary Affairs Olli Rehn indicated that the EU could consider easing Spain's budgetary targets if the region is seeing a notable deterioration in economic activity.

In corporate news, Dutch consumer electronics and healthcare giant Philips reported better than expected fourth quarter EBITDA and sales and also announced an agreement to sell its DVD and music player business to Funai Electric for 150 million euros in cash and a license fee.

Software AG reported declines in its fourth quarter profit and sales. Anglo American said it would record a charge of $4 billion on the value of its Minas-Rio iron ore project in Brazil in its results for the financial year ended December 31st, 2012.

On the economic front, the results of GfK's German consumer confidence survey showed that consumer sentiment is expected to see a small uptick in February. The consumer confidence index for February is set to rise to 5.8 from 5.7 in January, while economists expected the index to remain unchanged at 5.7.

At the same time, French consumer confidence remained unchanged in January, according to the results of a survey by French statistical office INSEE. The consumer sentiment index remained unchanged at 86 in January, in line with estimates.

A report released by the German Federal Statistical Office showed that import prices rose 0.3 percent year-over-year in December compared to a 1.1 percent increase in November. Economists had expected a 0.9 percent increase. The export price inflation also slowed to 1.1 percent from 1.5 percent in November.

U.S. Economic Reports

The 2-day FOMC meeting is scheduled to begin today, with the post-meeting policy announcement due at 2:15 pm ET on Wednesday.

The results of S&P/Case-Shiller's home price survey will be released at 9 am ET. The 20-city composite house price index based on the survey is expected to increase by 0.7 percent month-over-month on a seasonally adjusted basis in November, the same pace of growth as in the previous month. Annually, the index is expected to increase by a seasonally unadjusted 5.8 percent compared to a 4.3 percent increase in October.

The Conference Board is set to release the results of its consumer confidence survey at 10 am ET. The consumer confidence index is expected to remain unchanged at 65.1 in January.

In December, the consumer confidence index for the U.S. fell 6.4 points to 65.1. The expectations index slumped 14.4 points to 66.5, while the present situation index rose 5.4 points to 62.8.

Stocks in Focus

Pfizer (PFE) reported higher fourth quarter earnings. Meanwhile, Ford (F) reported better than expected operating earnings. Eli Lilly's (LLY) fourth quarter profit and total revenue declined from the year-ago period, but were above Wall Street view. The company reaffirmed its 2013 revenue forecast and raised its earnings forecast range.

Yahoo! (YHOO) reported fourth quarter non-GAAP earnings of 32 cents per share compared to 25 cents per share last year. Revenues, excluding traffic acquisition costs, rose 4 percent to $1.22 billion. The results exceeded estimates.

BMC Software (BMC) reported fourth quarter non-GAAP earnings of 99 cents per share on revenues of $580.2 million, up 5.8 percent. For 2013, the company expects non-GAAP earnings of $3.35 to $3.45 per share. The results missed estimates and the guidance was weak.

Seagate Technology (STX) reported second quarter non-GAAP earnings of $1.38 per share on revenues of $3.7 billion. The results were above estimates.

Microstrategy (MSTR) reported fourth quarter earnings of 73 cents per share compared to 81 cents per share in the year-ago period. Revenues rose 3 percent to $164.5 million, ahead of the consensus estimate.

Beazer Homes (BZH) reported a first quarter loss from continuing operations of 78 cents per share on revenues of $246.90 million. The results trailed expectations.

Illumina (ILMN) reported better than expected fourth quarter results, while it raised its full year earnings per share guidance, which however is below estimates.

Steel Dynamics (STLD) reported fourth quarter net income of 27 cents per share, higher than 14 cents per share last year. The recent quarter's results included a tax benefit totaling 7 cents per share. Total sales fell to $1.71 billion from $1.86 billion last year. The results exceeded estimates.

Crane (CR) reported fourth quarter adjusted earnings per share from continuing operations of 92 cents per share compared to 86 cents per share last year. Sales from continuing operations rose 1.6 percent to $630 million. The results trailed expectations. The company updated its 2013 earnings per share guidance to $4.10-$4.30.

RockTenn (RKT) said it has elected Steven Voorhees as its president and COO. Voorhes has been serving as the company's CFO since 2000, with the responsibility of Chief of Administrative Officer added in 2008.

Bob Evans (BOBE) announced an agreement to sell Mimi's Café restaurant chain to LeDuff America for $50 million. The company said the deal will help it focus on its annual long-term adjusted earnings per share growth outlook of 8-12 percent from its restaurant and food segment. The company also said it expects third quarter revenues to be higher than that of a year ago.

NETGEAR (NTGR) said it has agreed to acquire select assets and operations of Sierra Wireless (SWIR) AirCard business for $138 million in cash. The company also said it expects fourth quarter net revenues of $305 million to $310 million and non-GAAP operating margin of 11-11.5 percent. The revenue guidance surround the consensus estimates.

CTS Corp. (CTS) reported fourth quarter adjusted earnings of 18 cents per share on revenues of $138.3 million. For 2013, the company estimates earnings of 73-78 cents per share on sales growth of 12-15 percent.

Rent-A-Center (RCII) reported fourth quarter earnings of 81 cents per share on revenues of $758.4 million. For 2013, the company expects earnings of $3.25-$3.40 per share on revenue growth of 5-8 percent. The results trailed estimates.

Sanmina Corp. (SANM) reported first quarter non-GAAP earnings of 29 cents per share on revenues of $1.49 billion. The earnings exceeded estimates, while the revenues trailed expectations. The company also said it expects second quarter non-GAAP earnings of 26-32 cents per share on revenues of $1.40 billion to $1.45 billion. The guidance was lackluster.

Piedmont Natural Gas (PNY) said it intends to offer 4 million shares of its common stock in a registered underwritten public offering.

ACE Limited (ACE), Arthur J. Gallagher (AJG), Boston Properties (BXP), Broadcom (BRCM), Dolby Labs (DLB), Freescale Semiconductor (FSL), Hutchison Technology (HTCH), Manhattan Associates (MANH), PAREXEL (PRXL), Spansion (CODE), Unisys (UIS) and Websense (WBSN) are among the companies due to report their quarterly results after the close of trading.

by RTT Staff Writer

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