Market Analysis

Beyond the Numbers

Fed Fears Leading to Listlessness
7/29/2015 9:12 AM

The major U.S. index futures are pointing to a slightly higher opening on Wednesday, with sentiment reflecting the nervousness of traders as the FOMC decision looms. Earnings news has been mixed. Meanwhile, earnings and economic data across the Atlantic have been largely positive. With fears that the Fed would hint at a timeframe for the beginning of interest rate normalization abounding, the mood is likely to be listless ahead of the decision.

U.S. stocks snapped a 5-session losing streak and advanced solidly on Tuesday, helped by bargain hunting.

The major averages opened higher and were seen moving roughly sideways in early trading. Subsequently, the averages rose steadily until late afternoon trading and moved sideways thereafter before ending notably higher.

The Dow Industrials ended up 189.68 points or 1.09 percent at 17,630, the S&P 500 Index closed 25.61 points or 1.24 percent higher at 2,093 and the Nasdaq Composite ended at 5,089, up 49.43 points or 0.98 percent.

Twenty-seven of the thirty Dow components rose and one stock was unchanged, while the remaining two stocks retreated. Caterpillar (CAT), Chevron (CVX), Intel (INTC), Pfizer (PFE) and Exxon Mobil (XOM) were among the biggest gainers of the session. However, DuPont (DD) fell 1.46 percent in reaction to its disappointing guidance.

Among the sectors, transportation, biotechnology, resource, housing, semiconductor, and computer hardware stocks advanced strongly.

On the economic front, the Conference Board reported that consumer confidence fell more than expected in July. The consumer confidence index tumbled to 90.9 in July from a downwardly revised reading of 99.8 in June. Economists expected a decline in the index to 99.6 from the previously reported reading of 101.4. The expectations index fell about 13 points to 79.9 and the present situation index was down a more modest 3 points to 107.4.

The results of the S&P/Case-Shiller house price survey showed a 0.2 percent month-over-month drop by the seasonally adjusted 20-city composite house price index for May compared to a revised unchanged reading in April. Annually, house prices were up a less than expected 4.9 percent.

Markit’s preliminary survey revealed that U.S. service sector activity unexpectedly improved in July, with the corresponding index rising to 55.2 in July from 54.8 in June. Economists expected an unchanged reading.

The Richmond Federal Reserve’s manufacturing index came in at a better than expected 13 in July

Currency, Commodity Markets

Crude oil futures are sliding $0.38 to $47.60 a barrel after advancing $0.59 to $47.98 a barrel on Tuesday, when it rose for the first time in five days. Meanwhile, an ounce of gold is currently trading at $1,094.10, down $2.10 from the previous session’s close of $1,096.20. On Tuesday, gold dipped $0.20.

On the currency front, the U.S. dollar is trading at 123.65 yen compared to the 123.56 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1052 compared to yesterday’s $1.1060.


Most Asian markets ended higher, tracking the strong lead from Wall Street overnight and a rally by the Chinese market. However, the Japanese, South Korean and Taiwanese markets ended modestly lower.

Australia’s All Ordinaries Index opened higher and rallied strongly in early trading before moving roughly sideways. The index ended up 38.60 points or 0.69 percent at 5,610. The market witnessed broad based strength, with material and IT stocks leading the way higher.

China’s Shanghai Composite Index rallied 126.17 points or 3.44 percent before ending at 3,789. The rebound came as authorities signaled they are willing to take steps to avert systematic risks. Hong Kong’s Hang Seng Index ended up 115.51 points or 0.47 percent at 24,620.

Meanwhile, the Japanese market showed nervousness ahead of the Fed decision and was also impacted by some corporate results. The Nikkei 225 Index languished below the unchanged line for the bulk of the session before ending down 25.98 points or 0.13 percent at 20,303.

Tokyo Electron and Fanuc tumbled 11.44 percent and 10.66 percent, after both firms lowered their full year forecasts. Real estate, marine transportation, technology, heavy machinery and electric machinery stocks also came under selling pressure, while financial and utility stocks gained ground.

On the economic front, a report released by Japan’s Ministry of Economy, Trade and Industry showed that retail sales rose 0.9 percent year-over-year in June, smaller than the 1.1 percent growth expected by economists. Sales by large retailers slid 0.3 percent.


After a strong start, European stocks saw some volatility in early trading. Nevertheless, the averages were higher till the mid-session, as traders digest a slew of domestic earnings and German consumer confidence data ahead of the Fed announcement. By mid-session, Fed jitters generated some selling and the major averages in the region are currently mixed.

In corporate news, German chemical company Bayer reported better than expected second quarter earnings, helped by strong drug sales and forex gains.

French oil giant Total’s second quarter earnings also exceeded forecasts on cost cuts and higher refining margins. Smaller U.K. peer Tullow Oil reported a decline in its revenues for the first half of the year, although operating profits climbed notably.

Barclays (BCS) reported higher second quarter profits, while Holcim reported a sharp drop in its second quarter profits in its final report as a separate company. LafargeHolcim said it sees higher profitability in the second half of the year on cost cuts.

Among automakers, Volkswagen reported higher profits for its second quarter on an improving European auto market. However, the company lowered its sales guidance for the full year, citing weakness in China. Peugeot Citroen reversed to a profit in the first half of the year.

The results of a survey by French statistical office INSEE showed that French consumer confidence eased to 93 in July from 94 in June, remaining below the long-term average of 100. Economists had expected an unchanged reading.

Data released by the Bank of England showed that mortgage approvals in the U.K. rose more than expected in June and secured lending climbed the most since 2008.

U.S. Economic Reports

The Federal Reserve is scheduled to release its post-meeting monetary policy statement at 2 pm ET.

Ahead of the Fed decision at 10 am ET, the National Association of Realtors is due to release its pending home sales index for June. Economists expect the index to rise 1 percent month-over-month.

Pending home sales rose 0.9 percent month-over-month in May, above the 0.6 percent growth expected by economists. April’s reading was downwardly revised to show 2.7 percent growth from 3.4 percent. Pending home sales rose in the West and Northeast, while pending sales fell in the Southwest and Midwest.

The Energy Information Administration is scheduled to release its weekly petroleum status report for the week ended July 24th at 10:30 am ET.

Crude oil stockpiles rose by 2.5 million barrels to 463.9 million barrels in the week ended July 17th. Inventories remained near levels not seen for this time of year in at least the last 80 years.

Distillate stockpiles edged up by 0.2 million barrels and were in the middle of the average range for this time of the year. On the other hand, gasoline inventories fell by 1.7 million barrels but remained in the upper half of the average range.

Refinery capacity utilization averaged 95.1 percent over the four weeks ended July 17th compared to 94.7 percent over the four weeks ended July 10th.

The Treasury Department is set to announce the results of its auction of five-year notes at 1 pm ET.

Stocks in Focus

Twitter (TWTR) reported second quarter adjusted earnings and revenues that exceeded expectations and raised the low end of its 2015 revenue guidance.

United Steel (X) reported a wider than expected loss and below-consensus revenues for its second quarter. The company cautioned that if the current pace of commercial improvement in its markets does not improve, it expects to be near the low end of its guidance range.

Hilton (HLT) reported second quarter adjusted earnings per share that topped Street view, while its revenues matched the consensus estimate.

Altria’s (MO) second quarter profit improved from the year-ago quarter and its adjusted earnings per share topped analysts' estimate. Revenues were higher than in the prior year period and came above market view.

Akamai Technologies’ (AKAM) second quarter adjusted earnings per share missed estimates, while its revenues beat expectations.

IAC (IACI) reported better than expected second quarter earnings, while its revenues trailed estimates.

Citrix Systems (CTXS) reported better than expected second quarter results and issued upbeat full year guidance. The company also said its CEO Mark Templeton has informed the board of his intention to retire.

Gilead’s (GILD) second quarter results trumped estimates and the company raised its full year net products sales guidance. Edward Lifesciences (EW) also reported better than expected second quarter results and raised its full year adjusted earnings guidance.

Arthur J. Gallagher (AJG) reported better than expected second quarter results. C.H. Robinson’s (CHRW) second quarter earnings topped estimates but its revenues were shy of estimates.

Express Scripts (ESRX) reported above-consensus second quarter adjusted earnings per share, although its revenues trailed expectations. The company raised its full year earnings per share guidance.

Yelp (YLP) reported better than expected second quarter results but lowered its full year revenue guidance.

Panera Bread (PNRA) reported second quarter adjusted earnings and revenues that trailed estimates. The company reiterated its full year guidance.

Boston Properties (BXP), Callaway Golf (ELY), CBL & Associates (CBL), Cloud Peak Energy (CLD), Crocs (CROX), Facebook (FB), Hannover Insurance (THG), HealthSouth (HLS), Lincoln National (LNC), Manitowoc (MTW), Marriott (MAR), MetLife (MET), O’Reilly Auto (ORLY), Public Storage (PSA), Unum Group (UNM), Western Digital (WDC), Whole Foods (WFM), Williams Companies (WMB) and Wynn Resorts (WYNN) are among the companies due to release their quarterly results after the close of trading.
Follow RTT
PreMarket Movers

comments powered by Disqus