Beyond the Numbers
Markets May Waft Around Ahead of Wednesday's Fed Decision
12/17/2013 9:09 AM
The major U.S. index futures are pointing to a higher opening on Tuesday, with sentiment reflecting modest optimism that the verdict will be in favor of the central bank extending its current level of stimulus as long as it is warranted. With varying opinions floating around regarding the likely Fed stance, as the monetary policy setting meeting gets underway, the resulting uncertainty could temper the market momentum.
U.S. stocks advanced notably on Monday, encouraged by positive overseas data, which offered evidence of a healthy global economy. The major U.S. averages opened higher and rose slightly in early trading. Thereafter, the averaged moved roughly sideways before closing firmly positive.
The Dow Industrials added 129.21 points or 0.82 percent before closing at 15,885, the S&P 500 Index ended 11.22 points or 0.63 percent higher at 1,787 and the Nasdaq Composite closed at 4,030, up 28.54 points or 0.71 percent.
Twenty-six of the thirty Dow components closed higher and one stock ended unchanged, while the remaining three stocks receded. Cisco Systems (CSCO), IBM (IBM), Exxon Mobil (XOM), Goldman Sachs (GS) and Caterpillar (CAT) were among the biggest gainers of the session.
Semiconductor, computer hardware and oil service stocks turned in some of the market’s best performances on the day.
On the economic front, the results of the New York Federal Reserve’s manufacturing survey showed that manufacturing activity moved into expansion territory in December. The general business conditions index rose to 1 from –2.2 in November. The new orders index rose 2 points but was in negative territory at -3.5. The order backlogs index slipped 7 points to –24.1. The employment indexes weren’t encouraging either, with the number of employees index remaining flat, while the average workweek index declined 5 points to –10.8. The 6-month business conditions index fell 2 points.
The Federal Reserve reported that industrial production rose 1.1 percent month-over-month in November, with much of the increase coming from utilities output, which climbed 3.9 percent. Manufacturing output was up 0.6 percent, thanks to strong output of motor vehicles & parts. On the other hand, machinery and computer/electronics output fell slightly. Capacity utilization rose 0.8 percentage points to 79 percent.
Notwithstanding yesterday’s upside, the Dow Industrials settled below its 21-day MA (currently at 15,957). Immediate resistance for the index before it can make an attempt at its 21-day MA is 15,913. If the momentum carries through and the index breaks above these two resistance levels, which seems unlikely given the uncertainty surrounding the FOMC announcement, it has further resistance around the 16,023 and 16,075 levels. On the downside, the index has supports around the 15,845, 15,792 and 15,735 levels. Commodity, Currency Markets
Crude oil futures are slipping $0.21 to $97.27 a barrel after rising $0.88 to $97.48 a barrel on Monday. Gold futures are currently receding $11.30 to $1,233.10 an ounce. In the previous session, gold added $9.80 to $1,244.40 an ounce.
Among currencies, the U.S. dollar is trading at 102.98 yen compared to the 103.02 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.3764 compared to yesterday’s $1.3761.Asia
The major Asian markets closed mixed, as the positive sentiment generated by the strong close by Wall Street stocks overnight neutralized the negativity triggered by the U.S. monetary policy uncertainty.
The Japanese market continued to benefit from the yen's weakness. Japan's Nikkei 225 average opened higher and moved roughly sideways for the rest of the session. The index closed 125.72 points or 0.83 percent higher at 15,279. A majority of stocks advanced, although some defensive stocks came under selling pressure.
Australia's All Ordinaries opened higher and moved sideways in the morning only to give back most of its gains and begin moving back and forth across the unchanged line in a narrow range before closing up 13 points or 0.26 percent at 5,106. Consumer staple, healthcare, financial and telecom stocks gained ground, while utility stocks retreated sharply.
However, Hong Kong's Hang Seng Index closed at 23,069, down 45.43 points or 0.20 percent, and China's Shanghai Composite Index ended 9.78 points or 0.20 percent lower at 23,069.
On the economic front, the minutes of the Reserve Bank of Australia's December monetary policy board meeting showed that the central bank is still of the view that further monetary policy easing remains a possibility. The bank also expects below-trend economic growth in 2014.
A report released by the Australian Bureau of Statistics showed that total new motor vehicle sales rose 1.8 percent month-over-month in November, slower than the 2.5 percent increase expected by economists.
A leading index of economic activity compiled by the Conference Board showed that Australian economic activity is set to improve. The leading economic indicators index rose 0.5 percent month-over-month in October, extending the upward trend that began earlier this year. Europe
After yesterday's strong showing, European stocks opened lower and saw further weakness in early trading. Since then, the averages have been gradually recouping some of their losses. Traders may prefer to stay on the sidelines ahead of some key economic events in the U.S.
On the economic front, the ZEW indicator of economic sentiment climbed to 62 in December from 54.6 in November, according to the results of a survey conducted by the Centre for European Economic Research/ZEW. Economists were looking for a more modest increase to 55. The December reading was the highest since April 2006.
Revised estimates released by Eurostat showed that the euro area annual inflation for November was left unrevised at 0.9 percent, faster than the 0.7 percent rate in October. A separate report showed that hourly labor costs increased 1 percent year-over-year in the third quarter compared with the 1.1 percent in the second quarter.
The U.K. Office for National Statistics reported that U.K. inflation slowed to 2.1 percent in November from 2.2 percent in October. Economists expected the rate to have remained unchanged at 2.2 percent. U.S. Economic Reports
The FOMC is set to commence its 2-day monetary policy meeting today.
Consumer prices in the U.S. came in unchanged in the month of November, according to a report released by the Labor Department, with a steep drop in energy prices offsetting increases in prices for shelter and airline fares.
The Labor Department said its consumer price index was unchanged in November after edging down by 0.1 percent in October. The flat reading for the index came in line with economist estimates. Meanwhile, the core consumer price index, which excludes food and energy prices, rose by 0.2 percent in November following a 0.1 percent uptick in the previous month. Economists had expected core prices to inch up by another 0.1 percent
The Commerce Department will release the quarterly current account data also at 8:30 am ET.
The National Association of Realtors is due to release its housing market index for December at 10 am ET. The consensus estimates call for a small increase in the index to 55 from 54 in the previous month.
Builder confidence remained unchanged in November, as the housing market index was flat at 54 in November. The current sales conditions index remained unchanged at 58, while the future sales expectations index fell 1 point to 60 and the index measuring prospective buyer traffic also dropped 1 point to 42.
The Treasury is set to announce the results of its 2-year auction at 1 pm ET. Stocks in Focus
FuelCell (FCEL) reported a fourth quarter adjusted net loss of 5 cents per share, flat with last year. Revenues rose to $55.2 million from $35.4 million in the year ago period. The loss was wider than estimated, while the revenues were above estimates.
Juniper Networks (JNPR) announced an agreement to acquire multi-layer network provider WANDL for about $60 million. The deal is expected to close in January 2014.
AT&T (T) said it closed its previously announced transaction to lease rights to about 9,000 of its company-owned wireless towers to Crown Castle (CCI). Additionally, the company also completed the sale of about 600 AT&T towers. The deals fetched the company $4.83 billion.