Market Analysis

Beyond the Number

Markets Await FOMC Minutes Amid Uncertain Rate Outlook
10/8/2015 8:50 AM

The major U.S. index futures are pointing to a lower opening on Thursday, although the averages have trimmed some of their early losses. Recent gains could keep traders wary of valuations, as the Fed rate outlook continues to be murky and the third quarter reporting season rolls out. Alcoa is set to unofficially kick start the proceedings on the corporate earnings front. European stocks have trimmed their losses and are currently mixed and commodities are retreating, although oil is advancing on geopolitical concerns. Traders may also focus on the FOMC minutes for further direction.

U.S. stocks rebounded on Wednesday, as risk appetite improved and provided a thrust to all risky bets. The major averages opened higher and saw further gains in early trading only to give back the gains by the early afternoon. After seeing some volatility in the mid-session, the averages advanced until late trading before moving roughly sideways.

The Dow Industrials ended up 122.10 points or 0.73 percent at 16,912, the S&P 500 Index closed 15.91 points or 0.80 percent higher at 1,996 and the Nasdaq Composite ended at 4,791, up 42.79 points or 0.90 percent.

Twenty-five of the thirty Dow components closed higher for the session, with Boeing (BA), General Electric (GE), Exxon Mobil (XOM), Visa (V), Pfizer (PFE), Merck (MRK), Johnson & Johnson (JNJ) and Intel (INTC) leading the gains.

Among the sectors, transportation, biotechnology, basic material, energy, brokerage, housing, computer hardware and semiconductor stocks advanced strongly.

On the economic front, the Federal Reserve said outstanding consumer credit rose by $16 billion in August, smaller than the $20.5 billion increase expected by economists. The previous month’s increase was downwardly revised to $18.9 billion from $19.1 billion. Revolving credit tied to credit card loans rose by $4 billion, marking the sixth straight month of gains, and non-revolving credit climbed by $12 billion.

Currency, Commodity Markets

Crude oil futures are rising $0.16 to $47.97 a barrel after sliding $0.72 to $47.81 a barrel on Wednesday, snapping a 3-session winning streak.

The previous session’s decline came amid the release of the weekly petroleum status report, which showed that crude oil stockpiles rose by 3.1 million barrels to 461 million barrels in the week ended October 2nd. Inventories remained near levels not seen for this time of year in at least the last 80 years.

Gasoline inventories rose by 1.9 million barrels and were near the upper limit of the average range. Meanwhile, distillate stockpiles declined by 2.5 million barrels but were in the middle of the average range for this time of the year.

Refinery capacity utilization averaged 90.40 percent over the four weeks ended October 2nd compared to 91.20 percent over the four weeks ended September 25th.

Gold futures are receding $5.50 to $1,143.20 an ounce. In the previous session, the December futures ended at $1,148.70 an ounce, down $2.90.

Among currencies, the U.S. dollar is trading at 119.88 yen compared to the 120.01 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1258 compared to yesterday’s $1.1237.


The Asian markets closed mixed even as the Chinese market reopened with a strong rally after an extended break for National Day holidays. Weak machinery orders data forced the Japanese market to break a 6-session winning streak, while the Australian market advanced on support lent by resource stocks.

After an uncertain start and lackluster sentiment till early afternoon trading, Japan’s Nikkei 225 Index declined steadily through the remainder of the session. The index lost 181.81 points or 0.99 percent before ending at 18,141.

Retail stocks came under intense selling pressure. Export stocks ended mixed in the session, while resource stocks moved to the upside.

Australia’s All Ordinaries Index opened higher and rallied sharply in early trading. After moving sideways till the afternoon, the index pulled back and was confined to sideways movement for the rest of the session. At the close of trading, the index was up 13 points or 0.25 percent at 5,241.

Energy, material, financial and healthcare stocks rose notably, while telecom, real estate, IT and industrial stocks came under intense selling pressure.

China’s Shanghai Composite Index played catch up to the recent gains in the region by way of a 90.58-point or 2.97 percent rally to 3,143. Meanwhile, traders in the Hong Kong market paused for a breather, with the Hang Seng Index ending down 160.85 points or 0.71 percent at 22,355.

On the economic front, a report released by Japan’s Cabinet Office showed that core machinery orders in Japan fell 5.7 percent month-over-month in August, confounding expectations for a 3 percent increase. This followed a 3.6 percent drop in July. Annually, core machinery orders were down 3.5 percent.

The Ministry of Finance reported that Japan recorded a current account surplus of 1.653 billion yen in August, above expectations for a 1.226 billion yen surplus but narrower than the 1.808 billion surplus in July. The trade balance showed a wider deficit for the month.


European stocks opened lower and have been trading in an insipid manner following recent gains and the release of weak German export data. Germany’s DAX Index and France’s CAC 40 were higher for 4 sessions each in the run up to the current session. The Bank of England announced an unchanged policy stance.

In corporate news, Tate & Lyle reported that its first half came in line with expectations and also maintained its outlook for the full year. Immarsat also reiterated its guidance for the full year.

On the economic front, the Bank of England decided to maintain its key interest rate unchanged at a record low in a split vote. At the meeting ended October 6, the Monetary Policy Committee voted 8-1 to hold interest rate at 0.50 percent as in August and September. Policymakers voted unanimously to maintain quantitative easing at GBP 375 billion.

The German Federal Statistical Office reported that German exports fell 5.2 percent month-over-month in August, the biggest drop in more than six years. Imports were down 3.1 percent. The trade surplus fell to 19.6 billion euros from 22.4 billion euros in July.

Meanwhile, U.K. house price growth unexpectedly slowed in September, the results of a survey by the Royal Institution of Chartered Surveyors showed. The monthly house price balance fell to +44 in September from +53 in August, which was the highest in more than a year. Economists had expected the balance to rise again to +55.

U.S. Economic Reports

The Labor Department reported that jobless claims fell 13,000 to 263,000 in the week ended October 3rd from the previous week’s revised level of 276,000. Economists expected claims to have declined to 271,000 from 277,000 reported for the previous week.

Meanwhile, the four-week moving average fell by 3,000 to 267,500. Continuing claims calculated with a week’s lag also rose to 2.204 million in the week ended September 26th from 2.195 million in the week ended September 19th.

St Louis Federal Reserve President James Bullard is due to deliver the welcoming remarks at the children's savings account symposium in St. Louis at 9:30 am ET. Minneapolis Fed President Narayana Kocherlakota will give the welcoming remarks at an event in Mankato, Minnesota, at 1 pm ET.

Additionally, at 3:30 pm ET, San Francisco Fed President John Williams is scheduled to speak on the outlook in Spokane, Washington.

The Treasury Department is set to announce the results of its auction of 30-year bonds at 1 pm ET.

At 2 pm ET, the FOMC is scheduled to release the minutes of the September 16th-17th Monetary Policy Meeting.

Stocks in Focus

Resources Connection (RECN) reported better than expected first quarter results.

A Wall Street Journal report suggested that Dell is in talks to buy networking and storage solutions provider EMC Corp. (EMC).

Costco Wholesale (COST) reported sales of $10.75 billion in September, up 2 percent year-over-year. Comparable store sales were flat, while excluding the impact of gasoline price deflation and foreign exchange, comparable store sales rose 8 percent.

Zumiez (ZUMZ) reported a comparable store sales drop of 1.8 percent compared to a 6.6 percent increase in the year-ago period. Fred’s (FRED) comps. rose 4.2 percent and that of L Brands (L) climbed 8 percent.

BioMed Realty (BMR) announced a definitive agreement with affiliates of Blackstone Real Estate Partners VIII, for Blackstone to acquire all outstanding shares of common stock of BioMed for $23.75 per share in an all-cash transaction valued at $8 billion.

Alllscripts (MDRX) announced the promotion of its CFO Rick Poulton to the role of President, which was previously held by the company’s CEO Paul Black. The company also said it has initiated a search for a new CFO.

Gannett (GCI) announced a deal to buy Journal Media Group (JMG) for about $280 million, net of acquired cash, or $12 per share in cash.

Standard & Poor’s announced that AmSurg (AMSG) will replace Con-way (CNW) in the S&P MidCap 400 Index and INTL FCStone (INTL) will replace AmSurg in the SmallCap 600 Index after the close of trading on October 14th.

AutoZone (AZO) said that its board has authorized the buyback of an additional $750 million of its common stock.

Fiat Chrysler (FCAU) announced that it has reached a new tentative agreement with the UAW. The agreement is subject to ratification by the UAW members.

Royal Bank of Canada (RY) announced the receipt of approval from the Federal Reserve to complete its previously announced acquisition of City National (CYN).

Alcoa (AA), Angio Dynamics (ANGO), Helen of Troy (HELE) and Ruby Tuesday (RT) are among the companies due to release their quarterly results after the close of trading.
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