Beyond the Number
Traders May Take Advantage of Oversold Levels
6/22/2012 9:21 AM
The major U.S. index futures are pointing to a higher opening on Friday, with sentiment reflecting cautious sentiment of traders even as most stocks trade at oversold levels. Although there are no market moving domestic economic reports due for release, traders may focus on the developments in the eurozone, including the Ecofin meeting in Luxembourg and a meeting scheduled among leaders of Germany, France, Italy and Spain. Currency markets are showing a lack of direction, although some of the risk currencies are trading modestly lower. Commodities are also staging a modest rebound.
After the U.S. markets closed yesterday, Moody’s downgraded 15 global financial institutions, citing their significant exposure to the volatility and risk of outsized losses inherent to capital market activities.
U.S. stocks fell sharply on Thursday, with disappointing domestic economic data adding to the negative sentiment generated by the Federal Reserve decision in the previous session. The major averages opened slightly higher but nervously fidgeted near the unchanged line before embarking on a steady descent following the release of an extremely weak regional manufacturing report. All three of the averages closed with notable losses.
The Dow Industrials ended down 250.82 points or 1.96 percent at 12,574 and the S&P 500 Index closed 30.18 points or 2.23 percent lower at 1,326, while the Nasdaq Composite closed at 2,859, down 71.36 points or 2.44 percent.
Twenty-eight of the thirty Dow components closed lower, with Alcoa (AA), Cisco Systems (CSCO), Chevron (CVX), Hewlett-Packard (HPQ), Intel (INTC), Exxon Mobil (XOM), DuPont (DD) and Home Depot (HD) declining sharply in the session.
Resource, financial, semiconductor, housing, retail, transportation and biotechnology stocks were among the worst decliners in the session.
On the economic front, initial jobless claims fell to 387,000 in the week ended June 16th from an upwardly revised reading of 389,000 for the previous week. Meanwhile, the four-week average increased to 386,000 from 383,000, while continuing claims for the week ended June 9th remained unchanged. The fact that claims remained above 380,000 for four weeks now points to the slowing of the labor market.
The Philadelphia Fed’s survey showed that the manufacturing sector in the region contracted at a faster rate in June. The manufacturing index fell to –16.6 from –5.8 in May. The new orders index declined 17.6 points2` to –18.8 and the order backlogs index moved down by 6.9 points to –16.3. The employment indexes were mixed, with the number of employees index rising 3.1 points to 1.8, while the average workweek index declined to –19.1 from –5.4. The inventories index slumped 13.2 points to –8.7. However, the 6-month outlook index rose 4.5 points to 19.5.
A report released by the National Association of Realtors showed that existing home sales fell 1.5 percent month-over-month to a seasonally adjusted annual rate of 4.55 million units in May. Single-family home sales declined 1 percent, while condominiums and co-ops sales fell 5.7 percent. Inventories as measured by the months of supply rose to 6.6 months from 6.5 months in April. The median price of an existing home rose 7.9 percent year-over-year and were 5.1 percent higher compared to the previous month. First time buyers accounted for 34 percent of the total.Currency, Commodity Markets
Crude oil futures are rising $0.06 to $78.26 a barrel after tumbling $3.25 to $78.20 a barrel on Thursday, with the weakness stemming from the bleak U.S. data points.
Gold futures are currently rising $3.60 to $1,569.10 an ounce. In the previous session, the precious metal plunged $50.30 to $1,565.50 an ounce.
On the currency front, the U.S. dollar is trading at 80.32 yen compared to the 80.28 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2531 compared to yesterday’s $1.2540.Asia
Most Asian markets retreated, dragged down by the negative lead from Wall Street. The Malaysian market bucked the trend, with the KLSE Composite Index ending modestly higher, while the Chinese market was closed for a public holiday.
Japan’s Nikkei 225 average languished below the unchanged line for much of the session, although the index pared back most of its losses in late trading. The index closed down 25.72 points or 0.29 percent at 8,798.
A majority of stocks, with the exception of pharma, financial, steel, construction and some export stocks, declined in the session. The negativity triggered by macroeconomic concerns was mitigated by the weakness of the yen, which supported export related stocks.
Chiyoda fell 3.25 percent and oil refiner Inpex slipped 2.48 percent. JGC Corp., Japan Tobacco and Suzuki Motor were among the other notable decliners.
Sony rallied over 5 percent after it emerged that it is now the frontrunner to pick up a stake in beleaguered Olympus. Olympus ended 2.22 percent higher. Panasonic, another contender in the fray, also rose close to 1.50 percent. Reports also suggested that Panasonic and Sony may join hands in a TV making venture.
Australia’s All Ordinaries slipped sharply in early trading and then began consolidating around the lower levels. The index ended 39.90 points or 0.97 percent lower at 4,094. Energy and material stocks led the declines after resource prices pulled back sharply overnight.
Hong Kong’s Hang Seng Index closed at 18,995, down 269.94 points or 1.40 percent. India’s Sensex was down close to 0.50 percent after the rupee fell to a record low of 56.86 against the dollar amid the firming up of dollar demand from importers and also on increasing capital outflows. Europe
European stocks are also trading notably lower, with the French CAC 40 Index and the German DAX Index slipping 0.71 percent and 0.86 percent, respectively, while the U.K.’s FTSE 100 Index is declining 0.80 percent.
In a eurozone finance ministers’ meeting in Luxembourg, it was decided that the EFSF would disperse the remaining 1 billion euros of the withheld funds from the first installment before the end of the month. The Troika is expected to return to Greece next Monday to discuss the implementation of the second Greek bailout program. The 2-day meeting ending today is considered the forerunner of next week’s EU leaders’ summit in Brussels.
On the economic front, the Ifo Institute’s German business confidence index fell to 105.3 in June from 106.9 a month ago. Economists were expecting the index to fall to 105.6. On the other hand, the current assessment index unexpectedly rose to 113.9 from 113.2. The reading was well above the consensus forecast of 112. The economic expectations index deteriorated to 97.3 in June from 100.8 in May,Stocks in Focus
Standard & Poor’s announced that Monster Beverage (MNST) will replace Sara Lee (SLE) in the S&P 500 Index and Hillshire Brands (HSHwi), the post spin Sara Lee stub, will replace Monster Beverage in the S&P MidCap 400 Index after the close of trading on June 28th. Alexander & Baldwin (ALEXwi) will replace Patriot Coal (PCX) in the S&P MidCap 400 Index after the close of trading on June 29th.
Ryder (R) downwardly revised its second quarter and full year earnings guidance due to lower than expected results in its Fleet Management Solutions business segment. The company also said earnings are expected to be impacted by 5 cents per share due to unusually high medical benefit costs. The company now expects second quarter earnings of 90-95 cents per share, down from its earlier forecast of $1.07-$1.12 per share. The company also lowered its full year earnings guidance to $3.65-$3.85 per share from $4.02 to $4.12 per share.
Con-way Freight (CNW) announced a general rate increase of 6.9 percent on an average applicable to non-contractual business effective July 9th.
Nordson (NDSN) said it has completed the acquisition of Xaloy Superior Holdings.