Market Analysis

Beyond the Numbers

Directionless Trading Likely as Traders Await Next Catalysts
2/11/2013 9:15 AM

The major U.S. index futures are pointing to a slightly higher opening on Monday, with sentiment reflecting indecision among traders, as they have very little catalysts to take cues from. Earlier in the global trading day, Asia had a quiet session, as most markets in the region remained closed for the Lunar New Year holidays. European stocks are currently witnessing mixed sentiment. With little earnings and economic news to drive trading, stocks may see a further bout of consolidation.

U.S. stocks closed mixed in the week ended February 8th, as eurozone debt fears early in the week and the overbought levels of the markets kept buying interest in check, leading to a muted performance for much of the week.

Last Monday, the major U.S. averages were dragged down by eurzone debt worries, as Spanish and Italian bond yields surged higher amid political uncertainty in both countries. The averages ended the session notably lower. The major averages rebounded by as much as they fell in the previous session on Tuesday, as traders focused on positive earnings and the results of the service sector survey by the Institute for Supply Management, which suggested continued expansion in activity in the sector.

With the overbought levels of the markets creating indecision among traders, the major averages moved about in a lackluster fashion before closing mixed. Stocks declined modestly on Thursday amid a lack of conviction among traders concerning the recent run up. Positive trade data provided a boost to the markets on Friday, as the averages hovered in positive territory throughout the session before ending higher.

For the week ended February 8th, the Dow Industrials fell 0.12 percent, while the S&P 500 Index added 0.32 percent and the Nasdaq Composite rose 0.47 percent.

The Dow Industrials is likely to trade between the 13,865-14,018 range, especially due to the fact that there are no compelling catalysts to drive trading. If the downside support of the index’s 21-day MA (currently at 13,780) is violated to the downside, the index could go on towards another downside support of 13,664.

Among the sector indexes, the Philadelphia Housing Sector Index fell 1.86 percent for the week and the NYSE Arca Oil Index and the Philadelphia Oil Service Index declined close to 1 percent each. On the other hand, the NYSE Arca Airline Index gained 2.11 percent and the Philadelphia Semiconductor Index added 1.01 percent.

Currency, Commodity Markets

Crude oil futures are receding $0.52 to $95.20 a barrel after declining $2.05 or 2.10 percent to $95.72 a barrel in the week ended February 8th.

Last Monday, oil declined by over $1.50-a-barrel in reaction to the eurozone risks only to bounce back moderately on Tuesday amid the positive U.S. service sector reading. The commodity edged down marginally on Wednesday. Oil fell moderately on Thursday and extended its slide by a modest margin on Friday before ending the week lower.

Gold futures, which fell $3.70 or 0.22 percent to $1,666.90 an ounce, are currently trading slipping $17.90 to $1,649.40 an ounce.

Among currencies, the safe haven dollar was back in favor in the week ended February 8th, as eurozone worries and some mixed economic data reduced the risk appetite of traders and drove traders away from the riskier euro. The dollar rose 2.01 percent against the euro before ending the week at $1.3365. Meanwhile, the yen, which was above 93.00 yen during the week in anticipation of further monetary easing, recouped some of its losses and yet ended the week down 0.10 percent at 92.68.

The U.S. dollar is currently trading at 93.27 yen and is valued at $1.3384 versus the euro.


The Asian markets that remained open for trading closed mostly lower amid a lack of any major catalysts. The Australian, Indian and New Zealand markets closed lower, while the Indonesian markets gained ground. The Chinese, Hong Kong, Malaysia, Singapore, South Korean and Taiwanese markets were closed for Lunar New Year holidays, while the Japanese market was also closed for National Foundation Day.

Australia’s All Ordinaries showed volatility in the morning before climbing and moving above the unchanged line until late afternoon trading. Thereafter, the index moved mostly lower, closing down 9.10 points or 0.18 percent at 4,980.

New Zealand’s NZ 50 Average declined 1.80 percent, while the Indonesia’s Jakarta Composite Index closed 0.25 percent higher and the BSE Sensex of India went about a volatile rise before settling down 0.12 percent.

A report released by the Australian Bureau of Statistics showed that the number of new home loans in Australia fell 1.5 percent month-over-month in December compared to expectation for an unchanged reading.


European stocks are trading on a lackluster note amid a lack of any major trading cues. The Eurogroup finance ministers are due to meet in Brussels later in the day to discuss the proposed bailout for Greece, the progress Greece has made in its second rescue program and plans for direct bank bailouts by the ESM.

In corporate news, German builder Bilfinger Berger reported a higher full quarter operating profit and forecast higher profits for 2013. Dutch supermarket chain Ahold said it has agreed to sell a 60 stake in Scandinavian retailer ICA to Swedish company Hakon Invest for 21.2 billion Swedish Kronor.

U.S. Economic Reports

As the earnings news flow slows, traders are likely to shift their focus to Main Street, and a few key economic reports scheduled for the week could provide some direction to the markets. The spotlight of the week is likely to be on the Commerce Department’s retail sales report for January, the results of the New York Federal Reserve’s manufacturing survey for February, the Federal Reserve’s industrial production report for January, the preliminary results of a consumer sentiment survey by Reuters and the University of Michigan and the weekly jobless claims data.

Traders may also focus on the Fed speeches scheduled for the week, the Treasury Budget for January, the Labor Department’s import and export price indexes for January, the Commerce Department’s business inventories report for December and the results of Treasury auctions of 3-year and 10-year notes and 30-year bonds.

Stocks in Focus

Gilead Sciences (GILD) announced the completion of its acquisition of YM BioSciences (YMI) for $2.95 per share in cash.

Choice Hotels (CHH), Dun & Bradstreet (DNB), Forward Air (FWRD), Lions Gate (LGF), Masco (MAS), Owens & Minor (OMI), Parkway Properties (PKY) and Time Warner Tcom (TWTC) are among the companies due to release their results after the close of trading.

Celgene (CELG) announced that Revlimid has been granted approval for treatment of patients with relapsed or refractory multiple myeloma in China. The company also informed that its application for Revlimid in patients with relapsed or refractory mantle cell lymphoma after prior therapy that included bortezomib has been accepted by the FDA.

Loews Corp. (L) slipped to a loss in its fourth quarter, hurt mainly by Storm Sandy-related catastrophe losses at its 90 percent owned property and casualty insurance unit CNA Financial Corp. (CNA) and lower results at 50.4 percent-owned unit Diamond Offshore Drilling, Inc. (DO). Meanwhile, revenues for the quarter improved from the prior year period.

Google’s (GOOG) executive chairman Eric Schmidt plans to sell up to about 3.2 million shares of the company's Class A common stock over a period of one year pursuant to a pre-arranged trading plan adopted in November.
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