Market Analysis

Beyond the Number

Uneasy Optimism Prevails as Alcoa is Set to Report
4/10/2012 9:22 AM

The major U.S. index futures are pointing to a modestly higher opening on Tuesday, with sentiment improving from the extreme weakness that was prevalent yesterday. The impending reporting season may give some reason for traders to stay invested in stocks. Oil is trading lower and the dollar is seeing some weakness. Though optimism is not welling up, traders are likely to remain hopeful of the recovery being preserved.

The U.S. first quarter reporting season unofficially commences today, with aluminum producer Alcoa (AA) kick starting the season after the markets close. The company is expected to report a loss of 4 cents per share on revenues of $5.77 billion, down 3.20 percent year-over-year.

U.S. stocks tumbled on Monday in reaction to Friday’s report showing weaker than expected job growth in March. Job jitters kept sentiment subdued for much of the session before the major averages closed notably lower.

The major U.S. averages opened sharply lower and moved broadly sideways in the morning before paring some of the losses in the afternoon. The indexes moved sideways once again, ending the session firmly in the red.

The Dow Industrials ended down 130.55 points or 1 percent at 12,930 and the S&P 500 Index retreated 15.88 points or 1.14 percent before closing at 1,382. The Nasdaq Composite Index closed at 3,047, down 33.42 points or 1.09 percent.

Twenty-eight of the thirty Dow components closed lower, with Bank of America (BAC), Disney (DIS) and Caterpillar (CAT) declining sharply. American Express (AXP), Boeing (BA) and United Technologies (UTX) also moved notably lower.

Transportation, biotechnology, resource, semiconductor and financial stocks were among the worst performers of the session.

Currency, Commodity Markets

Crude oil futures are receding $0.21 to $102.25 a barrel after declining $0.85 to $102.46 a barrel on Monday. Gold futures are currently rising $5.10 to $1,648 an ounce. In the previous session, the precious metal added $13.80 to $1,643.90 an ounce.

Among currencies, the U.S. dollar is trading at 81 yen compared to the 81.49 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.3123 compared to yesterday’s $1.3106.


The major Asian markets ended mostly lower, with the Japanese, Hong Kong , Australian and South Korean markets closing lower, while the Chinese and New Zealand markets ended in positive territory.

After rebounding in early trading, Japan’s Nikkei 225 average retreated in the afternoon, disappointed by the fact that the central bank did not announce any augmentation in asset repurchases. The index closed down 8.24 points or 0.09 percent at 9,538, declining for the sixth straight session.

Following two days of deliberation, the Bank of Japan’s monetary policy board opted to keep interest rates unchanged at extremely accommodative levels of 0-0.1 percent. The asset purchase program and credit facility were also left unchanged at 30 trillion yen and 35 trillion yen, respectively.

After the markets closed, Sony (SNE) forecast a wider than expected loss of $6.4 billion for the fiscal year ended March. That said, the company expects to report an operating profit of 180 billion yen in the current fiscal year.

Australia’s All Ordinaries closed down 28.60 points or 0.65 percent at 4,374 and Hong Kong’s Hang Seng Index closed at 20,356, down 236.76 points or 1.15 percent. Meanwhile, China’s Shanghai Composite Index added 20.09 points or 0.88 percent before closing at 2,306. The Chinese Customs Office reported that the nation’s trade balance was a surplus of $5.35 billion in March, defying forecasts for a deficit of $3.15 billion.


The major European markets, which opened after Easter holidays, played catch up to yesterday’s losses in the rest of the global markets in the wake of anemic job additions by the U.S. economy in March.

The French CAC 40 Index is receding 1.64 percent and the German DAX Index is slipping 0.96 percent, while the U.K.’s FTSE 100 Index is declining 0.88 percent. Technology, automaker and resource stocks are among the biggest decliners of the session.

On the economic front, the results of a house price survey by the Royal Institution of Chartered Surveyors showed that the U.K. home price balance improved to –10 in March from –13 in February.

Trade data released from Germany showed that German exports unexpectedly increased in February, resulting in a higher surplus for the month. Exports rose 3.9 percent month-over-month compared to a 2.4 percent increase in February. Consequently, the country recorded a trade surplus of 14.7 billion euros for February, higher than January’s surplus of 13.2 billion euros and the 12 billion surplus forecast by economists.

INSEE reported that French industrial output rose by a seasonally and working day adjusted 0.3 percent in February compared to the previous month. That said, manufacturing output fell 1.2 percent.

The Bank of France released the results of its business sentiment survey, showing that its business confidence indicator remained unchanged at 95 in March. Meanwhile, the central bank indicated that the domestic economy stagnated in the first quarter.

An index measuring investor sentiment in the eurozone deteriorated in April, with the corresponding index coming in at –14.7 compared to –8.2 in March. Economists had expected a more modest deterioration to –9.1.

U.S. Economic Reports

The Commerce Department is due to release its wholesale inventories report at 10 am ET. Economists expect wholesale inventories at the end of February to show a 0.6 percent increase.

In January, wholesale sales edged down 0.1 percent month-over-month compared to a 0.4 percent increase in inventories. On a year-over-year basis, wholesales sales and wholesale inventories were up 7.9 percent and 9.4 percent, respectively. The inventories to sales ratio was at 1.15 compared to 1.14 in December.

Boston Federal Reserve Bank President Eric Rosengren is due to speak at the Atlanta Fed conference in Stone Mountain, Georgia, at 10:30 am ET. Minneapolis Federal Reserve Bank President Naryana Kocherlakota is scheduled to speak to the Southern Minnesota Initiative Foundation at 12:15 pm ET.

Additionally Atlanta Federal Reserve Bank President Dennis Lockhart is due to deliver the opening remarks at the Atlanta Fed conference on "Financial Reform: The Devil's in the Details" at 12:45 pm ET.

Stocks in Focus

EpiCept (EPCT) said the FDA has granted Fast Track designation for its neuropathic pain treatment AmiKet.

Marathon Oil (MRO) said it has agreed to sell substantially all of its Alaska assets to Hilcorp Alaska.

Flextronics (FLEX) said it has completed its previously announced acquisition of Stellar Microelectronics.

Facebook announced a deal to buy mobile-only photo sharing application Instagram for $1 billion.
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