Beyond the Numbers
Spanish Banking Woes May Unsettle Markets
5/25/2012 9:14 AM
The major U.S. index futures are pointing to a lower opening on Friday, with sentiment souring following the news that Spain’s fourth largest bank Bankia may seek a government bailout. Trading in the shares of the bank has been suspended, pending the announcement. The news could re-ignite concerns about the debt crisis in Europe and leave traders unsettled, especially due to the absence of any other trading catalysts. A U.S. consumer sentiment report due to be released after the markets open may also give some direction to the markets.
U.S. stocks moved about in a lackluster fashion for much of Thursday’s session before closing on a mixed note. The major averages opened little changed and moved back and forth across the unchanged line in the morning, as traders digested the about in line jobless claims data and a report showing a smaller than expected increase in durable goods orders.
Stocks pulled back in the afternoon and remained mostly below the unchanged line before recovering in late trading. The averages closed on a mixed note. The Dow Industrials added 33.60 points or 0.27 percent before closing at 12,530 and the S&P 500 Index rose 1.82 points or 0.14 percent to 1,321, while the Nasdaq Composite ended down 10.74 points or 0.38 percent at 2,839.
The Dow Industrials is going about a consolidation move without any real impetus for going up or down. The technical picture for the index is mixed. While the crossover of the 50-day and 100-day moving averages above the shorter-term 21-day moving average points to further bearishness, the 14-day relative strength index supports a rebound from oversold levels, as it is at 21.30 currently.
After completing a triple top formation around the 13,272 level in early May, the Dow Industrials has been on a near term downtrend. The candlestick chart of the Dow shows that it formed a doji candle on Wednesday, which exemplifies the indecision among traders. Subsequently, the index formed a short-wicked hammer on Thursday, signaling that some reversal could be in the works.
Near term supports for the index are around the 12,399 level, its 200-day MA (12,225) and the 12,049 level. On the upside, the index could face resistance around 12,612, its 21-day MA (12,841) and its 50-day MA (12,974).
Twenty-one of the thirty Dow components closed higher on Thursday, with Hewlett-Packard (HPQ) leading the gains. Coca-Cola (KO), Home Depot (HD) and Chevron (CVX) also gained notably. On the other hand, Caterpillar (CAT) and Cisco Systems (CSCO) retreated over 1 percent each.
Airline and housing stocks advanced, while semiconductor, hardware and networking stocks came under selling pressure.
On the economic front, durable goods orders rose by a smaller than expected 0.2 percent month-over-month in April, according to a report released by the Commerce Department. Excluding transportation, orders were down 0.6 percent. Orders for general machinery, computers/electronics, computer-related, communications, electrical appliances all declined during the month. Non-defense capital goods orders, excluding aircraft, fell 1.9 percent. Currency, Commodity Markets
Crude oil futures are receding $0.07 to $90.59 a barrel after advancing $0.76 to $90.66 a barrel on Thursday. Gold futures are currently moving up $4.80 to $1,562.30 an ounce. In the previous session, the precious metal rose $9.10 to $1,557.50 an ounce.
Among currencies, the dollar is trading at 79.57 yen compared to 79.60 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is trading at $1.2507 compared to yesterday’s $1.2533.Asia
The major Asian markets closed mixed, with the Japanese, Hong Kong, Malaysian and South Korean averages advancing, while the rest of the markets declined. The lackluster lead from Wall Street overnight weighed on sentiment, stifling the re-emergence of risk appetite.
Japan’s Nikkei 225 average showed considerable volatility before closing modestly higher, with the index ending up 17.01 points or 0.20 percent at 8,580. Pharma, retail, real estate and utility stocks gained ground, while financial, technology and resource stocks were among the worst hit.
Consumer price inflation data released by Japan’s Ministry of Internal Affairs and Communication showed that core consumer prices rose 0.2 percent year-over-year in April. Economists had expected a more modest 0.1 percent increase. The headline inflation rate was 0.4 percent, in line with estimates.
Hong Kong’s Hang Seng Index languished below the unchanged line for the bulk of the session before turning positive in late trading and closing up 47.01 points or 0.25 percent at 18,713.
Meanwhile, Australia’s All Ordinaries surrendered its early gains and declined throughout the session. The index closed 25 points or 0.61 percent lower at 4,081, representing more than a 7-month closing low. Consumer staple stocks fell the most, while energy and material stocks also posted notable losses. Europe
The European averages are retreating after yesterday’s advance, with concerns surrounding the Spanish banking system being the reason for the reversal in sentiment.
On the economic front, confidence among German consumers is set to remain stable in June, according to the results of a survey by the GfK. The forward looking consumer confidence index for June came in at 5.7, unchanged from the revised reading for May.
Meanwhile, a survey by French statistical agency INSEE showed that its consumer confidence index for France rose 1 point to 90 in May compared to expectations for a reading of 88. Notwithstanding the increase, the index still remains below its long-term average of 100. U.S. Economic Reports
Reuters and the University of Michigan's final report on the consumer sentiment index for May is scheduled to be released at 9:55 am ET. The consumer sentiment index is expected to be left unrevised at to 77.8. Stocks in Focus
Semtech (SMTC) reported first quarter non-GAAP earnings of 27 cents per share compared to 45 cents per share in the year-ago period. Net revenues fell 4.7 percent to $116.6 million. For the second quarter, the company expects non-GAAP earnings of 37-45 cents per share on revenues of $146 million to $154 million. The results missed expectations, while the guidance surrounded the consensus estimates.
Verifone (PAY) reported second quarter non-GAAP income of 64 cents per share, higher than 58 cents per share last year, as net non-GAAP revenues climbed to $479 million from the year-ago quarter’s $293 million. The results exceeded expectations. The company forecast full year earnings of $2.60 to $2.66 per share on revenues to $1.9 billion to $1.925 billion. The Street estimates earnings of $2.66 per share on revenues of $1.92 billion. The company issued a disappointing guidance for its third quarter.
CME Group (CME) announced a 5-for-1 split of its common stock in the form of a 400 percent stock dividend.
Mylan (MYL) announced that its unit Mylan Specialty has entered an agreement with Sunovion Pharma to resolve their patent litigation related to Sunovion’s Brovana product. The companies did not reveal the terms of the deal.
Acxiom (ACXM) announced that its board has increased the size of its stock repurchase authorization by $150 million
Talbots (TLB) announced that the exclusivity agreement with Sycamore Partners, which was executed on May 5, 2012 and twice extended through May 24, 2012, has expired, without reaching definitive merger agreement. The company also reported that its first quarter profit increased from the year-ago quarter. But sales decreased 8.4 percent.