Market Analysis

The major U.S. index futures are pointing to a lower opening on Wednesday, with negativity built on the back of the European political developments gathering further momentum. The bleak outlook for Europe has triggered a massive exodus from risky bets, with crude oil and gold trading at fresh multi-month lows. The euro has retreated further below the $1.3000 level. The absence of any major catalysts has precluded any revival and increased the preoccupation about the political crisis brewing across the Atlantic.

The Dow Industrials has briefly touched its 100-day moving average of 12,809, which was serving as a near term support. Once this level is violated to the downside, the next stop could be around the 12,756.

U.S. stocks retreated sharply on Tuesday, as the political uncertainty in Greece kept traders on tenterhooks. The major averages opened lower and declined steadily in early trading, hitting their session low in late morning trading. Thereafter, the averages gradually pared their losses over the course of the session but still closed moderately lower.

The Dow Industrials ended down 76.44 points or 0.59 percent at 12,932 and the S&P 500 Index slid 5.86 points or 0.43 percent before closing at 1,364, its lowest closing level since April 10th. Meanwhile, the Nasdaq Composite closed at 2,946, down 11.49 points or 0.39 percent, representing a 2-month closing low.

Airline, resource, retail, housing, financial and computer hardware stocks were among the worst performing sectors of the session.

Currency, Commodity Markets

Crude oil futures are slipping $1.05 to $95.96 a barrel after settling down $0.93 at $97.01 a barrel on Tuesday. The American Petroleum Institute’s inventory report released late Tuesday showed that crude oil stockpiles rose by 7.8 million barrels to 378 million barrels in the week ended May 4th.

An ounce of gold is currently fetching $1,584.2, down $20.30 from the previous session’s close of $1,604.50. Gold fell $34.60 in the previous session.

On the currency front, the U.S. dollar is trading at 79.58 yen compared to the 79.87 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.2939 compared to yesterday’s $1.2990.

Asia

Asian stocks wilted, as European concerns lingered and impacted market sentiment. The intensification of risk aversion also strengthened domestic currencies, which adversely affected export stocks.

Japan’s Nikkei 225 average languished notably below the unchanged line throughout the session before closing at a 3-month low of 9,045, down 136.59 points or 1.49 percent. Apart from European concerns, some lackluster earnings such as those of NTT Data also impacted sentiment.

After the markets closed, Toyota Motors (TM) reported a higher operating profit for its March quarter, while it also said it expects an operating profit of about 1 trillion yen for the next fiscal.

Australia’s All Ordinaries closed 43.70 points or 1 percent lower at 4,332, the lowest closing level in a month. Energy and material stocks tumbled in reaction to the pullback in the prices of commodities. Hong Kong’s Hang Seng Index declined 154.11 points or 0.75 percent before closing at 20,331.

Europe

The major European markets are trading on a mixed note, as debt concerns are mitigated to some extent by positive earnings news and trade data out of Germany. The French CAC 40 Index and the U.K. FTSE 100 Index are moving down 1.26 percent and 1.21 percent, respectively, while the German DAX Index is rising 0.31 percent.

In corporate news, German financial giant Commerzbank reported lower profits for its first quarter, with its results dragged down by lower interest income and an accounting charge. That said, the bank said it made up for the 5.3 billion euro shortfall determined by the European Banking Association. Netherlands’ ING reported a sharp drop in first quarter profits.

Frankfurt airport operator Fraport reported a 7.5 percent increase in its first quarter EBITDA, as revenues rose about 6 percent. U.K. low cost carrier easyJet reported that its first half loss narrowed from the year-ago period, while it also forecast up to 5 percent revenue growth for the second half. Air France-KLM said its load factor improved 2 percentage points year-over-year to 83.3 percent in April, as traffic increased 2.8 percent.

German insurer Allianz reported an increase in its first quarter profits and it also confirmed its 2012 operating profit guidance of 7.7 billion euros to 8.7 billion euros. U.K. insurer Prudential reported higher new business profits for the first quarter.

German utility company EON reported that its underlying net income rose to 1.7 billion euros in its first quarter compared to 1.32 billion euros last year. U.K. grocer Sainsbury’s underlying full year pre-tax profit rose on higher sales and the company also increased its full year dividend.

On the economic front, Germany reported a trade surplus of 17.4 billion euros in March compared to a 14.9 billion euros surplus in February. Economists had expected a more modest increase in the surplus to 14.3 billion euros. Exports rose 0.9 percent month-over-month, while imports increased by 1.2 percent.

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 March to show a 0.6 percent increase.



Wholesale sales rose 1.2 percent month-over-month in February. At the same time, wholesale inventories climbed a more modest 0.9 percent, although the increase was better than expected. The inventories to sales ratio remained unchanged at 1.17 in February compared to the year-ago period.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended May 4th at 10:30 AM ET.



Crude oil inventories rose by 2.8 million barrels in the week ended April 27th. Inventories remained in the upper limit of the average range.

Distillate inventories fell by 1.9 million barrels and were in the middle of the average range for this time of the year. Gasoline inventories declined by 2 million barrels, remaining in the middle of the average range. Refinery capacity utilization averaged 84.8 percent over the four weeks ended April 27th compared to 84.7 percent over the previous four weeks.

Cleveland Federal Reserve Bank President Sandra Pianalto is scheduled to speak to the "Women Leading Kentucky, Women's Business and Leadership Conference" in Lexington, Kentucky at 10:45 am ET. Philadelphia Federal Reserve Bank President Charles Plosser will speak at the Bank's conference on "Reinventing Older Communities" at 12 pm ET.

Stocks in Focus

Disney (DIS) reported second quarter adjusted earnings of 58 cents per share, exceeding the 25 cents per share consensus estimate. Revenues also exceeded estimates.

Vitesse Semiconductor (VTSS) reported better than expected second quarter earnings, while revenues were in line. The company issued below consensus revenue guidance for the third quarter.

Tyco (TYC) said it has filed preliminary proxy materials with the SEC, seeking approval from its shareholders for its previously announced plan to split into three independent companies.

AOL’s (AOL) first quarter profit jumped from the year-ago period. Although the company’s total revenues declined 4 percent, they were above Wall Street view.

Dean Foods (DF) reported first quarter profit that increased from the year-ago quarter and was above Wall Street view. The company guided second quarter adjusted earnings per share above Wall Street view and also raised its full year 2012 earnings forecast.

Macy's (M) reported first quarter profit that increased from the year-ago period, while its net sales rose 4.3 percent and were above the consensus estimate. The company also reiterated its earnings per share forecast for fiscal 2012.

Protective Life (PL) reported first quarter operating earnings of $1.18 per share, ahead of the $1.05 per share consensus estimate. Peer XL Group (XL) reversed to a profit on an operating basis in its first quarter, with the operating earnings coming in above estimates.

STEC (STEC) reported a first quarter loss that was wider than estimates, while its revenues declined by nearly half to $50.4 million, yet exceeded expectations. The company issued downbeat guidance for its second quarter.

Regeneron (REGN) said a FDA advisory committee voted against approving its ARCALYST for the prevention of gout flares during initiation of uric acid-lowering therapy. The PDUFA date for the sBLA is July 30th, 2012.

MercadoLibre (MELI) reported below consensus earnings and revenues for its first quarter. WTI Offshore’s (WTI) first quarter results also trailed expectations.

EOG Resources (EOG) reported better than expected adjusted earnings for its first quarter. The company also increased its 2012 liquids production target to 33 percent from 30 percent.

The Yahoo (YHOO) CEO’s inaccurate resume controversy snowballed further, as Patti Hart, a board member, who spearheaded the CEO search, informed Yahoo’s board that she will not seek re-election to the board.

Synopsys (SNPS) announced a deal to buy photonics design and simulation software maker Rsoft Design Group. The company did not reveal the terms of the deal.

CBRE (CBG) announced that its CEO Brett White will retir, effective 31st, 2012 and incumbent president Robert Sulentic will succeed White as of that date.

URS Group (URS) reported first quarter earnings and revenues that exceeded estimates. The company affirmed its 2012 expectations that call for below consensus revenues but earnings surrounding the consensus estimates.

TD Ameritrade (AMTD) announced that its average client trades per day in April fell 8 percent from the year-ago period and were 3 percent lower than in March.

Blue Nile (NILE) reported first quarter earnings that missed expectations, while its revenues exceeded expectations. The company’s second quarter earnings guidance was below estimates, while its second quarter revenue guidance and the full year guidance surrounded the consensus estimates.

Convergys (CVG) announced executive changes, including the elevation of president and COO Andrea Ayers as President and CEO. Jeff Fox, the incumbent president and CEO, will become the executive chairman of the board. Separately, the company reported better than expected first quarter earnings and also initiated a regular quarterly dividend of 5 cents per share.

Activision Blizzard (ATVI), BMC Software (BMC), Cisco Systems (CSCO), JDA Software (JDAS), Live Nation (LYV), MEMC Electronics (WFR), News Corp. NWSA), Priceline.com (PCLN) and Scientific Games (SGMS) are among the companies due to release their results after the markets close.