Market Analysis

The major U.S. index futures are pointing to a higher opening on Wednesday, with sentiment suggesting a rebound from recent losses. Though the Greek political crisis is yet unresolved, traders can take some comfort from a domestic economic report, which showed a strong increase in the housing starts for April. Traders may now focus on the industrial production report due to be released before the markets open. Given the recent declines, some rebound is likely if domestic economic reports encourage and the FOMC minutes throw up something positive.

U.S. stocks saw further downside on Tuesday after Greece suggested that it would have to go to polls yet again due to the non-resolution of the deadlock there. The major averages opened flat and moved about in a lackluster fashion for much of the session before pulling back sharply going into the close.

The Dow Industrials ended down 63.35 points or 0.50 percent at 12,632 and the S&P 500 Index closed at 1,331, down 7.69 points or 0.57 percent. Meanwhile, the Nasdaq Composite Index closed 8.82 points or 0.30 percent lower at 2,894.



The recent weakness has pulled the Dow below its 21-day MA, 50-day MA and 100-day MA, which are currently at 1,3018, 1,3040 and 1,2852, respectively. On the downside, the average has support around 12,573, 12,510 and 12,451. Overhead resistances lie around 12,682 and 12,718.

Twenty-six of the thirty Dow components closed lower, with Alcoa (AA), Home Depot (HD) and Hewlett-Packard (HPQ) leading the Dow lower. Meanwhile, JP Morgan Chase (JPM) rebounded from its losses and advanced 1.26 percent.

Resource, semiconductor and airline stocks were among the worst performing sectors of the session.

On the economic front, U.S. retail sales rose 0.1 percent month-over-month in April following a 0.7 percent increase in March. The slowdown reflected the impact of an early Easter. Auto sales rose 0.3 percent, furniture sales climbed 0.7 percent and electronics and appliance sales were up 0.2 percent. On the other hand, building materials, garden equipment & supply dealers sales fell 1.8 percent. That said, core retail sales that exclude gas, autos and building materials, rose 0.4 percent, marking the fourth straight month of gains.

Meanwhile, weighed down by energy prices, consumer prices remained unchanged in April. Food prices were up a modest 0.2 percent. Excluding food and energy prices, consumer prices were up 0.2 percent.

The results of the New York Federal Reserve’s manufacturing survey showed that activity in the manufacturing sector in the region expanded at a faster pace in May. The business conditions index rose 10.5 points to a 2-month high of 17.09. The new orders index rose about 2 points to 8.3 and the shipments index climbed 17.7 points to 24.1. The employment indexes also improved, with the number of employees index rising about 1 point to 20.5, while the average workweek index improved about 6 points to 12.1.

The results of the National Association of Home Builders’ survey showed that builder confidence improved in May. The housing market index based on the survey rose 5 points to a 5-year high of 29. The present conditions index rose 5 points compared to a 3 point-improvement by the expectations index. The index measuring prospective buyer traffic climbed 5 points to 23.

The Commerce Department reported that business inventories rose a smaller than expected 0.3 percent month-over-month, while business sales were up 0.6 percent. The business inventories to sales ratio was at 1.27 compared to 1.26 in the year-ago period.

Currency, Commodity Markets

Crude oil futures are slipping $1.39 to $92.59 a barrel after declining $0.80 to $93.98 a barrel on Tuesday. An ounce of gold is fetching $1,536.20, down $17.90 from the previous session’s close of $1,557.10. On Tuesday, gold fell $3.90.

Among currencies, the U.S. dollar is trading at 80.48 yen compared to the 80.19 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.2747 compared to yesterday’s $1.2729.

Asia

The major Asian markets ended the session notably lower, as Greek worries served as a major drag and accentuated concerns regarding the situation in the eurozone.

Japan suffered a double whammy, as worries set in motion by the developments in Greece were compounded by disappointing domestic data. The Nikkei 225 average ended down 99.57 points or 1.12 percent at 8,801.

Australia’s All Ordinaries declined steadily throughout the session before closing down 101.60 points or 2.35 percent at a 4-month low of 4,215. Hong Kong’s Hang Seng Index ended down 634.48 points or 3.19 percent at 19,260, the lowest closing level since January 16th, 2012.

On the economic front, Japan’s Cabinet Office reported that core machinery orders fell 2.8 percent month-over-month in March. The year-over-year comparison revealed a 3.5 percent drop compared to expectations for a 4.4 percent increase.

Europe

The major European markets are mixed, with the still-fluid situation stifling any kind of solid rebound.

In corporate news, EADS, owner of Airbus, reported a profit of 133 million euros for the first half of the year compared to a loss of 12 million euros last year. The company also increased its earnings forecast for the full year to over 1.85 euros per share while maintaining its jet deliveries forecast.

On the economic front, a report released by the U.K. Office for National Statistics showed that the claimant count came in at 1.59 million in April, down 13,700 from the previous month. Economists had estimated the count to increase by 5,000. The unemployment rate for the three months ended March dipped 0.2 percentage points to 8.2 percent.

Final estimates released by Eurostat showed that the region’s annual inflation was 2.7 percent in March, unrevised from the flash estimate. A separate report showed that the eurozone’s trade surplus came in better than expected at 8.6 billion euros.

U.S. Economic Reports

Housing starts in the U.S. came in well above estimates in the month of April, according to a report released by the Commerce Department, although the report also showed a sharp drop in building permits.

The report showed that housing starts rose 2.6 percent to an annual rate of 717,000 in April from the revised March estimate of 699,000. Economists had expected housing starts to increase to 690,000 from the 654,000 originally reported for the previous month.



At the same time, the Commerce Department said that building permits fell 7.0 percent to an annual rate of 715,000 in April from the revised March rate of 769,000. Building permits, which are seen as an indicator of future housing demand, had been expected to drop to 725,000 from the 747,000 originally reported for March.

The Federal Reserve's industrial production report is due out at 9:15 am ET. Economists estimate 0.5 percent growth in industrial production for April, while manufacturing output growth is estimated at 0.7 percent. Capacity utilization may have edged up slightly to 79 percent.



U.S. industrial output was flat in March compared to the previous month. Manufacturing output fell 0.2 percent, while production by the mining and utilities industries rose 0.2 percent and 1.5 percent, respectively. Capacity utilization edged down slightly to 78.6. Construction supplies, tech equipment and consumer durable output all weakened from the month-ago levels, while motor vehicle and parts production rose 0.6 percent.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended May 11th at 10:30 am ET.



Crude oil stockpiles rose by 3.7 million barrels to 379.5 million barrels in the week ended May 4th, with inventories remaining above the upper limit of the average range.

Meanwhile, gasoline inventories fell by 2.6 million barrels and were in the middle of the average range. Distillate inventories also declined, dropping by 3.3 million barrels. Inventories of distillate fuel were now in the lower limit of the average range. Refinery capacity utilization averaged 85.4 percent over the four weeks ended May 4th compared to 84.8 percent in the previous week.

St. Louis Federal Reserve Bank President James Bullard is scheduled to speak at the Lousiville branch of the Bank on the subject of "The U.S. Economy and Monetary Policy” at 12:30 pm ET.


The Federal Reserve is due to release the minutes of it’s April 24th-25th meeting at 2 pm ET.

In the post-meeting policy statement released that followed the April meeting, the Fed maintained its economic assessment, repeating its view that the economy has been expanding moderately. The Fed termed inflation as having picked up somewhat compared to its earlier view of a subdued inflationary environment.

The central bank repeated its pledge to maintain a very accommodative monetary policy at least through late 2014.

In the updated economic forecasts released by the Fed, the central tendency GDP growth forecast for 2012 was upwardly revised to 2.4-2.9 percent from the previously estimated 2.2-2.7 percent. Meanwhile, estimates for 2013 and 2014 were trimmed slightly. The unemployment rate forecast for 2012 was also reduced to 7.8-8.0 percent from 8.2-8.5 percent, while the core PCE inflation forecast was upwardly revised to 1.8-2 percent from 1.5-1.8 percent.

Chairman Ben Bernanke said in the press briefing that the central bank is entirely prepared to take additional action, if needed, to accomplish its dual mandate. At the same time, he suggested that the Fed could advance the timing of rate hikes if the economic and inflation outlook are stronger than expected.

Stocks in Focus

Pfizer (PFE) said Phase III trials of its advanced renal cell carcinoma treatment TORISEL did not meet the primary endpoint of prolonging progression free survival when compared to sorafenib.

J.C. Penney (JCP) reported a first quarter adjusted loss of 25 cents per share on revenues of $3.15 billion, down 20.1 percent year-over-year. The results missed expectations. Citing some one-time expenses, the company said it no longer expects to meet its full year GAAP earnings guidance of $1.59 per share, but it reaffirmed its non-GAAP earnings guidance of $2.16 per share. The company also said it would discontinue its dividend.

Avago Technologies (AVGO) and Triquint Semiconductor (TQNT) announced that they have agreed to settle all claims between the companies. The companies did not reveal the terms of settlement.

SINA (SINA) reported a first quarter non-GAAP net loss of 21 cents per share on revenues of $106.2 million. The earnings were ahead of estimates, while the revenues missed expectations. For the second quarter, the company estimates non-GAAP net revenues of $126 million to $129 million. The revenue guidance was below estimates.

P.F. Chang (PFCB) announced that Centerbridge Partners have commenced their previously announced cash tender offer to acquire all outstanding shares of the company for $51.50 per share.

THQ, Inc. (THQI) reported a fourth quarter loss of 12 cents per share on a non-GAAP basis on non-GAAP revenues of $170.7 million. The results were better than expected.

Cost Plus (CPWM), Ctrip (CTRP), DryShips (DRYS), Hot Topic (HOTT), Jack in the Box (JBX), Limited Brands (LTD), Netease.com, (NTES) and Red Robin (RRGB) are among the companies due to release their quarterly results after the markets close.