Beyond the Number
Cautious Trading Likely as Fed Meeting Gets Underway
6/19/2012 9:24 AM
The major U.S. index futures are pointing to a higher opening on Tuesday, with sentiment remaining optimistic amid the release of a mostly positive housing starts report. Although starts fell from a 3-1/2 year high, building permits rose to a record. An augmentation of the IMF corpus should also offer some encouragement. A debt auction by Spain elicited mixed response. Meanwhile, there was disconcerting news about the German economy, with a private survey showing that economic sentiment declined sharply. The mood is also rendered cautious due to the 2-day FOMC meeting underway.
U.S. stocks closed Monday’s session on a mixed note, with sentiment weighed down by fears regarding the ongoing debt crisis in the eurozone.
The major U.S. averages opened lower as traders looked past favorable election results in Greece amid continued worries about eurozone nations’ ability to put their fiscal houses in order. The averages pared their losses by late morning trading, as traders digested a positive domestic housing reading. However, the averages continued to show nervousness over the course of the session before closing on a mixed note.
The Dow Industrials ended down 25.35 points or 0.20 percent at 12,742, while the S&P 500 added 1.94 points or 0.14 percent before closing at 1,345 and the Nasdaq Composite Index ended at 2,895, up 22.53 points or 0.78 percent.
Nineteen of the thirty Dow components closed lower, with Hewlett-Packard (HPQ), Alcoa (AA), Bank of America (BAC), General Electric (GE) and Procter & Gamble (PG) declining sharply in the session.
Energy and financial stocks lost ground, while transportation, retail, housing, gold and semiconductor stocks advanced.
A survey conducted by the National Association of Home Builders showed that its housing market index rose to a 5-year high of 29 in June from a downwardly revised reading of 28 in May. The present sales conditions index rose 2 points to 32, but the sales expectations index and the index measuring prospective buyer traffic remained unchanged.Currency, Commodity Markets
Crude oil futures are adding $0.45 to $83.72 a barrel after declining $0.76 to $83.27 a barrel on Monday. Gold futures are currently adding $3.40 to $1,630.40 an ounce. In the previous session, gold fell $1.10 to $1,627 an ounce.
On the currency front, the U.S. dollar is trading at 78.95 yen compared to the 79.11 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.2628compared to yesterday’s $1.2577.Asia
Asian stocks ended on a mixed note, with the Japanese, Australian, Chinese, Hong Kong and Taiwanese markets ending lower, while the Singaporean, New Zealand, Malaysian, Indonesian and Indian market moved to the upside.
Japan’s Nikkei 225 average languished below the unchanged line throughout the session, with the selling pressure intensifying in late trading. The index closed down 65.15 points or 0.75 percent at 8,656. Most sectors, barring defensive pharma, utility and telecom stocks, declined.
Australia’s All Ordinaries, which plunged sharply in early trading, pared back its losses gradually over the course of the session. The index legged down further going into the close but closed off its lows at 4,167, down 16.50 points or 0.39 percent. Energy stocks served as the biggest drags, while selling was also evident in a few other sectors.
Hong Kong’s Hang Seng Index closed 11.14 points or 0.06 percent lower at 19,417.
In economic news, the minutes of the Reserve Bank of Australia’s June monetary policy meeting showed that the central bank is of the view that its decision to cut interest rates by 25 basis points was finely balanced. The board apparently weighed relatively strong domestic data against clear evidence showing softening in global conditions.
Revised estimates released by Japan’s Cabinet Office showed that its leading economic indicators index for the nation fell 1 point to 95.6 in April but represented an upward revision from the preliminary estimate of 95.1. Europe
After seeing some volatility, the European markets have now turned higher amid the debt turmoil. Spain auctioned 12-month and 18-month T-bills and succeeded in raising debt slightly above the targeted amount. Though demand was better than at a May auction, borrowing costs were higher.
At the G20 meeting in Mexico, 12 countries, including BRICS nations, pledged financial support, which would increase the IMF bailout fund by $456 billion.
On the economic front, French statistical agency INSEE released the results of its business sentiment survey, showing that French business sentiment dipped 1 point to 92 in June. The decline was in line with expectations.
The Zew Institute’s survey showed that German economic sentiment fell by 27.7 points to –16.9 in June, marking the steepest decline since October 1998. Economists had forecast a more modest decline to 2.3. The current economic situation index fell by 10.9 points to 33.2.
The inflation report released by the U.K. Office for National Statistics showed that the U.K.’s annual inflation rate eased to 2.8 percent due to a slowdown in the pace of price increases in food and non-alcoholic beverages. Economists expected inflation to remain unchanged at 3 percent. U.S. Economic Reports
A 2-day FOMC meeting is scheduled to begin on Tuesday.
U.S. housing starts dipped in May, somewhat reversing a higher than initially reported April rebound, according to figures released by the Commerce Department. The department put the number of privately owned housing starts at a seasonally adjusted annual rate of 708,000 for May.
While the May figure is 4.8 percent below the revised April estimate of 744,000, much of that drop comes as a result of revised figures that put the April rebound in housing starts notably higher than the 717,000 rate initially reported.
The revised figures put the April housing starts at the highest rate since October 2008. Nevertheless, most economists had hoped to see at least a small continuation of the growth in May, forecasting an annual rate of housing starts at 720,000Stocks in Focus
Pulling forward its earnings release date, Oracle (ORCL) announced fourth quarter non-GAAP earnings of 82 cents per share on non-GAAP revenues of $11 billion, up 1 percent year-over-year. The results were ahead of estimates. The company also announced a new buyback program to repurchase up to an additional $10 billion worth of its common stock.
Pfizer (PFE) said it has received a complete response letter from the FDA on its NDA for tafamidis meglumine, a drug for treating neurology impairment. The FDA has sought a second efficacy study to establish substantial evidence of effectiveness prior to approval.
Ballard Power Systems (BLDP) lowered its 2012 guidance, citing delays in terms of closing and shipping expected sales orders, primarily in its Brazilian and European bus market. The company lowered its revenue guidance to $85 million from $100 million and cut its adjusted EBITDA guidance to a loss of $5 million compared to the break even results it forecast earlier.
Pep Boys (PBY) announced the resignation of its CFO Ray Arthur, as he leaves to pursue another business opportunity.
J.C. Penney (JCP) announced the departure of its President Michael Francis, effective June 18th. The marketing and merchandising functions will now be taken care of by the CEO Ron Johnson.
Watson Pharma (WPI) said the U.S. Court of Appeals for the Federal Circuit has affirmed a district court’s decision that certain patents related to Sanctura used for the treatment of overreaction bladed are invalid. The company has filed an ANDA for a generic version of Sanctura.
Walgreen’s (WAG) third quarter net earnings and sales declined from the year-ago period. The company also announced that it would invest approximately $6.7 billion in cash and stock in exchange for a 45% equity ownership stake in Alliance Boots GmbH. The company also announced an increase in its quarterly dividend by 22.2 percent.
FedEx (FDX) reported fourth quarter GAAP profit that declined from the year-ago period and issued below-consensus earnings guidance for the first quarter. However, the company’s earnings per share, excluding charge, topped the consensus estimate. The
Adobe Systems (ADBE), Jabil Circuit (JBL) and La-Z-Boy (LZB) are among the companies due to release their quarterly results after the markets close.