Market Analysis

The major U.S. index futures are pointing to a lower opening on Wednesday, with domestic stocks taking cues from across the Atlantic. The debt situation in Europe is precipitating, with no quick fix in sight. The upcoming June 17th Greek election is keeping traders on tenterhook, as an adverse result conjures up visions of an eventual eurozone break up. Domestically, the retail sales report released earlier in the day showed an anemic consumer spending environment, reflecting the cautious disposition of consumers, given the fluid macroeconomic environment. Against this backdrop, the market may go about in a lackluster manner before clarity emerges.

U.S. stocks rebounded on Tuesday despite the lingering eurozone and domestic economic worries. The major averages opened the session on a tentative note but rose sharply in late morning trading. Thereafter, the averages moved broadly sideways before legging up further in late trading.

The Dow Industrials advanced 162.57 points or 1.31 percent before closing at 12,574 and the S&P 500 Index closed 15.25 points or 1.17 percent higher at 1,324, while the Nasdaq Composite ended at 2,843, up 33.34 points or 1.19 percent.

Twenty-nine of the thirty Dow components closed higher, with Boeing (BA), Bank of America (BAC) and JP Morgan Chase (JPM) advancing strongly in the session. Alcoa (AA), American Express (AXP), Caterpillar (CAT), DuPont (DD) and Intel (INTC) also showed strength.

Resource, biotechnology, financial, housing and semiconductor stocks were among the best performing sectors of the session.

Currency, Commodity Markets

Crude oil futures are slipping $0.37 to $82.95 a barrel after adding $0.62 to $83.32 a barrel on Tuesday. The inventory report released by the American Petroleum Institute late Tuesday showed that crude oil stockpiles rose by 1.6 million barrels in the week ended June 8th. Distillate stockpiles rose by 519,000 barrels, while gasoline inventories fell by 878,000 barrels. The report also showed that stockpiles at Cushing, Oklahoma delivery point fell by 344,000 barrels.

An ounce of gold is currently at $1,623.20, up $9.40 from the previous session’s close of $1,613.90. In the previous session, gold added $17.

Among currencies, the U.S. dollar is trading at 79.49 yen compared to the 79.53 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.2546 compared to yesterday’s $1.2504.

Asia

Asian stocks capitalized on the positive overseas clues and ended mostly higher, although a lack of direction was evident due to the encircling economic gloom.

Japan’s Nikkei 225 average opened higher and remained higher throughout the session before closing up 51.12 points or 0.60 percent at 8,588. The upside in Japan was aided by positive machinery orders data released by Japan’s Cabinet Office.

The report showed that core machinery orders climbed a seasonally adjusted 5.7 percent month-over-month in April, topping estimates for an increase of 1.6 percent, following a 2.8 percent contraction in March.

Australia’s All Ordinaries surrendered its early gains and dipped below the unchanged line in late morning trading. After hitting an intra-day low by the mid-session, the index pared some of its losses but yet closed down 6.80 points or 0.17 percent at 4,112. Financial shares reversed yesterday’s gains, while the resource space saw mixed sentiment.

Hong Kong’s Hang Seng Index closed at 19,027, up 153.96 points or 0.82 percent, with insurance stocks lending support after reports suggested that the China Insurance Regulatory Commission is considering expanding investment options for insurance companies.

Europe

European stocks are moving to the downside amid simmering fears concerning how the eurozone crisis will pan out. Italy was successful in raising debt in line with its 6.5 billion euro-target in an auction of 12-month bills, although the yield was sharply higher and demand was lower than at a previous auction.

Spanish retailer Inditex reported a 30 percent increase in its first quarter earnings, while sales were up 15 percent. The results were ahead of estimates. U.K. grocer Sainsbury said its same store sales, excluding fuel, were up 1.4 percent, as sales got a boost from spending related to Queen Elizabeth’s diamond jubilee celebration. While pointing out that it is operating in a challenging market, the company said it is well placed to continue to outperform the market.

On the economic front, a report released by Eurostat showed that eurozone industrial output fell 0.8 percent month-over-month in April after declining 0.1 percent in March. Economists had expected a steeper decline.

U.S. Economic Reports

A steep drop in energy prices at the producer level fueled a larger than expected drop in overall producer prices for May, according to figures released by the Labor Department. The producer price index for finished goods fell a full 1 percent in May, marking the largest drop since July 2009.
Most economists had predicted a fairly large drop in the PPI following April's 0.2 percent decline, but most had expected producer prices to fall by 0.6 percent.



On an annualized basis, producer prices remain up 0.7 percent over May 2011 levels despite two consecutive monthly declines. So called, "core" producer prices, which exclude the somewhat volatile food and energy sector, rose by 0.2 percent for May, the third consecutive monthly increase in a row.

A Commerce Department report showed that retail sales fell 0.2 percent month-over-month in May compared to a downwardly revised reading of a 0.2 percent drop in April. The decline was in line with expectations. Excluding autos, retail sales fell 0.4 percent, steeper than the 0.1 percent drop expected by economists.



Auto sales rose 0.8 percent, stronger than the 0.1 percent in the previous month. Furniture & home appliance store sales and electronics & appliance store sales rose 0.4 percent and 0.8 percent, respectively. On the other hand, building material & garden equipment & supplies dealers store sales were lower than a month ago and food & beverage store sales also edged down. Gasoline store sales were 2.2 percent below the previous month.

The Commerce Department is scheduled to release its business inventories report for April at 10 am ET. The report summarizes the results from the monthly retail trade, wholesale trade and factory goods orders surveys. The report is expected to show a 0.3 percent increase in business inventories for the month.



Business inventories rose a smaller than expected 0.3 percent month-over-month in March, 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.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended June 8th at 10:30 AM ET.



Crude oil stockpiles fell by 100,000 barrels in the week ended June 1st. Meanwhile, gasoline inventories rose by 3.3 million barrels.

Stocks in Focus

Dell (DELL) said ahead of its 2012 analyst meeting that it expects to initiate a quarterly dividend of 8 cents per share. The company also said it has executed on its commitment to grow profitability and operating income, while expanding its enterprise solutions and services.

Casey’s General (CASY) reported fourth quarter earnings of 60 cents per share, flat with last year. Revenues rose to $1.75 billion from the year-ago quarter’s $1.55 billion. The earnings trailed expectations, while the revenues were ahead of estimates. The company also said its board has increased its quarterly dividend to 165 cents per share.

Aetna (AET) announced that it has received a license to begin selling health insurance in Singapore.

Johnson & Johnson (JNJ) said it has received U.S. regulatory clearance for its proposed acquisition of Synthes for $19.7 billion in cash and stock. The company expects the deal to close on June 14th.

Scotts Miracle-Go (SMG) said it expects to fall short of its previous 2012 guidance of 6-8 percent sales growth and adjusted earnings per share of $2.65-$2.85. The company attributed the predicament to slowing consumer demand.

Prudential Financial (PRU) said its board has authorized the purchase of up to $1 billion of its shares during the period from July 1st 2012 through June 30th, 2013.

Amgen (AMGN) said it has completed its previously announced acquisition of more than 99 percent of the shares of Turkish company Mustafa Nevzat Pharma.