Market Analysis

The major U.S. index futures are pointing to a higher opening on Wednesday, with sentiment boosted by continued global central bank support. The Bank of Japan announced additional stimulus measures earlier in the global trading day in a bid to boost growth and prevent the appreciation of the yen. The modest support measure triggered buying in risky bets. A domestic economic report released short while again showed that housing starts rose month-over-month in August, although the increase was less than expected. Sentiment will now depend on the existing home sales report to be released shortly after the markets open.

U.S. stocks went about in a lackluster fashion on Tuesday amid the re-ignition of economic concerns and ended on a mixed. The major averages opened lower but cut their losses amid the release of the results of an upbeat homebuilder sentiment survey for September. After declining yet again in the early afternoon, the major averages moved back to the upside in late-day trading, closing nearly flat.

The Dow Industrials ended up 11.54 points or 0.09 percent at 13,565, while the S&P 500 Index slipped 1.87 points or 0.13 percent before closing at 1,459 and the Nasdaq Composite closed at 3,178, down 0.87 points or 0.03 percent.

Despite the Dow’s advance, the breadth was titled in favor of the decliners, with seventeen stocks falling, while thirteen stocks ended higher. Alcoa (AA), Bank of America (BAC) and American Express (AXP) were among the biggest decliners, while Caterpillar (CAT), Kraft Foods (KFT) and McDonald’s (MCD) advanced strongly.

Transportation and brokerage stocks were among the worst performers of the session.

On the economic front, a report from the National Association of National Home Builders showed that its housing market index rose to 40 in September from 37 in August, marking the highest level in 6 years. The current sales conditions index rose 4 points to 42 and the sales expectation index surged up 8 points to 51. Additionally, the index measuring prospective buyer traffic rose 1 point to 31.

Currency, Commodity Markets

Crude oil futures are slipping $0.64 to $94.65a barrel after slipping $1.33 to $95.29 a barrel on Tuesday. An ounce of gold is currently trading at $1,773.70, up $2.50 from the previous session’s close of $1,771.20 an ounce. In the previous session, gold rose $0.60.

Among currencies, the U.S. dollar is currently trading at 79.63 yen compared to the 78.81 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.3024 compared to yesterday’s $1.3047.

Asia

The major Asian markets closed higher, capitalizing on the Bank of Japan’s decision to bestow the economy with additional stimulus. The Hong Kong and the Japanese markets led the region’s gains, while the New Zealand market closed moderately lower. Meanwhile, the Indian market was closed for a public holiday.

Japan’s Nikkei 225 average opened higher and was modestly higher until the afternoon. With the Bank of Japan announcement, buying interest perked up, sending the average sharply higher. Thereafter, the average consolidated before closing up 108.44 points or 1.19 percent at 9,232, the highest closing level since May 2nd, 2012.

Barring some defensive stocks, most stocks advanced, with export stocks particularly benefiting from the yen’s weakness. Kawasaki Kisen Kaisha rallied over 11 percent, while Mitsui OSK Lines, Nippon Yusen, Mazda Motor and TDK also saw notable gains. Most stocks that retreated in reaction to the Chinese protests over disputed islands rebounded.

After seeing lackluster sentiment till early afternoon trading, Australia’s All Ordinaries rose steadily before moving sideways in late trading. The index closed up 22.60 points or 0.51 percent at 4,440. Healthcare and material stocks advanced.

Hong Kong’s Hang Seng Index closed at a nearly one-month closing high of 20,842, up 239.98 points or 1.16 percent.

Following the conclusion of its two-day monetary policy meeting, the Bank of Japan announced a 10 trillion yen increase in its asset purchase program to 80 trillion yen, although the purchases will be made only in 2013. One-half of the increase is meant to purchase T-bills and the remaining half for the purchase of Japanese government bonds.

The asset purchase target for 2012 was maintained unchanged. The central bank also did away with the 0.1 percent interest rate floor on its Japanese bond purchases. Meanwhile, the bank maintained the key interest rate unchanged at 0-0.1 percent.

Europe

European stocks are rebounding after a 2-day slide, as additional central bank stimulus, this time from the Bank of Japan, warmed the Street. That said, an uneasy optimism prevailed, as the region is left to contend with the sovereign debt crisis.

In corporate news, Spanish retailer Inditex reported higher earnings for its first half, which also came in above estimates by most analysts. Sales rose 17 percent. The company also said sales growth since the end of the first half has accelerated to 17 percent compared to 9 percent in the year-ago period.

German tire maker Michelin raised its adjusted earnings guidance for 2015 to 2.9 billion euros from its previous target of 2.5 billion euros.

On the economic front, the minutes of the Bank of England’s September monetary policy meeting showed that the decision to retain the key rate unchanged and to maintain the size of its quantitative easing was unanimous. That said, some committee members perceived the need for more stimulus in due course.

U.S. Economic Reports

Federal Reserve Chairman Ben Bernanke will meet with the Senate Finance committee Wednesday to focus on economic policy and the fiscal cliff.

New housing construction in the U.S. rebounded in August from an unexpectedly large dip in July, but failed to reach the levels expected by most economists. According to figures released by the Commerce Department new privately-owned housing starts came in at a seasonally adjusted annual rate of 750,000, a 2.3 percent increase from revised July levels.



The increase comes in part because revisions showed July housing starts at a 733,000 rate rather than the 746,000 initially reported. So while housing starts did rebound from July levels, the rate of new construction still fell notably below the 768,000 rate predicted by most economists.

New building permits, a leading indicator for housing starts, dropped somewhat in August, falling to a 803,000 seasonally adjusted annual rate, 1.0 percent below the revised July rate of 811,000. The July revision was a minor change from the 812,000 rate initially reported. Most economists had expected building permits to fall even further to a rate of 802,000 or even lower.

Kansas City Federal Reserve President Esther George is due to deliver the opening remarks at a Kansas City Fed jobs conference at 9:45 am ET.

The National Association of Realtors is scheduled to release its report on existing home sales for August at 10 am ET. Economists estimate existing home sales of 4.550 million for the month.

Existing home sales rose 2.3 percent month-over-month to a seasonally adjusted annual rate of 4.47 million units in July. Sales rose in all regions, with the exception of the West, where sales remained unchanged. The median price of an existing home rose 9.4 percent year-over-year to $187,300. Inventories measured in absolute numbers rose slightly to 2.4 million units, while inventories measured in terms of months of supply fell to 6.4 months from 6.5 months in June.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended September 14th at 10:30 AM ET.



Crude oil stockpiles rose by 2 million barrels to 359.1 million barrels in the week ended September 7th. Inventories were above the upper limit of the average range for this time of the year.

Distillate stockpiles rose by 1.5 million barrels yet remained below the lower limit of the average range. Meanwhile, gasoline inventories fell by 1.2 million barrels and were in the lower half of the average range. Refinery capacity utilization averaged 88.3 percent over the four weeks ended September 7th compared to 90.3 percent over the previous four weeks.

Dallas Federal Reserve Bank President Richard Fisher is scheduled to speak to the Harvard Club of New York City on the "Economic and Monetary Policy Outlook" at 7 pm ET.

Stocks in Focus

Microsoft (MSFT) announced that its board approved a 15 percent increase in its quarterly dividend to 23 cents per share. This would be better as “The company also said Raymond Gilmartin, a former Merck (MRK) executive, will not seek re-election to Microsoft’s board of directors at the 2012 annual shareholders meeting after an 11-year stint.

General Mills’ (GIS) first quarter profit increased from the year-ago quarter and its adjusted earnings per share were above Wall Street view. Net sales for the quarter rose 5.3 percent, but missed the consensus estimate. Meanwhile, the company reaffirmed its fiscal 2013 earnings per share guidance.

Cracker Barrel Old Country Store (CBRL) reported fourth quarter profit that jumped from the same period prior year. Total revenue improved from the year-ago quarter and topped the consensus estimate.

Goldman Sachs (GS) said its long time CFO David Viniar has decided to retire, effective at the end of January 2013, after a 12 year stint in the position. Viniar will join the board as a non-independent director while Harvey Schwartz, currently global co-head of the Securities Division, will replace him at the CFO position.

ACE (ACE) announced that it has acquired 80 percent of Indonesian general insurer Asuransi Jaya Proteski.

Newfield Exploration (NFX) announced an agreement to sell its remaining assets in the Gulf of Mexico to W&T Offshore. The company noted that total assets sales made in late 2011, early 2012 and the proposed sale culminated in its exit from the Gulf of the Mexico region, generating proceeds of about $300 million.

AAR Corp. (AIR), Adobe Systems (ADBE), Apogee Enterprises (APOG), Bed Bath & Beyond (BBBY), CLARCOR (CLC), Herman Miller (MLHR) and Steelcase (SCS) are among the companies due to report their quarterly results after the markets close.