Market Analysis

The major U.S. index futures are pointing to a lower opening on Wednesday, with sentiment hurt by an increase in risk aversion. The risk off mood gained ground after doubts concerning Spain seeking a full fledged bailout re-emerged. Stiff opposition to the reforms the government is contemplating to secure a bailout has left traders unsettled over whether the Spanish bailout will materialize. The new home sales report due to be released after the markets open may also serve as a litmus paper to ascertain the strength of the housing market recovery.

U.S. stocks retreated sharply on Tuesday, as eurozone debt fears and earnings apprehension weighed on the markets.

The major U.S. averages opened higher following the release of a report showing an increase in house prices. After holding modestly above the unchanged line till the mid-session amid the release of positive consumer confidence and manufacturing readings, the averages retreated steadily, closing notably lower for the session.

The Dow Industrials ended down 101.37 points or 0.75 percent at 13,458 and the S&P 500 Index lost 15.30 points or 1.05 percent before closing at 1,442, while the Nasdaq Composite ended at 3,118, down 43.06 points or 1.36 percent.

Twenty-five of the thirty Dow components closed lower, with Caterpillar (CAT) leading the Dow’s decline with a 4.25 percent slide. Alcoa (AA) (down 2.43 percent), IBM (IBM) (down 2.91 percent), Bank of America (BAC) (down 1.92 percent), DuPont (DD) (down 1.45 percent), JP Morgan Chase (JPM) (down 1.65 percent) and United Technologies (UTX) (down 1.57 percent) also declined sharply.

Semiconductor, housing, airline, biotechnology, resource and financial stocks were among the worst decliners of the session.

On the economic front, the results of the S&P/Case-Shiller house price survey showed that house prices rose 1.2 percent year-over-year in July, the biggest annual advance since August 2010. Only 4 out of the 20 cities saw declines in house prices. On a seasonally adjusted basis, house prices were up 0.44 percent compared to the previous month.

The Conference Board’s consumer confidence index rose to 70.3 in September from 61.3 in August, with the improvement primarily stemming from an optimistic outlook for the job market. Consumers expecting more jobs in the months ahead rose to 18.5 percent from 15.8 percent, while those anticipating fewer jobs fell to 18.5 percent from 23.7 percent.

The results of the Richmond’s Federal Reserve’s manufacturing survey showed that its manufacturing index rose to 4 in September from –9 in August.

Currency, Commodity Markets

Crude oil futures are slipping $1.39 to $89.98 a barrel after declining $0.56 to $91.37 a barrel on Tuesday. An ounce of gold is currently trading at $1,747, down $19.40 from the previous session’s close of $1,766.40. On Tuesday, gold added $1.80.

Among currencies, the U.S. dollar is trading at 77.78 yen compared to the 77.80 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.2852 compared to yesterday’s $1.2899.

Asia

The major Asian markets retreated, tracking the negative lead from Wall Street overnight. Risk aversion intensified, as the situation in Europe continued to haunt investors. With Spain’s bailout requests hanging in the balance and Greece yet to show a solid improvement with the bailout financing availed thus far, Europe’s travails are far from over.

Japan’s Nikkei 225 average led the declines in the region, with the index opening notably lower and moving sideways for the rest of the session. The index closed down 184.84 points or 2.03 percent at 8,907.

Most sectors declined, while utility, pharma, telecom and real estate stocks saw some strength. Taiyo Yuden plunged over 9 percent and was the biggest decliner among the index components followed by Tokuyama, Pioneer, NTN, Dainippon Screen Manufacturing and Kawasaki Kisen Kaisha.

Sharp, which announced after the markets closed that it has reached an agreement with the labor union on implementation of a voluntary retirement program, ended flat. Reports suggest that the company is considering the elimination of 1,000 jobs and the sale of TV plants in a survival bid.

Australia’s All Ordinaries also languished below the unchanged line throughout the session before closing down 13 points or 0.30 percent at 4,383. Most stocks, with the exception of defensive stocks, declined, with material and energy stocks among the biggest decliners.

Miners Rio Tinto and BHP Billiton declined sharply. Among the four major banks, ANZ, National Australia Bank and Westpac declined, while Commonwealth Bank advanced.

Hong Kong’s Hang Seng Index closed at 20,528, down 170.95 points or 0.83 percent.

Europe

European stocks opened sharply lower and are seeing notable weakness. Spain has been facing a lot of rough weather over the speculated austerity measures it is contemplating in a bid to table a request for a bailout.

In corporate news, U.K. inter-dealer broker ICAP said it expects revenues for the six months ending September 30th to come in 14 percent lower than last year due to weak trading activity. Meanwhile, the London Stock Exchange reported average daily trading values of 4 billion pounds for the five months ended August 31st, down 20 percent year-over-year.
U.S. Economic Reports

The Commerce Department is due to release its new home sales report for August at 10 am ET. The consensus estimate calls for an annual rate of new homes sales of 380,000.



New home sales rose 3.6 percent month-over-month to a seasonally adjusted annual rate of 372,000 in July. Inventories measured in terms of months of supply fell to 4.6 months from 4.8 months in June. The median price of a new home fell 2.5 percent year-over-year and dropped 2.1 percent month-over-month to $224,000.

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



Stocks in Focus

Jabil Circuit (JBL) reported fourth quarter non-GAAP earnings of 54 cents per share, lower than 62 cents per share in the year-ago period. Net revenues remained flat at $4.3 billion. The earnings trailed expectations, while the revenues were above estimates. For the first quarter, the company expects non-GAAP earnings of 51-62 cents per share on net revenues of $4.3 billion to $4.5 billion. The guidance was lackluster.

Copart (CPRT) reported fourth quarter earnings of 35 cents per share compared to 29 cents per share last year. Revenues rose 5.2 percent to $226.6 million. The results exceeded estimates.

Standard & Poor’s announced that Krafts Food (KRFTV) will replace Alpha Natural Resource (ANR) in the S&P 500 Index. Kraft Foods Group is being spun off from Kraft Foods Inc. (KFT).Alpha Natural will replace Korn/Ferry in the S&P MidCap 400 Index, while Korn/Ferry will take the place of Pulse Electronics (PULS) in the S&P SmallCap 600 Index after the close of trading on October 1st.

Additionally, InterDigital (IDCC) will replace Quest Software (QSFT) in the S&P MidCap 400 Index after the close of trading on October 1st, as Quest is being acquired by Dell (DELL). Genesee & Wyoming (GWR) will replace Collective Brands (PSS) in the S&P MidCap 400 Index, as Wolverine (WWW) is set to take over Collective Brands.

OMNOVA Solutions (OMN) reported third quarter adjusted income from continuing operations of 16 cents per share compared to 10 cents per share last year. Net sales rose 8.5 percent to $288.2 million. The results trailed expectations.

In a major move following the assumption of the reins by CEO Marissa Mayer, Yahoo (YHOO) announced the appointment of Ken Goldman as its CFO, effective October 22nd. Goldman will replace Tim Morse, who has served the company since June 2009.

Ericsson (ERIC) announced the acquisition of ConceptWave Software, a provider of customer, product and order lifecycle management solutions for the communications service provider market.