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European Debt Fears Return To Haunt Wall Street

European Debt Fears Return To Haunt Wall Street
4/18/2012 6:30 AM ET

Wall Street's conviction concerning global economic recovery is wavering, as indicated by the U.S. index futures, which point to a slightly lower opening on Wednesday. Reports of an increase in bad debts held by Spanish banks should accentuate concerns about the fiscal situation of the country. Meanwhile, a 2-year bond auction by Germany went on well, with borrowing costs at a record low. Earnings news has been mostly encouraging, although slowing revenue growth at IBM (IBM) and Intel (INTC) should cause worries concerning corporate profit growth in the near to medium term.

As of 6:30 am ET, the Dow futures are slipping 3 points, while the S&P 500 futures are receding 1.20 points and the Nasdaq 100 futures are moving down 1.50 points.

U.S. stocks advanced on Tuesday, piggybacking on a batch of solid earnings report, a fairly successful Spanish debt auction and a data showing an unexpected increase in German economic sentiment.

On the economic front, the Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended April 13th at 10:30 am ET. The weekly inventory report released by the American Petroleum Institute released late Tuesday showed that crude oil stockpiles rose by 3.4 million barrels in the week ended April 13th.

In corporate news, IBM (IBM) reported first quarter earnings that beat expectations, while its revenues were shy of estimates. The company raised its 2012 non-GAAP earnings outlook to at least $15 per share from its earlier estimate of at least $14.85 per share, ahead of the $14.93 per share consensus estimate.

Intel's (INTC) first earnings exceeded estimates, while its revenues were in line with estimates. For the second quarter, the company expects revenues of $13.6 billion, plus or minus $500 million. Analysts estimate revenues of $13.43 billion.

Yahoo (YHOO) reported better than expected first quarter results, while its second quarter revenue guidance surrounded the consensus estimate.

Linear Technology's (LLTC) third quarter earnings exceeded estimates, while its revenues were in line. Seagate (STX) reported third quarter non-GAAP earnings of $2.64 per share on revenues of $4.45 billion. The results came ahead of estimates. Railroad operator CSX (CSX) also reported above consensus earnings and revenues for its first quarter.

On the other hand, Cree's (CREE) third quarter earnings trailed expectations and it issued a downbeat outlook for its fourth quarter.

American Express (AXP), eBay (EBAY), F5 Networks (FFIV), Lam Research (LRCX), Marriott (MAR), Noble Corp. (NE), Plexus (PLXS), Qualcomm (QCOM), SLM Corp. (SLM), Stanley Black & Decker (SWK), Steel Dynamics (STLD), Vmware (VMW) and Yum Brands (YUM) are among the companies due to release their quarterly results after the markets open.

The Asian markets advanced, tracking the overnight gains on Wall Street and Europe, as growth fears waned in the wake of some positive economic data and the Spanish debt auction.

Japan's Nikkei 225 average capitalized on the weakening of the yen in response to the re-ignition of risk appetite and closed notably higher. The index ended up 202.55 points or 2.14 percent at 9,667.

Australia's All Ordinaries closed at 4,427, up 58.40 points or 1.34 percent, and Hong Kong's Hang Seng Index ended 218.42 points or 1.06 percent higher at 20,781.

The results by a survey by Westpac and the Melbourne Institute showed that the leading indicator index of economic activity in the U.S. rose 0.5 points to 284.2 in February. That said, the annualized growth rate came in at 2.4 percent, weaker than the long-term growth trend of 2.9 percent.

The European markets are trading on a weak note following yesterday's advance, as traders remain cautious ahead of a debt auction by Germany and amid the release of corporate earnings. A report released by the Bank of Spain, which showed that bad loan ratio at Spanish banks rose to 8.16 percent of the total loans held by banks in February, marking the highest recorded since May 1994.

The French CAC 40 Index is down 1.28 percent, while the German DAX Index is declining 0.53 percent and the U.K.' FTSE 100 Index is slipping 0.20 percent.

In corporate news, ASML (ASML) reported a drop in its first quarter net income and revenues, while it said it is on track to record sales of 2.4 billion euros for the first half of 2012. Meanwhile, French luxury retailer LVMH reported a 25 percent increase in its first quarter revenues to 6.6 billion euros. Statoil's (STO) Statoil Fuel & Retail announced a deal to be sold to Alimentation Couche-Tard for 15.9 billion Norwegian Kroner.

The minutes of the April monetary policy meeting of the Bank of England showed that the status quo decision to hold rates unchanged as well as maintain the size of bond buying program was adopted by an 8-1 margin. Adam Posen abandoned his calls for an expansion in the bond-buying program, adding to the strength of hawks in the committee. Meanwhile, a government report showed that the U.K. jobless claims rose a less than expected 3,600 to 1.61 million in March.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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