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Stocks May Fall Sharply Amid Worries About Europe - U.S. Commentary

With traders once again focusing on developments in Europe, stocks are likely to come under pressure in early trading on Wednesday. The major index futures are currently pointing to a sharply lower open for the markets, with the Dow futures down by 95 points.

The downward momentum for the markets comes as traders are expressing caution ahead of a meeting of European leaders in Brussels.

The European Union summit is expected to focus on ways to boost the struggling European economy as well as the ongoing uncertainty about Greece following the debt-plagued nation's failure to form a government.

Noting yesterday's reaction to remarks by former Greek Prime Minister Lucas Papademos, Peter Boockvar, managing director at Miller Tabak, said, "The markets are on edge and sensitive to every possible out of control scenario coming out of Europe."

Trading could also be impacted by the release of the Commerce Department's monthly report on U.S. new home sales. Economists expect new home sales to rise to an annual rate of 335,000 in April from 328,000 in March.

In corporate news, shares of Dell (DELL) are likely to move sharply lower at the open after the PC giant reported weaker than expected first quarter results and provided disappointing second quarter revenue guidance. Dell is down by 13.9 percent in pre-market trading.

Chip maker Analog Devices (ADI) could also see early weakness after reporting lower second quarter earnings and forecasting third quarter earnings toward the low end of analyst estimates.

Meanwhile, shares of Take-Two (TTWO) are moving notably higher in pre-market trading after the video game maker reported a wider than expected fourth quarter loss but on stronger than expected revenues. The company also suggested that it is positioned for profitability this year.

Social networking giant Facebook (FB) is also seeing some pre-market strength after posting steep losses in the two previous sessions.

After seeing a positive bias throughout much of the session, stocks showed a notable move to the downside in the latter part of the trading day on Tuesday. Buying interest reemerged in the final minutes of trading, however, and the markets ended the day roughly flat.

While the Nasdaq remained stuck in the red, the Dow and the S&P 500 closed nearly unchanged. The Nasdaq dipped 8.13 points or 0.3 percent to 2,839.08, while the Dow edged down 1.67 points or less than a tenth of a percent to 12,502.81 and the S&P 500 crept up 0.64 points or 0.1 percent to 1,316.63.

In overseas trading, stock markets across the Asia-Pacific region came under pressure during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 2 percent, while Hong Kong's Hang Seng Index ended the day down by 1.3 percent.

The major European markets are also seeing significant weakness on the day. The German DAX Index is down by 1.8 percent, the U.K.'s FTSE 100 Index is down by 2 percent, and the French CAC 40 Index is down by 2.2 percent.

In commodities trading, crude oil for July delivery is sliding $0.74 to $91.11 in its first day as the front month contract. June crude ended Tuesday's trading down $0.91 at $91.66 a barrel. Gold futures, which slid $12.10 to $1,576.60 an ounce in the previous session, are falling $18.40 to $1,558.20 an ounce.

On the currency front, the U.S. dollar is trading at 79.38 yen compared to the 79.96 yen it fetched at the close of trading on Tuesday. Against the euro, the dollar is valued at $1.266 compared to yesterday's $1.2684.

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