Nervous Markets Await Next Catalysts After Fed Comfort

The major U.S. index futures are pointing to a mixed opening on Friday, with sentiment turning cautious as traders pause to meditate on their next moves. Some of the economic data released after the Fed appeased the markets with the promise of persisting with its stimulus has been strong enough to trigger anxiety concerning the monetary policy. Additionally, all risky bets that rallied strongly in reaction to the Fed announcement are likely to see some profit taking on the premise of the gains being overdone. The markets are most likely to consolidate around current levels unless the Fed officials scheduled to speak during the day suggest something to move the markets.

After seeing some strength in early trading on Thursday, U.S. stocks retreated on profit taking amid the release of some mixed corporate news and mostly positive economic data. The major averages opened higher but saw volatility, with the Dow Industrials and the S&P 500 Index retreating below the unchanged line in early afternoon trading and declining for the rest of the session. The Nasdaq Composite Index held mostly above the unchanged line amid some volatility before closing modestly higher.

The Dow Industrials fell 40.39 points or 0.26 percent before closing at 15,637 and the S&P 500 Index closed 3.18 points or 0.18 percent lower at 1,722. Meanwhile, the Nasdaq Composite ended up 5.74 points or 0.15 percent at 3,789.

Twenty-two of the thirty Dow components closed lower, with Disney (DIS), Hewlett-Packard (HPQ) and UnitedHealth Group (UNH) leading the declines. On the other hand, Travelers (TRV), Home Depot (HD) and Microsoft (MSFT) advanced notably.

Gold, banking and housing stocks were among the worst performers of the session.

On the economic front, the Labor Department reported that jobless claims rose by 15,000 to 309,000 in the week ended September 14th. The previous week's claims were upwardly revised by 2,000 to 294,000. Economists expected jobless claims to have increased to 341,000 from the 292,000 originally reported for the week ended September 7th. The four-week average fell to 314,750 from 321,750 in the previous week. Meanwhile, continuing claims calculated with a week's lag declined to 2.787 million in the week ended September 7th from 2.815 million in the previous week.

The results of the Philadelphia Federal Reserve's survey showed that manufacturing conditions in the region improved in September. The manufacturing index based on the survey surged up to 22.3 from 9.3 in August. The new orders index climbed to 21.2 from 5.3 and the order backlogs index moved into positive territory for the first time since April 2012. Additionally, the shipments index improved to 21.2 from -0.9, the employment index climbed 6.8 points to 10.3 and the average workweek index increased 14 points. The 6-month outlook index also increased, rising to 58.2 from 38.9.

Also suggesting positivity, the National Association of Realtors reported that existing home sales came in at a seasonally adjusted annual rate of 5.48 million units in August, the highest level since February 2007. Single-family as well as co-operatives sales increased during the month. Inventories measured in terms of months of supply fell to 4.9 from 5. At the same time, the median price of an existing home climbed 14.7 percent year-over-year. First time homebuyers accounted for 28 percent of the total sales.

A Conference Board report showed that its leading economic indicators index for the U.S. rose 0.7 percent month-over-month in August following a 0.5 percent increase in July. The labor market and financial component as well as new manufacturing orders led to the month's gain by the index. Economists expected a more moderate pace of increase. The coincident economic indicators index rose 0.2 percent and the lagging economic indicators index was up 0.3 percent.

The Commerce Department reported that its current account deficit narrowed to $98.9 billion or 2.4 percent of GDP in the second quarter. The deficit represented the lowest in 15 years.

On Thursday, the Dow Industrials bounced off a support around 15,617 and closed slightly above the level. Given the likelihood of a further pullback, the 15,524, 15,461 and 15,362 levels could serve as further supports.

Crude, Commodity Markets

Crude oil futures are slipping $0.63 to $105.23 a barrel after declining $1.68 to $106.39 a barrel on Thursday. Gold futures are currently trading down $19.60 to $1,349.70 an ounce. In the previous session, gold added $61.70 to $1,369.30 an ounce.

Among currencies, the U.S. dollar is trading at 99.52 yen compared to the 99.45 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3529 compared to yesterday's $1.3530.


The major Asian markets that remained opened for trading closed lower amid some profit taking following yesterday's sharp rally. The Hong Kong, Chinese, Taiwanese and South Korean markets remained closed for public holidays.

Japan's Nikkei 225 average, which held mostly above the unchanged line with modest gains in the morning, retreated in the afternoon before closing down 23.76 points or 0.16 percent at 14,742. Resource, construction, real estate, financial stocks were among the worst performers of the session. Export stocks also came under selling pressure.

Australia's All Ordinaries opened lower and languished below the unchanged line throughout the session. The index closed down 17.80 points or 0.34 percent at 5,271. Healthcare, material and financial stocks declined the most, leading the index lower.

India's Sensex plunged over 2 percent after the Reserve Bank of India headed by the new Governor Raghuram Rajan unexpectedly raised interest rates in order to curb inflation and also withdrew some of the measures recently introduced to prop up the falling rupee.


European stocks opened lower and have been languishing in the red since then amid a lack of any major corporate and economic news.

U.S. Economic Reports

Kansas City Federal Reserve Bank President Esther George is scheduled to speak on the economy to the Shadow Open Market Committee in New York at 12:30 am ET. Federal Reserve Governor Daniel Tarullo will speak on macroprudential regulation in New Haven, Connecticut at 12:40 am ET.

St. Louis Federal Reserve Bank President James Bullard is due to speak on monetary policy to the New York Association for Business Economics at 12:55 pm ET. Minneapolis Federal Reserve Bank President Narayana Kocherlakota will talk at a conference on risk in options prices in New York at 1:45 am ET.

Stocks in Focus

TIBCO (TIBX) reported third quarter non-GAAP earnings of 28 cents per share compared to 27 cents per share last year. Total revenues rose to $270.9 million from $255 million in the year-ago period. The results were better than expected.

Cintas (CTAS) reported first quarter earnings of 63 cents per share, up 5 percent from 60 cents per share in the year-ago period. Revenues rose to $792.87 million from $754.84 million in the year-ago period. The earnings were in line and the revenues exceeded estimates. To reflect the impact of its share buybacks, the company updated its 2014 earnings guidance to $2.70-$2.79 per share, while it continues to expect revenues of $4.5 billion to $4.6 billion. The guidance was positive.

Texas Instruments (TXN) said it would increase its quarterly cash dividend by 7 percent to 30 cents per share.

Con Edison (ED) announced that its board has elected John McAvoy as its president and CEO, effective January 1st, 2014. McAvoy will replace Kevin Burke, who will retire as president and CEO on December 31st, 2013 after 40 years of service.

AK Steel (AKS) said it expects to report a loss of 22-27 cents per share for its third quarter, which includes a loss of 9 cents per share related to its previously disclosed unplanned Middletown Work blast furnace outage. Analysts expect a loss of 12 cents per share for the quarter.

Horace Mann (HMN) announced that its board has appointed Marita Zuraitis as its president and CEO and has also elected her to the board.

Moneygram (MGI) announced that it has acquired Advanced ChronoCash Services. Additionally, the company announced a deal to buy Athens-based MoneyGlobe Payment Institution.

Darden Restaurants' (DRI) first quarter profit declined from the year-ago period. The company also announced steps to reduce its annualized operating support spending by approximately $50 million through a combination of workforce reductions and program spending cuts.

For comments and feedback contact: editorial@rttnews.com

Follow RTT