The major U.S. index futures are pointing to a mixed opening on Tuesday. Federal Reserve Chairman Ben Bernanke's comments released ahead of his testimony before the Senate Banking Committee warned of serious repercussions to markets and economy if the government's rescue package is not enacted at the earliest. These comments are likely to trigger the anxiety of traders. The markets are likely to closely follow the hearing to find out the government's and central bank's take on the crisis. However, the retreat in oil prices should offer some consolation.
U.S. stocks opened lower and declined steadily throughout Monday's session, with the selling pressure intensifying in late trading, leading the major averages to close near their lows of the session. The predicament reflected investor anxiety over the likelihood of the speedy implementation of the government bailout of the financial market. The Dow Industrials ended the day down 372.75 points or 3.27% at 11,016 and the Nasdaq Composite fell 94.92 points or 4.17% to 2,179, while the S&P 500 Index declined 47.99 points or 3.82% to 1,207.
Twenty-seven of the thirty Dow components ended the session lower, with American Express (AXP) (down 7.70%), Bank of America (BAC) (down 8.88%), DuPont (DD) (down 5.52%), Walt-Disney (DIS) (down 4.30%), General Motors (GM) (down 11.47%), JP Morgan (JPM) (down 13.28%), AT&T (T) (down 4.01%) and United Technologies (UTX) (down 4.17%) leading the declines. On the other hand, AIG (AIG) jumped 22.60%, Microsoft (MSFT) rose close to a percentage point and Alcoa (AA) edged up marginally.
Among the sectors, the Amex Securities Broker/Dealer Index and the KBW Bank Index receded about 10.50% each. The Dow Jones Transportation Average and the Amex Airline Index declined 5.11% and 9.43%, respectively, while the Dow Jones Utility Average fell 2.30%. The S&P Retail Index lost 5.86% compared to an 8.70% slump by the Philadelphia Housing Sector Index.
The Philadelphia Semiconductor Index declined 4.61%, while biotechnology, hardware, software, networking and Internet stocks also came under significant selling pressure.
As has been the trend in the past couple of sessions, the Dow is showing volatility, with the index moving back and forth in a broad range. However, on a positive note, volume that accompanied Monday's decline were light. The insipid phase is likely to persist until we see some improvement in the credit market and economic fundamentals. Wachovia Securities expects below-trend growth, but with persistent inflationary pressures in the short term. Therefore, the central bank is unlikely to move at its October meeting, with some possible easing in December or early next year.
The $700 billion rescue package submitted to Congress is unlikely to be submitted soon enough to stop a contraction in the second half. That said, UBS expects the program to support a slow recovery in 2009.
Currency, Commodity Markets
In its first day of trading as the front-month contract, crude oil for November delivery is receding $1.81 to $107.56 a barrel. On Monday, the October contract expired at $120.92 a barrel, representing a gain of $16.37. The contract surged up to $130 a barrel in intraday trading before giving back some ground. Yesterday's strength was due to short sellers scrambling to buy the contract to square up positions.
Meanwhile, gold futures, which ended the previous session up $44.30 at $909 an ounce, are currently slipping $14.70 to $894.30 an ounce.
On the currency front, the U.S. dollar is trading at 105.5850 yen compared to 105.5095 yen at the close of New York trading on Monday. Against the euro, the dollar is trading at $1.4737.
Asia
Stock markets across the Asia-Pacific region closed mostly lower Tuesday on worries about the effectiveness of the U.S. government's $700 billion bailout plan for failing financial firms. Investors also turned cautious ahead of U.S. Treasury Secretary Henry Paulson's testimony to the Senate Banking Committee. The Japanese markets were closed on account of a public holiday. Crude oil futures for November settlement fell more than $2 in the Asian session Tuesday.
The Chinese stock market closed lower on profit taking after the key index surged up more than 17% over the previous two sessions. Property developers and liquor producers led the losers. However, index heavyweight PetroChina posted a sharp gain on news that its parent company bought 60 million shares, equivalent to a 0.03% stake. The benchmark Shanghai Composite Index closed down 34.90 points or 1.56% at 2,202.
Hong Kong's Hang Seng Index opened significantly lower and moved sideways for the rest of the session. The benchmark Hang Seng index closed down 759.35 points or 3.87% at 18,873.
Chinese stocks, especially property developers, fell sharply on worries about the property market downturn on the mainland. Airlines slumped after crude oil prices rose, while gold miners surged up on higher gold prices.
Among large-caps, HSBC lost 2.1%, China Mobile plunged 4.2%, Hong Kong Exchange & Clearing slumped 7.4%, China Life tumbled 5.1%, and Hutchison Whampoa declined 2.5%. Australia's All Ordinaries opened unchanged, but it dipped sharply in early trading before moving sideways for the rest of the session. The All Ordinaries index lost 92.4 points or 1.8% to close at 4,958.
Banks and property trusts fell sharply on worries about the extent of the credit crunch and a slowdown in economic growth. National Australia Bank fell 1.8%, Westpac Banking dropped 0.8%, Australia and New Zealand Banking Group plunged 5.8%, and Commonwealth Bank gave away 0.9%. Global miner BHP Billiton shed 4.5%, and its rival Rio Tinto lost 2.5%. Gold miners surged up on higher gold prices. Energy stocks closed mixed, with Woodside Petroleum closing little changed, Santos climbing 0.9%, and Oil Search falling 1.6%.
South Korea's Kospi opened lower, but it reversed course after an hour of trading before and then showed a lacking a direction till early afternoon. Thereafter, the index moved steadily higher to close up 21.03 points or 1.44% to finish at 1,481. Investors bought machinery, finance and other blue-chip stocks despite weakness among regional markets and the biggest one-day jump in crude oil prices on Monday.
Technology stocks recovered to end in positive territory. Samsung Electronics edged up 0.4%, chipmaker Hynix Semiconductor rose 2.6% and LG Electronics advanced 1.0%. Automaker Hyundai Motor jumped 2.5% after the company said that it has reached another preliminary wage deal with unionized workers.
Eugene Investment & Securities surged 14.8% after Kookmin Bank said in its filing to the Korea Exchange that it is considering a number of M&A targets including Eugene Investment. Meanwhile, Kookmin Bank fell, ahead of its scheduled trading suspension on Thursday that will last until its holding company is listed on the Korea Exchange on October 10. Separately, the lender said that it was seeking to sell back its 14.9% stake in ING Group's South Korean unit to the Dutch group.
Europe
The major European markets are receding on Tuesday, with the French CAC 40 Index and the German DAX Index dropping 1.61% and 0.52%, respectively, while the U.K.'s FTSE 100 Index is declining by 2.20%.
On the economic front, the French National Institute of Statistics and Economic Studies released a report on consumer spending, showing that household consumption expenditures rose by 0.4% in July, but decreased 0.3% in August. Spending on durables eased 0.2% in August, with the decline mainly due to a 1% fall in spending on automobiles, which more than offset a 0.6% increase in spending on household durables. Spending on textile-leather declined 1.9%.
U.S. Economic Reports
Federal Reserve Chairman Ben Bernanke, U.S. Treasury Secretary Henry Paulson, SEC Chairman Christopher Cox and the Director of the Office of Federal Housing Finance, Dennis Lockhart are scheduled to testify on the credit turmoil before the Senate Banking Committee at 9:30 AM ET. The title of the hearing is "Turmoil in US Credit Markets: Recent Actions Regarding Government Sponsored Entities, Investment Banks and Other Financial Institutions."
Stocks in Focus
Circuit City (CC) is likely to see buying interest after it revealed that its Chairman, President and CEO Philip Schoonover has agreed to step down from those positions, effective immediately. Schoonover has also resigned as a director of the company. The company also announced the appointment of James Macrum as acting President and CEO. Meanwhile, Allen King has been appointed as the Chairman of the company's board of directors.
Lennar Corp. (LEN) is likely to react to its announcement that its third quarter loss narrowed to 56 cents per share from $3.25 per share last year. Revenues declined 53% to $1.11 billion. Analysts, on average, expected a loss of 52 cents per share on revenues of $1.07 billion.
3Com Corp. (COMS) may remain in focus after it reported a first quarter profits of 20 cents per share compared to a loss of 5 cents per share in the year-ago period. On an adjusted basis, the company earned 11 cents per share. Analysts, on average, estimated earnings of 6 cents per share. Revenues rose 7% to $342.7 million.
Chesapeake Energy (CHK) gained in Monday's after-hours session after it announced a reduction in its drilling capital expenditure budget for the second half of 2008 through the year-end 2010 by $3.2 billion or 17%. The company attributed the reduction to a 50% decline in natural gas prices since June 30, 2008 and concerns over surplus stocks of natural gas. The company also said it plans to reduce its current operated drilling rig count to 140 rigs by the year-end 2008 from 157 rigs and keep its rig count relatively flat through 2009 and 2010. Additionally, the company slashed its full year production growth estimate to 18% from 21% and production growth forecast for 2009 and cut its 2010 to 16% per year from 19% per year.
Citigroup (C) may react to its announcement that it has appointed Mike Corbat as the Chief Executive Officer of its Global Wealth Management unit and Edward Ned Kelly as Head of Global Banking for Institutional Clients Group. The company also noted that Sallie Krawcheck has opted to quit to pursue other opportunities, though she will remain in the role of Chairman of the Global Wealth Management business through the end of the year to ensure an orderly transition.
Gap (GPS) gained ground in Monday's after hours session after it said it has agreed to buy apparel maker Athleta for about $150 million in cash. Athleta is expected to eventually become the fifth brand in the company's portfolio.
Union Pacific (UNP) may see some strength after it said it expects net income of $1.28-$1.33 per share for its third quarter compared to its earlier estimate of $1.10-$1.20 per share. The company attributed to the optimism to lower diesel fuel costs and operating costs. The company also clarified that the guidance would have been 10 cents per share higher if not for the recent hurricanes that cut transportation volumes.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.