The major U.S. index futures are pointing to a lower opening on Tuesday, with sentiment reflecting extreme caution ahead of a spate of economic events scheduled for the day. The results of a regional manufacturing sector survey and consumer confidence survey and the FOMC minutes are among the key events that are likely to chart the course of the market in today's session.
U.S. stocks opened Monday's session lower and moved sideways for a little while before beginning to move steadily lower. The weakness came despite the release of a report showing fairly robust spending and income growth.
The Dow Industrials ended down 140.92 points or 1.39% at 10,010 and the S&P 500 Index fell 15.67 points or 1.47% to close at 1,049, while the Nasdaq Composite Index closed 33.66 points or 1.56% lower at 2,120.
Twenty-nine of the thirty Dow components closed lower, with Hewlett-Packard (HPQ) alone bucking the downtrend with a 1.47% advance. American Express (AXP), Bank of America (BAC), Caterpillar (CAT), Cisco Systems (CSCO), Home Depot (HD), Intel (INTC) and JP Morgan Chase (JPM) declined sharply.
Among the sector indexes, the KBW Bank Index receded 2.74%, the NYSE Arca Securities Broker/Dealer Index declined 2.35%, the Philadelphia Housing Sector fell 2.24%, the S&P Retail Index slipped 2.22%, the Philadelphia Semiconductor Index moved down 2.54%, the NYSE Arca Oil Index lost 1.71% and the Dow Jones Transportation Average retreated 1.76%.
Currency, Commodity Markets
Crude oil futures are moving down $0.90 to $73.80 a barrel after slipping $0.47 to $74.70 a barrel on Monday. Gold futures, which rose $1.30 to $1,239.20 an ounce in the previous session, are currently slipping $2.10 to $1,237.10 an ounce.
Among currencies, the U.S. dollar is trading at 84.375 yen compared to the 84.6185 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is trading at $1.2677 compared to yesterday's $1.2662.
Asia
The major Asian markets declined on Tuesday, with the Japanese Nikkei 225 Index leading the slide in the region with an over 3.5% drop. Continuing economic uncertainty led to an exodus away from risky bets.
Japan's Nikkei 225 Index opened sharply lower and declined steadily to end the session down 325.20 points or 3.55% at 8,824. All 225 of the index components ended lower.
Japan's Ministry of Economy, Trade and Industry said today that retail sales fell for the seventh straight month and at a faster than expected pace in July, led by higher demand for motor vehicles and fuel. Retail sales rose 3.9% from a year earlier to 11.7 trillion yen, accelerating from the 3.3% increase in June. Analysts had predicted a 3.5% increase. Separately, the ministry said industrial production climbed 0.3% in July, belying expectations for a 0.2% fall. Factory output had dropped 1.1% in June.
Australia's All Ordinaries also languished below the unchanged line below the unchanged line throughout the session to close down 44.30 points or 0.99% at 4,439. Energy and material stocks led the day's declines, with most other sectors also declining.
Europe
The major European markets opened Tuesday's session sharply lower and are moving sideways following a very negative lead from Wall Street overnight and Asia subsequently. The French CAC 40 Index and the German DAX Index are slipping 1.27% and 0.93%, respectively, while the U.K.'s FTSE 100 Index is moving down 0.97%.
In economic news, a report released by the German Federal Labor Agency showed that the number of unemployed individuals fell by a less than expected 17,000 in August compared to the previous month. Economists had expected a drop of 20,000. The unemployment rate remained unchanged at 7.6%.
Eurostat's preliminary inflation report showed that the euro area's inflation rate slowed to 1.6% year-over-year in August, slower than the 1.7% increase in the previous month.
A separate report released by the agency showed that the euro area's unemployment rate remained unchanged at 10% in July, in line with expectations. Eurostat said a total of 15.8 million people were registered as unemployed in the eurozone, with the number of unemployed people decreasing by 8,000 compared to the previous month.
Meanwhile, the Gfk NOP released the results of its consumer confidence survey for August, showing that its consumer confidence index for the U.K. improved unexpectedly to -18 from -22 in the previous month. Economists had expected a reading of -24.
U.S. Economic Reports
The S&P/Case-Shiller home price index, which tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S., is scheduled to be released at 9 AM. Economists expect a 3.1% year-over-year increase by the 20-city composite house price index for June.
The index rose 4.6% year-over-year in May, marking the biggest price increase since August 2006. On a monthly basis, the index was up 0.5% in May following a 0.6% increase in April.
The results of the Institute for Supply Management-Chicago's business survey for August are scheduled to be released at 9:45 AM ET. Economists expect the business barometer index based on the survey to come in at 57.0.
Conditions in the manufacturing sector in the Mid-western region improved at a faster than expected rate in July. The purchasing managers' index rose to 62.3 from 59.1 in June, while economists had expected a decline to 56. The new orders index rose 5.5 points to 64.6 and the backlog orders index climbed about 7 points to 57.6. The employment index also increased, rising 2.2 points to 56.6.
The Conference Board is scheduled to release its consumer confidence report for August at about 10 am ET. The report, which is based on a survey of 5,000 U.S. households, is expected to show that the consumer confidence index fell to 50.0 in August.
The consumer confidence index fell to 50.4 in July from 54.3 in June. Economists had expected a more modest decline to 51. The expectations index fell about 6 points, while the present situation index edged down by only 0.7 points. The percentage of individuals who said jobs were plentiful remained at 4.3%, while those who said jobs were hard to get rose to its highest level since March.
The Federal Reserve is scheduled to release the minutes of its August 10th Federal Open Market Committee meeting at 2 PM ET.
At the end of its one-day monetary policy meeting, the Federal Open Market Committee left its key interest rates unchanged at 0%-0.25%. Kansas City Federal Reserve President Thomas Hoenig continued to dissent, arguing for a change in the language, as he is of the view that the economy is recovering modestly as projected.
The Fed said in the post-meeting policy statement that the pace of recovery in output and employment has slowed in recent months. This was in contrast to its view in June, when it said the economic recovery was proceeding and the labor market was improving gradually. The committee also dropped its reference to financial conditions as being less supportive of growth. The FOMC also said the pace of the economic recovery is likely to be more modest in the near term than had been anticipated.
Stocks in Focus
GlaxoSmithKline (GSK) and Valeant Pharma (VRX) could be in focus after the companies announced that the U.S. FDA has extended the Prescription Drug User Fee Act goal date for their anti-epileptic drug ezogabine by 2 months to November 30th, 2010. The delay came as the FDA has not completed the review of the NDA due to the recent submission of additional data.
Donaldson (DCI) is expected to see some activity after it announced that its fourth quarter earnings climbed to 65 cents per share from 30 cents per share last year. The year-ago results included a charge of 5 cents per share. Revenues rose 22% to $515 million. Analysts estimated earnings of 64 cents per share on revenues of $499.50 million. For fiscal 2011, the company expects earnings of $2.28-$2.48 per share on revenues of about $2 billion. The consensus estimates call for earnings of $2.45 per share on revenues of $2.07 billion.
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