The major U.S. index futures are pointing to a lower opening on Wednesday, with sentiment continuing to be weak, as the overbought markets react to fears concerning monetary policy normalization. The mood across the Atlantic is also cagey, as traders react to Bank of England's move to tie interest rate moves to the unemployment rate. Earlier in the global trading day, Asian stocks closed lower. With more Fed speech lined up in the economic calendar, the bias for the market movement is tilted to the downside.
U.S. stocks continued with their consolidation move on Tuesday amid the release of some strong overseas and domestic data. The major averages opened lower following the release of a report showing a smaller than expected trade deficit for June.The averages declined till early afternoon trading, as bond purchase tapering fears took hold of the markets following comments by Atlanta Federal Reserve President Dennis Lockhart and Chicago Federal Reserve President Charles Evans. The averages moved roughly sideways throughout the remainder of the session.
The Dow Industrials ended down 93.39 points or 0.60 percent at 15,519, the S&P 500 Index lost 9.77 points or 0.57 percent before closing at 1,697 and the Nasdaq Composite closed at 3,666, down 27.18 points or 0.74 percent.
Twenty-five of the thirty Dow components closed lower, while the remaining five stocks advanced. Hewlett-Packard (HPQ), IBM (IBM), JP Morgan Chase (JPM), Travelers (TRV), United Technologies (UTX), Wal-Mart (WMT), Alcoa (AA) and Caterpillar (CAT) were among the biggest decliners of the session, while Disney (DIS) advanced notably ahead of the release of its quarterly results.
Gold, biotechnology, transportation, basic material, oil and housing stocks declined steeply in the session.
On the economic front, the Commerce Department reported that the U.S. trade deficit narrowed by more than expected to $34.2 billion in June from $44.1 billion in May, marking the lowest deficit since October 2009. Exports rose 2.2 percent month-over-month, while imports fell by 2.5 percent. The narrower deficit suggests that the U.S. second quarter GDP growth may be upwardly revised from the advance estimate.
Evans suggested in remarks to reporters that the Fed's bond buying program may be tapered as early as September, with the program expected to be ended in the middle of 2014. However, the Fed president premised such an itinerary on incoming data.
The Dow Industrials stopped short of its 21-day MA of 15,512 on Tuesday. If the negativity becomes overwhelming enough for the index to lose support at this level, the index could seek next support around the 15,468, 15,403 and 15,339 levels. On the upside, the index faces resistance around 15,550 and 15,610.
Currency, Commodity Markets
Crude oil futures are slipping $0.19 to $105.11 a barrel after declining $1.26 to $105.30 a barrel on Tuesday. An ounce of gold is currently moving down $4.20 to $1,278.30 from the previous session's close of $1,282.50. On Tuesday, gold fell $19.90.
Among currencies, the U.S. dollar is currently trading at 96.98 yen compared to the 97.74 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.3297 compared to yesterday's $1.3305.
Asia
The Asian markets retreated, with sentiment tracking the negative performance on Wall Street overnight as stimulus trimming fears gained ground. The Indonesian market remained closed for a public holiday.
Japan's Nikkei 225 average opened notably lower and moved sideways in the morning before declining steadily in the afternoon, as the yen strengthened to a 6-week high amid the 2-day monetary policy meeting of the Bank of Japan that began today. The index ended down 576.12 points or 4 percent at 13,825. A majority of stocks declined, with Pacific Metals among the worst decliners among the index components.
Australia's All Ordinaries opened lower and declined steadily throughout the session before closing down 91.40 points or 1.80 percent at 4,997. The market witnessed broad based weakness, with energy, healthcare, material and financial stocks leading the declines.
Hong Kong's Hang Seng Index ended down 331.51 points or 1.51 percent at 21,592 and China's Shanghai Composite Index closed at 2,047, down 13.72 points or 0.67 percent.
On the economic front, a report released by the Australian Bureau of Statistics showed that the number of loans on owner-occupied housing rose 2.7 percent month-over-month in June compared to expectations for 2 percent growth.
Construction activity in Australia remained lackluster in July. A survey by the Australian Industry Group and the Housing Industry Association showed that the index of construction activity fell 4.6 points to 44.1 in July.
Europe
European stocks are trading mixed amid fears concerning the U.S. monetary policy. The averages opened lower and fell further in early trading but have turned mixed since then, as traders digested a radical move by the Bank of England in announcing forward guidance.
In corporate news, ING (ING) reported a decline in its underlying second quarter profit to 800 million euros, down from 1.11 billion euros last year. Frankfurt airport operator Fraport reported better than expected second quarter earnings but termed its 2013 outlook as challenging to achieve.
Hanover Re reported a strong increase in its second quarter profit and confirmed its outlook for the year. Travels and tour operator TUI reported modest increases in its second quarter profits and revenues and said it was confident of delivering full-year profit growth of at least 10 percent.
Airlines Air France-KLM and Air Berlin reported traffic results for July. The former reported a 1.8 percent increase in traffic and a 0.4-point increase in load factor, while the latter reported a 5.1 percent drop in traffic.
On the economic front, the Bank of England issued an explicit guidance on the future conduct of monetary policy. The central bank said the Monetary Policy Committee, led by Governor Mark Carney, "intends at a minimum to maintain the current highly stimulative stance of monetary policy until economic slack has been substantially reduced, provided this does not entail material risks to either price stability or financial stability.
The statement also said the MPC intends not to raise Bank Rate from its current level of 0.5 percent at least until the Labor Force Survey headline measure of the unemployment rate has fallen to a threshold of 7 percent, subject to certain conditions.
Data from the French Customs Office showed that the French trade deficit narrowed to 4.44 billion euros in June from 5.7 billion euros in May. Economists had expected a deficit of 5.35 billion euros.
The results of a survey by the Bank of France showed that French business sentiment weakened in July, with the index measuring sentiment among businesses dropping a point to 95. The bank also said it expects the French economy to expand by 0.1 percent sequentially in the third quarter.
U.S. Economic Reports
The Energy Information Administration is scheduled to release its petroleum inventory report for the week ended August 2nd at 10:30 am ET.
Crude oil stockpiles rose by 0.4 million barrels to 364.6 million barrels in the week ended July 26th, with inventories remaining in the upper half of the average range.
Gasoline stockpiles increased by 0.8 million barrels and were in the upper half of the average range. Meanwhile, distillate inventories fell by 0.5 million barrels and remained near the lower limit of the average range. Refinery capacity utilization averaged 92.2 percent over the four weeks ended July 26th compared to 92.4 percent over the four weeks ended July 19th.
Cleveland Federal Reserve Bank President Sandra Pianalto will speak at Cleveland in 1:40 pm ET.
The Federal Reserve is due to release its report on outstanding consumer credit at 3 pm ET. The consensus expectations call for a $15 billion increase in outstanding consumer credit for June compared to the $19.6 billion increase in May.
The $19.6 billion increase in outstanding consumer credit reflected increases in both revolving credit tied to credit cards and non-revolving credit tied to auto loans. Revolving credit rose $6.6 billion and non-revolving credit increased $13 billion.
Stocks in Focus
Disney (DIS) reported third quarter earnings of $1.01 per share, flat with last year, while its revenues rose 4 percent to $11.58 billion. The earnings were in line, while the revenues were shy of estimates.
AOL's (AOL) second quarter adjusted earnings per share and revenue were above Wall Street view. The company also announced an agreement to acquire Adap.tv, an unified programmatic video platform, for $405 million.
Time Warner (TWX) reported second quarter profit that improved 87 percent from the year ago period and its adjusted earnings per share topped Street view. Revenues for the quarter came in above the consensus estimate. Time Warner also increased its 2013 full-year business outlook.
Devon Energy's (DVN) second quarter earnings and revenues were higher than the year-ago quarter and came above analysts' expectations.
Anadarko (APC) announced that its board has approved the doubling of its quarterly dividend to 18 cents per share. Monsanto (MON) said its board approved an increase in its quarterly dividend to 43 cents per share from 37.5 cents per share.
CSC Corp. (CSC) reported better than expected first quarter results and raised its earnings outlook for the year.
Sotheby's (BID) second quarter results trailed expectations. On the other hand, ViaSat (VSAT) reported better than expected first quarter results.
EOG Resources (EOG) reported second quarter adjusted earnings of $2.10 per share, ahead of the $1.73 per share estimate. Operating revenues rose 32 percent to $3.84 billion and beat estimates. The company also raised its full year production forecast.
Forest Oil (FST) reported second quarter adjusted earnings of 6 cents per share on revenues of $116.81 million, down $135.73 million last year. The earnings exceeded estimates, while the revenues missed expectations.
Avis Budget (CAR) reported in line second quarter results but issued full year earnings guidance that trailed estimates. The company also said its board approved a new $200 million stock buyback program.
Live Nation Entertainment (LYV) reported second quarter earnings of 30 cents per share on revenues of $1.68 billion. The results were ahead of expectations.
Finisar (FNSR) raised its first quarter earnings and revenues guidance above the consensus estimate, citing increased sales of Ethernet transceivers for datacom applications, a favorable product mix and increased operating leverage.
Papa John's (PZZA) reported second quarter adjusted earnings of 76 cents per share. Revenues increased to $12.44 million. The results exceeded estimates. The company raised the low end of its 2013 earnings guidance by 2 cents to $2.92 per share while maintaining the upper end at $3 per share. Separately, the company announced the promotion of Tony Thomson as its president and COO.
Career Education (CECO), Education Management (EDMC), Green Mountain Coffee (GMCR), Groupon (GRPN), Jack in the Box (JACK), MBIA (MBI), News Corp. (NWSA), Prudential (PRU), TW Telecom (TWTC) and Transocean (RIG) are among the companies due to release their quarterly results after the close of trading.
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