The major U.S. index futures are pointing to a sharply lower opening on Tuesday, with sentiment reflecting caution among traders ahead of the Federal Open Market Committee announcement. The Asian markets closed lower in reaction to some weak economic data points, while the European markets are trading mixed. At the same time, the prices of commodities are currently pulling back.
Since the market has discounted a not-so-optimistic commentary on growth by the Fed, the post-meeting policy statement of the Fed is unlikely to cause anxiety. The markets also seem to have reconciled to the idea that the Fed may not announce further support measures, while at the same time they expect the central bank to express readiness to act if warranted.
U.S. stocks rose moderately on Monday, as traders bid up stocks on hopes that the Federal Reserve will act to put the recovery back on track following recent signs that the economy is floundering a bit. The major averages opened higher, inspired by positive data points from across the Atlantic. Although some volatility followed in early trading, the sentiment was broadly positive and the major averages continued to moved to the upside to close higher.
The Dow Industrials ended the session up 45.19 points or 0.42% at 10,699 and the Nasdaq Composite rose 17.22 points or 0.75% to close at 2,306, while the S&P 500 Index finished 6.12 points or 0.55% higher at 1,128.
Twenty-six of the thirty Dow components closed higher, with Cisco Systems (CSCO), IBM (IBM), McDonald's (MCD), Merck (MRK), AT&T (T), Pfizer (PFE) and Verizon (VZ) leading the gains. On the other hand, Hewlett-Packard (HPQ) slumped 7.40% after announcing the resignation of its CEO amid allegations of sexual harassment. JP Morgan Chase (JPM) fell over 1.50%.
Among the sector indexes, the Dow Jones Transportation Average rose 1.33%, the NYSE Arca Airline Index gained 2.51%, and the Philadelphia Housing Sector Index advanced 2.29%.
Fed Statement on Radar
The Federal Reserve Open Market Committee is scheduled make an announcement regarding the near-term direction of monetary policy at 2:15 PM ET. At its June meeting, the Federal Open Market Committee maintained the fed funds futures rate unchanged at 0%-0.25% and also reiterated the statement conveying its intention to leave interest rates at exceptionally low levels for an extended period.
Although the markets seem to have priced in policy changes, given the recent soft readings, it is unlikely that the central bank will announce any new measures following today's meeting. Dankse Bank commented that the recent deterioration in data should warrant a softer tone in the statement. The firm expects the comments on growth to be downgraded but with no material changes to the outlook.
The "extended period" language is likely to be retained and the statement is expected to show a dovish twist in the forward-looking section. Prominent hawk Kansas City Federal Reserve President Thomas Hoenig's stance in the upcoming meeting will be keenly watched by traders. If he refrains from dissenting, then it could be considered a dovish shift in the bias.
Currency, Commodity Markets
Crude oil futures are moving down $1.46 to $80.02 a barrel after advancing $0.78 to $81.48 a barrel on Monday. An ounce of gold is currently fetching $1,194.70, down $7.90. In the previous session, the precious metal slid $2.40 to $1,202.60 an ounce.
Among currencies, the U.S. dollar is valued at 86.103 yen compared to the 85.9355 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.3126 compared to yesterday's $1.3222.
Asia
The major Asian markets ended Tuesday's session lower, weighed down by some weak economic data from the region. China reported a huge trade surplus of $28.7 billion in July compared to a surplus of $20 billion in June. The increase in the surplus reflected a slowdown in import growth to 22.7% in July from 34.1% in the previous month.
Japan's Nikkei 225 average opened higher, but pared back its gains over the course of the morning session. The index dipped into negative territory in the afternoon session and languished below the unchanged line thereafter to close down 21.44 points or 0.22% at 9,551. Most sectors saw weakness in the session, although some auto, chemical and financial stocks bucked the downtrend.The Bank of Japan today maintained its key interest rate at near-zero levels and refrained from unveiling further support measures to tackle deflation. The decision was in line with market expectations.
The policy board of the central bank, led by Governor Masaaki Shirakawa, unanimously decided to leave its uncollateralized overnight call rate unchanged at 0.10% and pledged to maintain an extremely accommodative financial environment. Rates have been frozen at their record low for more than a year.Speculation was rife that the BOJ may decide to intervene in the foreign exchange market to counter the strong yen, which climbed to an eight-month high against the U.S. dollar last week. A stronger yen hurts exports, as it makes them more expensive and less competitive in global markets. The bank did not comment on the strength of the yen.Australia's All Ordinaries opened almost unchanged and after some moments of indecision in early trading, it declined steadily to close down 52.60 points or 1.14% at 4,563. Energy and material stocks tumbled in the session, with most other sector stocks also seeing weakness. Sentiment was also impacted by the release of a weak business confidence reading. A survey by the National Australia Bank showed that Australia's business confidence slipped to 2 in July from 4 in June, representing a 14-month low.Hong Kong's Hang Seng Index declined steadily throughout the session to close down 327.99 points or 1.50% at 21,474. The market witnessed a broad based sell-off, with thirty-nine of the forty-three index components closing lower.
Europe
The major European markets are trading mixed amid some volatility on Tuesday. The French CAC 40 Index and the German DAX Index are rising 0.61% and 0.26%, respectively, while the U.K.'s FTSE 100 Index is receding 0.73%.
In economic news, Germany's consumer price inflation accelerated to 1.2% in July from 0.9% in June. The reading represented an upward revision to the preliminary estimate of 1.1%. On a monthly basis, consumer prices rose at a 0.3% rate compared to the 0.1% increase in the previous month.
A separate report showed that Germany's wholesale price inflation rose 5.3% in July compared to the 5.1% growth in the previous month. However, on a monthly basis, wholesale prices fell 0.3% following a 0.2% drop in the previous month.
A report from the U.K. Office for National Statistical Office showed that U.K.'s trade deficit narrowed to 7.4 billion pounds in June from a deficit of 7.8 billion pounds in May. The narrowing was aided by a faster rate of increase in exports than the imports.
Meanwhile, French industrial production fell 1.7% month-over-month in June following a 1.9% increase in May. Economists had expected a more modest decline of 0.2%. Manufacturing output fell 1.3%, marking the first drop for the year.
U.S. Economic News
The Labor Department released a report showing an unexpected decrease in labor productivity in the quarter, as a significant increase in hours worked in the second quarter outpaced an increase in output.
Productivity fell by 0.9% in the second quarter following an upwardly revised 3.9% increase in the first quarter. Economists had expected productivity to edge up by 0.1% compared to the 2.8% growth that had been reported for the previous quarter.
Meanwhile, the Labor Department also said that unit labor costs rose by 0.2% in the second quarter compared to a revised 3.7% decrease in the first quarter. Labor costs had been expected to increase by about 1.4%.
The Commerce Department is due to release its wholesale inventories report at 10 AM ET. Economists expect wholesale inventories at the end of June to show a 0.4% increase.
In May, wholesale inventories saw a 0.5% month-over-month increase. However, the previous month's increase was downwardly revised to show 0.2% growth. Wholesale sales fell 0.3%, marking the first decline since February 2009.
Stocks in Focus
Earnings
Ambac Financial Group (ABK) reported a second quarter loss of 20 cents per share compared to a loss of $8.24 per share in the year-ago period. The company reported revenues of $381.17 million compared to negative revenues of $476.88 million last year. The company also said it may have to seek bankruptcy protection, as it has insufficient capital to finance its debt service and operating expense requirements beyond the second quarter of 2011.
Meanwhile, MBIA (MBI) reported second quarter net income of $6.32 per share compared with $4.30 per share last year. Revenues totaled $2.08 billion, sharply higher than $992.10 million in the year-ago period.
THQ, Inc. (THQI) reported a loss of 21 cents per share on a non-GAAP basis for its first quarter compared to a profit of 10 cents per share last year. On a non-GAAP basis, the company's revenues were $160.3 million, lower than $233.9 million last year. Analysts estimated a loss of 24 cents per share on revenues of $161.04 million. The company also said it continues to expect break-even results on a non-GAAP basis for the full year and revenues of $845 million to $865 million. Analysts expect a loss of 1 cent per share on revenues of $850.91 million.
Other Corporate News
Raytheon (RTN) may see some buying interest after it said the U.S. Air Force has selected the company's GBU-53/B for the Small Diameter Bomb increment II program. The contract is valued at $450 million and delivery is expected to begin in 2013.
UAL Corp. (UAUA) is likely to see some activity after it announced that the load factor for its United Airlines unit rose 0.3 points year-over-year to 87.2%, as traffic and capacity increased 2.1% and 1.8%, respectively.
Laboratory Corp. of America (LH) is also expected to be in focus after it said its board authorized the buyback of up to an additional aggregate of $250 million shares of its common stock.
Novell (NOVL) could see weakness after it lowered its third quarter net revenue guidance to $197 million to $199 million from its previous guidance of $205 million to $210 million. The company also lowered its non-GAAP operating margin guidance to 13%-15% from its previous guidance of 15%. The muted outlook was attributed to customer uncertainty related to the company's board's ongoing review of various alternatives to enhance stockholder value.
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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.