Markets Hopeful Of Economy's Resilience

The major U.S. index futures are pointing to a higher opening on Tuesday, with sentiment remaining buoyant, as economic hopes brighten. With most of the overhangs now ceasing to pose grave threats, there is a feeling of sanguinity. Deal news surrounding a potential Vodafone (VOD) takeover could also instill confidence among traders. European stocks are notably higher after the Easter break. Going by early indications, the domestic markets are likely to stage a rebound from the previous session's retreat.

U.S. stocks retreated on Monday on a bout of profit taking, triggered by the release of a soft manufacturing reading. The major averages opened on a nervous note and moved listlessly in early trading. Thereafter, the averages declined sharply till early afternoon trading. Thereafter, the S&P 500 Index moved roughly sideways till the close, while the Nasdaq Composite moved steadily lower before paring back some of its losses in late trading. The technology-weighted index closed 28.35 points or 0.87 percent lower at 3,239. The Dow Industrials continued to move listlessly below the unchanged before closing down 5.69 points or 0.04 percent at 14,573.

Eighteen of the thirty Dow components closed lower, while the remaining twelve stocks advanced. Alcoa (AA), Hewlett-Packard (HPQ), Intel (INTC) and Caterpillar (CAT) declined sharply, serving as a drag on the index. On the other hand, UnitedHealth (UNH) rallied 3.08 percent and AT&T (T) rose 1.53 percent.

Semiconductor, financial, computer hardware, housing, transportation, oil service and gold stocks were among the biggest decliners of the session.

The Dow Industrials is trading close to its record closing high and is currently well supported by its 21-day MA of 14,426. Despite the run up the 14-day RSI, a momentum indicator is around the neutral zone. If the economy continues to be resilient and weathers the sequestration effects fairly well and the reporting season is promising, the index could sustain its upward momentum or at least consolidate around its record levels. The immediate support for the index is around 14,537.

On the economic front, the result of the Institute for Supply Management's manufacturing survey showed that manufacturing activity expanded at a slower pace in March. The manufacturing purchasing managers' index fell 2.9 points to 51.3, the lowest level since December 2012. The new orders index slipped 6.4 points to 51.4 and the production index declined 5.4 points to 52.2. The order backlogs index fell 4 points to 51, while the employment index rose 1.6 points to a 9-month high of 54.2.

The Commerce Department reported that construction spending rose 1.2 percent month-over-month in February following a 2.1 percent drop in January. Private and public construction spending rose 1.3 percent and 0.9 percent, respectively.

Currency, Commodity Markets

Crude oil futures are slipping $0.20 to $96.87 a barrel after receding $0.16 to $97.07 a barrel on Tuesday. Gold futures are currently moving down $0.40 to $1,600.50 an ounce. In the previous session, gold rose $5.20 to $1,600.90 an ounce.

Among the currencies, the U.S. dollar is trading at 93.19 yen compared to the 93.25 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.2838 compared to yesterday's $1.2850.


Asian stocks closed on a mixed note, as the negative close on Wall Street overnight following the release of weak U.S. manufacturing data kept sentiment subdued.

Japan's Nikkei 225 average opened lower but cut some of its losses by the mid-session and traded roughly sideways thereafter. The index closed down 131.59 points or 1.08 percent at 12,003. Export, utility and resource stocks came under selling pressure, while realty, banking and retail stocks saw some strength.

Australia's All Ordinaries rose sharply in early trading before paring back most of its gains over the course of the morning. The index stayed above the unchanged line for the rest of the session, closing up 15.60 points or 0.31 percent at 4,996. Consumer staple and financial stocks led the gains, while material stocks came under selling pressure.

After seeing some volatility, Hong Kong's Hang Seng Index closed at 22,334, up 34.16 points or 0.15 percent. Meanwhile, China's Shanghai Composite Index fell 6.80 points or 0.30 percent.

On the economic front, the Reserve Bank of Australia opted to maintain its official cash rate unchanged at 3 percent for the third straight month. The decision was in line with expectations and reflected the central bank's view that the economy will witness sub-par growth over the coming year. Vindicating the central bank's stance, a report released by the Australian Industry Group showed that manufacturing activity continued to contract in March.

A report released by the Bank of Japan showed that Japan's monetary base expanded 19.8 percent year-over-year in March following a 15 percent jump in February.


European stocks have opened higher, as the markets in the region reopened following the Easter holidays, and are currently trading notably higher.

Focus is on Cyprus ahead of its meetings with the Troika this week to seek easier bailout terms. Vodafone shares rallied in London following reports that U.S. peers Verizon and AT&T are working on a $245 billion break-up bid for the telecoms group.

In economic news, operating conditions across Eurozone manufacturing sector deteriorated further in March, but the rate of decline in activity was less steeper than previously estimated, the latest results of a survey by Markit Economics showed. The headline purchasing managers' index, that measures the performance of the manufacturing sector, fell to 46.8 in March from 47.9 in February.

Separately, Eurozone's unemployment rate stayed unchanged at 12 percent in February, matching economists' forecasts, data published by statistical office Eurostat showed.

U.S. Economic Reports

Automakers are scheduled to release their monthly sales results for March. Economists expect auto sales to come in at a seasonally adjusted annual rate of 15.4 million units, flat with last month.

The Commerce Department is scheduled to release its factory orders report for February at 10 am ET. Economists estimate factory orders growth of 2.9 percent compared to the previous month.

In January, factory orders fell 2 percent month-over-month following a 1.3 percent increase in December. Shipments and unfilled orders were down 0.2 percent each, while inventories were up 0.5 percent.

Meanwhile, durable goods orders that make up the bulk of factory orders rose 5.7 percent month-over-month in February. However, excluding transportation, orders unexpectedly fell 0.5 percent. Machinery and communication equipment orders declined, while orders for computers, metals and electrical items improved. Non-defense capital goods orders, excluding aircrafts, declined 2.7 percent in February after rising 6.7 percent in January. Shipments of this category of goods used for GDP calculation were up 1.9 percent following a 0.7 percent drop in January.

Minneapolis Federal Reserve Bank President Narayana Kocherlakota is due to speak on improving the outlook with monetary policy in Grand Forks, North Dakota at 1 pm ET. Chicago Federal Reserve Bank President Charles Evans will speak on the monetary policy in Richmond at 7 pm ET.

Stocks in Focus

AT&T (T) said AT&T West has reached a new tentative agreement with the Communications Workers of America District 9 in wireline contraction negotiations. The company noted that the agreement provides for general wage increases in each year of the contract and will take effect on April 8, 2012.

Shoe Carnival (SCVL) reported fourth quarter adjusted earnings of 16 cents per share on net sales of $205.7 million, up from $181.94 million last year. The earnings were in line, while the revenues missed estimates. For the first quarter of 2013, the company expects earnings of 36-44 cents per share on sales of $226 million to $232 million. The guidance was weak.

TIBCO Software (TIBX) announced that its CFO Sydney Carey has decided to leave the company to take up another career opportunity, and Murray Rode, its COO, will assume the additional responsibility of CFO on an interim basis.

Global Payments (GPN), Oxford Industries (OXM), Pep Boys (PBY) and Resources Connect (RECN) are among the companies due to release their quarterly results after the close of trading.

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