After remaining below the unchanged line for the better part of Tuesday’s session, U.S. stocks closed on a mixed note. Notwithstanding a positive housing starts report, the major averages opened on a mixed note amid caution about the FOMC announcement. The major averages moved roughly sideways until the release of the post-meeting policy statement.
All three of the averages spiked sharply in reaction to the Fed statement before pulling back in late trading and closing on a mixed note. The Dow Industrials added 7.41 points or 0.07% to end at 10,761, while the Nasdaq Composite Index ended down 6.48 points or 0.28% at 2,349 and the S&P 500 Index closed 2.93 points or 0.26% lower at 1,140.
Fifteen of the thirty Dow components closed higher, with Caterpillar (CAT) (up 2.19%), Hewlett-Packard (HPQ) (up 1.35%) and Intel (INTC) (up 1.11%) among the notable gainers. On the other hand, Travelers Co. (TRV) slid 1.18%, Microsoft (MSFT) lost 1.10%, JP Morgan Chase (JPM) moved down 1.46%, Disney (DIS) fell 1.15% and Alcoa (AA) retreated 1.85%.
Among the sector indexes, the KBW Bank Index moved down 1.42%, the NYSE Arca Securities Broker/Dealer Index declined 1.48% and the NYSE Arca Disk Drive Index lost close to 1%, while the NYSE Arca Airline Index rose 1.87%.
On the economic front, the Commerce Department reported that housing starts rose 10.5% month-over-month in August to 598,000 from 541,000 in the previous month. The consensus estimates had called for starts to come in at a 550,000 unit annual rate. Single-family starts rose 4.3%, marking the first increase since April, and multi-family starts jumped 32.2%. Region-wise, month-over-month increases were recorded in the Midwest, South and West, while the Northeast reported a sharp 24.3% drop. Meanwhile, building permits, an indicator of future housing activity, rose 1.8% to 569,000.
Commerzbank noted that the slowly expanding economy has generated feeble demand that has helped to offset the pressure emanating from the overhang of unsold houses and stabilized the situation. However, new house construction will remain depressed due to still elevated vacancy rates.
As expectedly, the Fed maintained interest rates at 0%-0.25% at the conclusion of its 1-day FOMC meeting. However, the Fed appeased the Street by slightly tweaking the language of its accompanying statement.
The commentary regarding growth was maintained, with the central bank repeating its assessment that the pace of employment and output growth is slowing and household spending, despite the increase, is constrained by multiple factors. However, the Fed felt that equipment and software spending is rising at a slower pace than earlier in the year. On a positive note, the Fed noted that bank lending is contracting at a reduced rate. The FOMC reiterated its view that the pace of economic recovery will be modest in the near term.
The commentary on inflation was altered slightly, with the central bank explicitly saying that underlying inflation measures are below levels consistent with the Fed’s mandate of maintaining maximum employment and price stability. However, the central bank is of the view that it will return to levels consistent with its mandate after some time.
The central bank also reiterated that it expects economic conditions to warrant exceptionally low rates for "an extended period. In a marked deviation, the FOMC said it is prepared to provide additional accommodation if needed to support economic recovery and to return inflation over time to levels consistent with its mandate. Meanwhile, in the past, it said it would employ its policy tools if necessary.
Currency, Commodity Markets
In their first trading session as the front-month contract, crude oil futures for November delivery are trading up $0.53 at $75.50 a barrel. The October futures expired on Tuesday at a 3-week low of $73.52, down $1.34 a barrel. At the same time, gold is at fresh record highs, with an ounce of gold now fetching $1,293.50, up $19.20 from its previous close of $1,274.30. In the previous session, the precious metal slid $6.50.
Among currencies, the U.S. dollar is trading at 84.694 yen compared to the 85.0895 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.3368 compared to yesterday’s $1.2364.
Asia
The major Asian markets ended a lackluster session on Wednesday mixed, with the Australian, Chinese, Hong Kong, South Korean and Taiwanese markets ending higher, while the Japanese, Indian, Singaporean, Malaysian and Indonesian markets posted moderate losses. The euphoria of the Fed decision seems to have been lost as traders looked ahead to the key U.S. housing and durable goods orders reports due to be released over the next two days.
Japan’s Nikkei 225 average languished below the unchanged line for much of the session, although amid some volatility, before closing lower. The index ended down 35.79 points or 0.37% at 9,566.
Exporters and financial stocks declined for the second straight day, with Chiyoda, Meidensha, Mizuho Trust & Banking, Shinshei Bank, Sumitomo Heavy, Sumco, Sumitomo Osaka and Taiheiyo among the worst decliners. On the other hand, some resource, real estate and trading house stocks advanced.
Japan’s Ministry of Trade, Economy and Industry said its all industry activity index increased 1% on a monthly basis in July following a 0.2% increase in June. The growth rate matched economists' expectations. The increase was mainly due to an increase in services activity and an improvement in construction activity. Annually, the index increased 3.1% in July, faster than the 3% growth seen in the previous month.
After opening unchanged, Australia’s All Ordinaries advanced amid volatility till late trading. Thereafter, the index gave back some ground to close up 9.80 points or 0.21% at 4,675. Healthcare stocks led the day’s advance, with consumer staple and energy stocks lending support. However, industrial, IT and telecom stocks saw some weakness.
The Westpac-Melbourne Institute said its leading index for Australia rose 6.8% on an annualized basis in July, well above the long term trend of 3.2%, but slower than June's 7.4% increase. This is the fourth consecutive month in which the growth rate of the leading index has slowed.
Hong Kong’s Hang Seng Index hovered in positive territory throughout the session before closing up 45.12 points or 0.21% at 22,048. Property and utility stocks gained ground in the session, while financial and resource stocks showed mixed sentiment.
Europe
The major European markets are declining for the second straight day on Wednesday, with all three of the major averages in the region firmly in negative territory. The French CAC 40 Index is receding 0.75% and the German DAX Index is slipping 1.19%, while the U.K.’s FTSE 100 Index is dropping 0.21%.
In economic news, the minutes of the Bank of England’s September meeting revealed that eight members voted to hold the interest rate at a record low of 0.5%, while Andrew Sentance sought a 25 basis point rate hike.
Sentance seems to have argued that the data over the month had not changed his assessment that it was appropriate to start to withdraw some of the exceptional monetary stimulus provided by cutting the bank rate to 0.5% alongside the program of asset purchases. The policymakers also decided to maintain the stock of asset purchases financed by the issuance of central bank reserves at 200 billion pounds.
A Eurostat report showed that industrial new orders in the euro area declined 2.4% month-over-month in July, steeper than the 1.4% drop expected by economists. Excluding volatile transport equipment orders, orders fell by a more modest 0.6%. At the same time, industrial new orders were 11.2% higher than in the year-ago period, slower than the 16.2% growth expected by economists.
U.S. Economic Reports
The Federal House Finance Agency, or FHFA, is set to release its house price index for July at 10 AM ET. The index is a weighted, repeat-sales index, which measures average price changes of single-family houses in repeat sales or refinancings on the same properties. In June, the seasonally adjusted house price index fell 0.3% from May, trimming some of the price increases seen in the previous months.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended September 17th at 10:30 AM ET.
Commercial crude oil inventories fell by 2.5 million barrels to 357.4 million barrels in the week ended September 10th, with stockpiles remaining above the upper limit of the average range for this time of the year.
Distillate inventories fell by 0.3 million barrels yet remained above the upper boundary of the average range. Gasoline inventories also declined, falling by 0.7 million barrels. Inventories of gasoline were above the upper limit of the average range. Refinery capacity utilization averaged 87.6% over the four-weeks ended September 10th compared to 88.2% for the previous week.
Stocks in Focus
Adobe Systems (ADBE) declined in Tuesday’s after hours session after it said it expects fourth quarter non-GAAP earnings of 48-54 cents per share on revenues of $950 million to $1 billion. Analysts estimate earnings of 53 cents per share on revenues of $1.03 billion. The company also reported third quarter non-GAAP earnings of 54 cents per share, higher than 35 cents per share last year, while revenues were $990.3 million. Analysts estimated earnings of 49 cents per share on revenues of $984.07 million.
Cintas Corp. (CTAS) may move in reaction to its announcement that its first quarter earnings rose to 40 cents per share from 35 cents per share last year. The recent quarter included 3 cents per share in gains compared to charges of 8 cents per share in the year-ago period. Analysts’ estimates, which typically exclude one-time items, called for earnings of 43 cents per share on revenues of $914.95 million. Revenues rose 3.6% to $923.90 million. The company reiterated its 2011 revenue guidance of $3.55 billion to $3.75 billion, while it expects earnings per share of $1.55-$1.63. Analysts estimate revenues of $3.70 billion.
Novartis (NVS) could be in focus after it announced that a late stage study of its Cushing’s disease treatment, SOM203, showed a reduction in cortisol levels. On the basis of this data, the company plans to do the first regulatory filing for the treatment this year. Separately, the FDA announced regulatory approval for Novartis’ multiple sclerosis drug Gilenya.
Microsoft (MSFT) may see buying interest after it announced a 23% increase in its quarterly dividend to 16 cents per share. The company also announced that its board has authorized up to $6 billion in incremental commercial paper and longer-term debt.
Progress Software (PRGS) rose modestly in Tuesday’s after hours session after it reported that its third quarter non-GAAP earnings rose to 56 cents per share from 40 cents per share last year. Revenues rose 8% year-over-year to $128.8 million. Analysts estimated earnings of 54 cents per share on revenues of $122.35 million. For the full year, the company expects non-GAAP earnings of $2.32-$2.36 per share on revenues of $524 million to $528 million. The consensus estimates call for earnings of $2.32 per share on revenues of $517.37 million.
Darden Restaurants (DRI) may see some activity after it reported that its first quarter earnings from continuing operations rose 19% to 80 cents per share from 67 cents per share last year. Sales from continuing operations rose 4.2% to $1.81 billion. Analysts estimated earnings of 77 cents per share on revenues of $1.82 billion. The company reaffirmed its forecast for 2011 earnings per share growth from continuing operations of 14%-17%, while analysts look for 14% earnings growth.
Power-One (PWER) is expected to see some buying interest after it said its board approved a $10 million stock buyback program. Swift Energy (SWFT) could also gain ground after it announced that it has renewed and extended its $500 million revolving credit facility till October 15th, 2015.
PMC-Sierra (PMCS) may see weakness after it lowered its third quarter net revenue guidance to $161 million to $163 million from its earlier estimate of $169 million to $170 million. Analysts estimate revenues of $173.50 million. The company also said it expects gross margins to be at the lower end of its earlier guidance range of 67.5%-68.5%, while the company also lowered its operating expense guidance for the quarter.
FMC Technologies (FTI) is likely to move to the upside it said it has been awarded a $520 million contract from Total Exploration and Production Angola for the manufacture and supply of subsea production equipment for the CLOV development project.
General Mills (GIS) may also be in focus after it reported first quarter adjusted earnings of 64 cents per share, the same as in the year-ago period. Net sales rose 1% to $3.53 billion. Analysts estimated earnings of 63 cents per share on revenues of $3.57 billion. The company reaffirmed its 2011 adjusted earnings estimate of $2.46-$2.48 per share, while analysts estimate earnings of $2.48 per share.
No comments:
Post a Comment