Tuesday, with sentiment likely to remain guarded ahead of the release of the consumer confidence report. Economic data from across the Atlantic has been encouraging, with Germany reporting a strong consumer confidence reading, while earlier in the day the Asian Development Bank gave an upbeat commentary on growth in developing Asian countries. Depending on how the U.S. consumer confidence index comes in, the markets may see a bounce or a retreat, although range bound trading is most likely.
U.S. stocks reversed course and ended Monday’s session on a moderately weak note, as traders showed indecision amid a lack of trading catalysts. The major averages opened lower and remained below the unchanged line for the better of the session before closing moderately lower.
With the markets trading at their highest levels in more than four months, uncertainty weighed on the averages and prevented any follow through buying. The Dow Industrials ended down 48.22 points or 0.44% at 10,812 and the Nasdaq Composite Index fell 11.45 points or 0.48% to close at 2,370, while the S&P 500 Index finished 6.51 points or 0.57% lower at 1,142.
Twenty-four of the thirty Dow components closed the session lower, with Alcoa (AA), Bank of America (BAC), General Electric (GE), JP Morgan Chase (JPM), Pfizer (PFE) and Travelers Co. (TRV) among the notable decliners. On the other hand, AT&T (T) rose over 1%.
Among the sector indexes, the NYSE Arca Biotechnology Index fell 1.27%, the KBW Bank Index slipped 1.87% and the NYSE Arca Disk Drive Index moved down 2.09%. However, the NYSE Arca Airline Index rose 1.84%.
Currency, Commodity Markets
Crude oil futures are moving down $0.70 to $75.82 a barrel after edging up $0.03 to $76.52 a barrel on Monday. Gold futures are currently receding $11.40 to $1,287.20 an ounce. In the previous session, the precious metal rose $0.50 to $1,298.60 an ounce.
Among currencies, the U.S. dollar is trading at 84.116 yen compared to the 84.2902 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is currently valued at $1.3468 compared to yesterday’s $1.3454.
Asia
The major Asian markets closed Tuesday’s session lower, as the negative lead from Wall Street overnight weighed on the averages. Negative sentiment prevailed despite the Asian Development Bank giving an upbeat outlook for the developing economies in Asia.
The 45 economies of developing Asia – spanning from countries in the Pacific to Central Asia – are now forecast to expand by an impressive 8.2%, well above the 5.4% growth recorded in 2009 and also above the 7.9% growth ADB forecast in July. The bank attributed the optimism to the region's strong export-based recovery, robust private demand, and the sustained effects of stimulus policies.
Japan’s Nikkei 225 average opened moderately lower and moved sideways until late trading before legging down further. The index closed down 107.38 points or 1.12% at 9,496. The general economic uncertainty and the yen’s strength along with the several stocks turning ex-dividend weighed on the index.
A majority of the stocks declined in the session, with Credit Saison, Eisai, Nippon Electric, Sky Perfect Jsat, Takeda Pharma, TDK and Trend Micro leading the slide. On the other hand, most resource and real estate stocks and some auto stocks closed the session higher.
Australia’s All Ordinaries languished in negative territory for the better part of the session amid some volatility to close down 5.20 points or 0.11% at 4,717. Material and energy stocks saw weakness, dragging the markets lower.
Hong Kong’s Hang Seng Index moved back and forth across the unchanged line in a very narrow range till the afternoon before pulling back sharply in the afternoon. The index closed down 230.89 points or 1.03% at 22,110.
Europe
The major European averages are trading Tuesday’s session on a mixed note, with the French CAC 40 Index and the German DAX Index are moving up 0.28% and 0.18%, respectively, while the U.K.’s FTSE 100 Index is retreating 0.19%.
In economic news, the GfK Institute said its forward-looking consumer sentiment indicator, based on a survey of about 2,000 Germans, jumped to 4.9 in October from 4.3 in September. This was well above analyst expectations for a score of 4.2 and represents a three-year high.
French consumer spending fell 1.6% month-over-month in August after increasing by 2.7% in July, a report from the statistical office INSEE showed. Economists had expected only 0.2% fall. Annually, consumer spending grew 1.2%, faster than the consensus forecast for 0.9% growth.
The U.K. Office for National Statistics reported that the U.K. GDP growth for the second quarter was confirmed at initial estimate of 1.2% compared to the previous quarter. On a year-over-year basis, GDP growth was 1.7%. Meanwhile, a separate report showed that business investment in the U.K. rose by a revised sequential rate of 0.7% in the June quarter.
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 3.3% year-over-year increase in the 20-city composite house price index for July.
The house price index rose 1.3% month-over-month in June, marking the third straight month of growth. On a year-over-year basis, house prices climbed 4.2%.
The Conference Board is scheduled to release its consumer confidence report for September 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 53 in September.
The consumer confidence index for August rose 2.5 points to 53.5, marking the first increase since May. The present situations index fell 1.5 points to 24.9, but the expectations index rose about 5 points to 72.5.
Stocks in Focus
Walgreen (WAG) is likely to move in reaction to its announcement that its fourth quarter net earnings rose to 49 cents per share compared to 44 cents per share last year. The recent quarter’s results included charges of 5 cents per share compared to 3 cents per share in the year-ago period. Sales rose 7.4% year-over-year to $16.9 billion. Analysts estimated earnings of 44 cents per share on revenues of $16.84 billion.
Jabil Circuit (JBL) receded in Monday’s after hours session after it reported fourth quarter core earnings of 52 cents per share compared to 16 cents per share last year. Revenues rose to $3.86 billion from $2.80 billion last year. Analysts estimated earnings of 49 cents per share on revenues of $3.89 billion. The company expects first quarter core earnings of 53-57 cents per share on revenues of $3.9 billion to $4 billion. The consensus estimates call for earnings of 53 cents per share on revenues of $4.09 billion.
Boeing (BA) may see some activity after it announced that Air China has ordered for four of its long-haul airplane 777-300Ers valued at $1.1 billion at current list prices.
Rackspace Hosting (RAX) is expected to gain ground after Standard & Poor’s announced that the company would replace AmeriCredit (ACF) in the S&P MidCap 400 Index after the close of trading on September 30th. Watsco (WSO) will replace Hewitt Associates (HEW) in the S&P MidCap 400 Index and Super Micro Computer (SMCO) will replace Watsco in the S&P SmallCap 600 Index. Additionally, Riverbed Technology (RVBD) will replace NBTY (NTY) in the S&P MidCap 400 Index.
Pfizer’s (PFE) stock may see some ripples after it announced that it will discontinue the Phase III trials for evaluating its prostrate cancer treatment SUN 1120 in combination with prednisone following an independent evaluation committee’s finding that the combination is unlikely to improve overall survival when compared to prednisone alone.
Research In Motion (RIMM) could see some buying interest after it introduced its version of the Tablet PC named ‘the PlayBook’ at its annual developers’ conference. The company also unveiled other services such as the opening of BBM as a social platform and a BlackBerry Advertising service.
Avis Budget (CAR) is also expected to be in focus after it sent a letter to Dollar Thrifty (DTG) stating that its offer provides shareholders an opportunity to participate in a larger share of the value to be created through a business combination. The company also announced two concrete proposals to counter any opposition posed by anti-trust concerns. Earlier, Dollar Thrifty’s board reaffirmed its support for the offer by Hertz (HTZ).
Valero (VLO) is likely to move in reaction to its announcement that it has signed an agreement to sell the ownership of its 185,000 barrels per day Paulsboro refinery to PBF Holdings for a net sales price of $360 million plus the value of net working capital and inventories.
Alcoa (AA) may see some strength after it announced that is has won a contract to supply alloy sheet and plate for shipbuilder AUSTAL’s vessels, including commercial ships and U.S. Navy ships. The contract will run through 2014.
United Natural Foods (UNFI) could come under selling pressure after it announced that it has commenced an underwritten public offering of 3.85 million shares of its common stock.
Peet’s Coffee & Tea (PEET) may react to its announcement that it will increase prices of most drinks by 10 cents and that of beans sold in Peet’s stores by an average of 8%, effective September 29th. The pricing action follows a 35% increase in green Arabica coffee prices.
Boston Properties (BXP) could see some activity after it said it would buy Bay Colony Corporate Center in Waltham, Massachusetts, for about $185 million.
Paychex (PAYX) is also likely to be in focus after it reported that its first quarter earnings rose 6% to 36 cents per share and revenues climbed 4% to %518.3 million. Analysts estimated earnings of 34 cents per share on revenues of $507.53 million. The company also said it expects net income for the fiscal year to improve over fiscal 2010, while analysts look for a modest rise in earnings to $1.36 per share.
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