| US Market |
The major U.S. index futures are pointing to a mixed opening on Thursday, with sentiment reflecting apprehensions of traders following two consecutive sessions of gains. Economic data released during the day has been fairly robust, with jobless claims unexpectedly declining, while the private sector added jobs roughly in line with expectations. The strong data points may rekindle worries concerning potential monetary policy tightening, impacting sentiment among traders. The G20 meeting getting underway in Russia may also assume prominence, given the likelihood of discussions on the Syrian crisis. Traders may also focus on the results of the Institute for Supply Management’s service sector survey.
U.S. stocks advanced yet again on Wednesday, as strong auto sales and the lack of a concrete decision among U.S. lawmakers on the use of military force in Syria supported sentiment. The major averages opened on a nervous note but advanced steadily until early afternoon trading before going about a consolidation move.
The Dow Industrials ended up 96.91 points or 0.65 percent at 14,931 and the S&P 500 Index added 13.31 points or 0.81 percent before closing at 1,653, while the Nasdaq Composite closed at 3,649, up 36.43 points or 1.01 percent.
Twenty-six the thirty Dow components closed higher, while the remaining four stocks declined. Intel, DuPont, Alcoa, JP Morgan Chase , Coca-Cola and Verizon were the biggest gainers of the session. On the other hand, Microsoft fell 2.15 percent.
Networking, semiconductor, biotechnology, oil service, brokerage and retail stocks advanced strongly in the session.
On the economic front, the Commerce Department reported that the U.S. trade deficit widened to $39.1 billion in July from $34.5 billion in June, which was the smallest deficit since late 2009. Imports rose 1.6 percent, with a higher oil import bill accounting for the bulk of the increase, while exports declined 0.6 percent.
The Beige Book released by the Federal Reserve stated that national economic activity expanded at a modest to moderate pace from the period of early July through late August. Consumer spending was reported to have improved in most districts. The report also noted that automobile sales remained robust on the back of pent up demand and attractive financing conditions. Most districts were reported to have seen high levels of travel and tourism activity.
The expansion by the manufacturing sector was qualified as being modest, and the activity in residential real estate markets was found to have increased moderately. The Beige Book also noted that demand for non-residential real estate increased. At the same time, the report said lending activity weakened a bit. Hiring was qualified as having held steady or increased somewhat in most districts, while pricing pressures were found to be subdued.
Auto sales for the month of August remained buoyant, with General Motors , Chrysler and Toyota all reporting double-digit sales growth.
The Dow Industrials settled Wednesday’s session near a resistance area we highlighted in yesterday’s article. If the index receives support from catalysts, it remains on track to test resistance around 14,982, 15,055, the index’s 21-day MA currently at 15,103, its 100-day MA currently at 15,132 and its 50-day MA currently at 15,245. On the downside, the index has strong support around the 14,885, 14,830 and 14,757 levels.
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Private sector employment in the U.S. rose by slightly less than expected in the month of August, according to a report released by payroll processor ADP. ADP said private sector employment increased by 176,000 jobs in August compared to a downwardly revised increase of 198,000 jobs in July.
Economists had been expecting the private sector to add about 180,000 jobs compared to the addition of 200,000 jobs originally reported for the previous month
In another upbeat sign for the jobs market, the Labor Department released a report showing that first-time claims for U.S. unemployment benefits fell by more than expected in the week ended August 31st.
The report said initial jobless claims dropped to 323,000, a decrease of 9,000 from the previous week's revised figure of 332,000. Economists had been expecting initial jobless claims to edge down to 330,000 from the 331,000 originally reported for the previous week
The Labor Department also reported that productivity increased by a revised 2.3 percent in the second quarter compared to the previously reported 0.9 percent growth. Economists had expected productivity to increase by about 1.8 percent.
The report also showed that unit labor costs came in unchanged in the second quarter versus the previously reported 1.4 percent jump. The revised labor cost data had been expected to show a 0.7 percent increase.
Minneapolis Federal Reserve Bank President Narayana Kocherlakota will answer questions at an economic indicator breakfast in La Crosse, Wisconsin at 9 am ET.
The Institute for Supply Management is scheduled to release the results of its non-manufacturing survey at 10 am ET. The consensus estimates call for a decline in the index to 55 in August from 56 in July.
The non-manufacturing index rose to 56 in July from 52.2 in June, reaching the highest reading since February. The new orders index rose roughly 7 points to 57.7 and the business activity index was up 8.7 points to 60.4. On the other hand, the order backlogs index fell to 46.5 from 52 and the employment index slipped to 53.2 from 54.7.
Also at 10 am ET, the Commerce Department will release its factory orders report for July. Economists expect a 3.4 percent decline in factory orders following a 1.5 percent increase in June.
Factory orders climbed 1.5 percent month-over-month in June following a 3 percent jump in May. However, shipments of factory goods were down 0.4 percent. Meanwhile, orders for durable goods, making up the bulk of factory orders, fell 7.3 percent month-over-month in July, dragged down by a steep drop in aircraft and defense orders.
Non-defense capital goods orders, excluding aircraft and parts, fell 3.3 percent, although this measure is up 8.4 percent year-over-year. Shipments of this category of goods, which are directly plugged in to GDP calculations, fell 1.4 percent. Computer equipment orders fell 20 percent and electrical equipment/appliance orders fell 4.3 percent.
The Energy Information Administration is due to release its petroleum inventory report for the week ended August 30th at 10:30 am ET.
Crude oil stockpiles rose by 3 million barrels to 362 million barrels in the week ended August 23rd. Inventories remained near the upper limit of the average range for this time of the year.
Meanwhile, gasoline stockpiles declined by 0.6 million barrels yet were in the upper half of the average range. Distillate inventories edged down by 0.3 million barrels and were near the lower limit of the average range. Refinery capacity utilization averaged 90.6 percent over the four weeks ended August 23rd compared to 90.6 percent over the four weeks ended August 16th.
The Treasury is scheduled to make announcements concerning next week’s auctions of 3-year and 10-year notes and 30-year bonds at 11 am ET.
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Fred’s reported that its sales for August remained almost unchanged at $140 million, while its comparable store sales remained flat compared to a 2.8 percent drop in the year-ago period.
NCI Building System reported third quarter adjusted net income of 2 cents per share on sales of $317.2 million, up 6 percent year-over-year. The results trailed expectations.
Hess said its board approved a 150 percent increase in its quarterly dividend to 25 cents per share.
Louisiana-Pacific announced an agreement to acquire all of the outstanding common shares of Ainsworth for a total consideration equating to C$3.76 per Ainsworth share or a total deal value of $1.1 billion.
FuelCell reported a third quarter loss of 3 cents per share on revenues of $53.7 million, up from $29.7 million in the year-ago quarter.
Finisar, Quiksilver, Smith & Wesson, VeriFone and Zumiez are among the companies due to release their quarterly results after the close of trading.
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| European Market |
European stocks opened slightly higher and have gained further ground since then. The markets are digesting two major central bank decisions from the region, namely the Bank of England and the European Central Bank. Traders may also look ahead to the U.S. economic data and deliberations on Syria at the G20 meeting being held in St. Petersburg.
Both central banks kept their respective interest rates unchanged at a record low 0.50 percent. The Bank of England also maintained its quantitative easing after it issued forward guidance last month linking interest rates to the unemployment rate.
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The major Asian markets closed mixed, with the Japanese, Taiwanese, South Korean, Malaysian, Indian and Hong Kong markets advancing, while the Australian, Chinese, Indonesian and New Zealand markets moved to the downside. Even as the markets in the region were encouraged by the positive close on Wall Street overnight, the underlying mood was cautious as traders awaited a slew of U.S. economic data and monetary policy decisions from Europe.
Japan’s Nikkei 225 average showed volatility throughout the session, moving back and forth across the unchanged line before closing slightly higher. The index ended up 10.95 points or 0.08 percent at 14,065.
Utility and resource stocks gained ground in the session. Auto stocks also ended mostly higher, boosted by solid U.S. sales figures. On the other hand, banking, real estate, retail and some export stocks moved to the downside.
Meanwhile, Australia’s All Ordinaries opened slightly higher but declined immediately after and fell steadily until early afternoon trading. After paring some of its losses, the index moved sideways before closing down 18.10 points or 0.35 percent at 5,138. Energy, material and financial stocks came under selling pressure.
Hong Kong’s Hang Seng Index closed at 22,598, up 271.75 points or 1.22 percent, while China’s Shanghai Composite Index closed 5.19 points or 0.24 percent lower at 2,122.
On the economic front, the Bank of Japan decided to keep its monetary easing program unchanged following a two-day meeting of its Policy Board. At the same time, the central bank upwardly revised its assessment of the economy.
The nine-member Board, led by Governor Haruhiko Kuroda, unanimously voted to keep the target of the monetary base expansion at an annual pace of 60-70 trillion yen. The BOJ will continue to increase its purchases of Japanese government bonds at an annual pace of about JPY 50 trillion, with the average remaining maturity of the bank's JGB buying around seven years.
A report released by the Australian Bureau of Statistics showed that the nation’s trade balance turned to a deficit of A$765 million in July from a surplus of A$243 million, while economists expected a surplus of A$100.
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| Currency and Commodities Markets |
Crude oil futures are rising $0.56 to $107.79 a barrel after declining $1.31 to $107.23 a barrel on Wednesday. An ounce of gold is currently fetching $1,392.30, up $2.30 from the previous session’s close of $1,390. On Wednesday, gold fell $22.
Among currencies, the U.S. dollar is trading at 99.78 yen compared to the 99.74 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.3144 compared to yesterday’s $1.3189.
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