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| US Market | ||||||||||||
The
major U.S. index futures are pointing to a higher opening on Tuesday,
with sentiment revealing nervousness as traders await the outcome of the
FOMC meeting. The Federal Reserve's stimulus tapering has been the
biggest preoccupation in the minds of traders currently, as they dread a
slowdown in economic momentum if the stimulus is prematurely withdrawn.
Given that a decision on the itinerary for the withdrawal of stimulus
is most likely due at the end of the 2-day FOMC meeting that gets
underway today, traders are unlikely to make big moves.
Some movement could be expected in reaction to an announcement by Microsoft on its dividend increase and stock buyback program. Traders may also react to the results of a housing market survey by the National Home Builders' Association. U.S. stocks closed mixed on Monday, with the optimism generated by the withdrawal of the candidacy of Larry Summers curtailed by weakness in the tech space. The major averages opened higher as traders digested mostly positive economic data. Subsequently, the Dow Industrials and the S&P 500 Index moved sideways until late afternoon trading. Thereafter, the averages gradually gave back some of their gains over the remainder of the session and yet closed moderately higher. The Dow Industrials added 118.72 points or 0.77 percent before closing at 15,495 and the S&P 500 Index ended up 9.61 points or 0.57 percent at 1,698. After the positive opening, the Nasdaq Composite Index moved sharply lower till late morning trading and then continued to move steadily lower, dropping below the unchanged line in late afternoon trading. Falling further, the index closed 4.34 points or 0.12 percent lower at 3,718, with the much of the weakness stemming from an over 3 percent drop by the shares of Apple . Twenty-six of the thirty Dow components closed higher, with Boeing leading the gains with a 3.90 percent rally. DuPont , General Electric , JP Morgan Chase (JPM), Procter & Gamble , Travelers (TRV), United Technologies and Verizon also rose notably. On the other hand, tech stocks among the Dow components ended mostly lower, led by Hewlett-Packard , which slipped 1.50 percent. Transportation, housing, basic material and financial stocks were among the best performers of the session. On the economic front, the results of the manufacturing survey by the New York Federal Reserve showed that the business conditions index based on the survey fell 2 points to 6.3 in September. Meanwhile, the new orders index rose 2 points to 2.4 and the shipments index jumped nearly 15 points to 16.4, the highest level in more than a year. At the same time, the employment indexes slipped, with the number of employees index retreating 3 points to 7.5, while the average workweek index slipped to 1.1. Nevertheless, the outlook is positive, with the 6-month outlook index advancing 3 points to 40.6. The Federal Reserve's industrial production report showed that output climbed 0.4 percent month-over-month in August after remaining unchanged in July. Manufacturing output was up 0.7 percent and mining output increased 0.3 percent, while production by utilities fell 1.5 percent. Capacity utilization edged up 0.2 points to 77.8 percent in August. Among categories, motor vehicles/parts production jumped 5.2 percent, while machinery and computer/electronics production also improved. With the advances in recent sessions, the Dow Industrials has rebounded nicely and has risen above its 21-day MA (currently at 15,026), 100-day MA (currently at 15,178) and 50-day MA (currently at 15,285). The 14-day relative strength index is currently at 76.56, suggesting that the Dow is in the overbought territory. The index could face resistance around the 15,548 level, which it reached yesterday before a modest pullback. Ahead of this level, the index also has resistance around 15,610 and 15,654 levels. On the downside, support lies around 15,461 and 15,380 and also around the 50, 100 and 21-day moving averages. | ||||||||||||
| US Economic Reports | ||||||||||||
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A
2-day FOMC meeting is scheduled to begin today, although the
post-meeting policy statement and the Chairman's press briefing are not
due until tomorrow.
Consumer prices in the U.S. showed a modest increase in the month of August, according to a report released by the Labor Department, with the uptick in prices matching economist estimates. The Labor Department said its consumer price index inched up by 0.1 percent in August following a 0.2 percent increase in July. The core consumer price index, which excludes food and energy prices, also edged up by 0.1 percent in August after rising by 0.2 percent in the previous month. The National Association of Home Builders is due to release its housing market index for September at 10 am ET. The consensus estimates call for an unchanged reading for the index, which is currently at 59. The housing market index rose to 59 from 56 in July. The present conditions index rose by 3 points to 62 and the sales expectations index was up by a point, while the index measuring prospective buyer traffic remained unchanged at 45. | ||||||||||||
| Stocks in Focus | ||||||||||||
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Altria
upwardly revised its full year earnings guidance to $2.57-$2.62 per
share from $2.51-$2.56 per share to reflect the impact of the September
11th Arbitration Panel decision and the reversal of tax accruals no
longer required. Meanwhile, the company affirmed its adjusted earnings
guidance of $2.36-$2.41 per share.
Microsoft raised its quarterly dividend by 22 percent to 28 cents per share. The company's board also approved a new share repurchase program authorizing up to $40 billion in share repurchases. Werner Enterprises issued below-consensus third quarter earnings guidance, blaming the anticipated shortfall on lower gains on sales of equipment, lower miles per truck and higher costs. The company expects earnings of 27-30 cents per share compared to the 36 cents per share expected by economists. Nvidia announced the appointment of Colette Kress, a former Microsoft and Cisco Systems executive, as its EVP and CFO, effective later this month. | ||||||||||||
| European Market | ||||||||||||
European stocks opened lower and have been languishing in the red, as traders look ahead to the FOMC meeting
In corporate news, U.K. Financial Investments announced that it has successfully completed the disposal of 6 percent of HM Treasury's stake in Lloyds Banking Group by an accelerated book building process to institutional investors. U.K. department store Debenhams said in its trading update that it expects full year pre-tax profits to be in line with the current market view. At its Capital Markets Day, Philips said it is committed to achieving its 2013 targets of 4-6 percent compounded annual growth in comparable sales, 10-12 percent EBITDA growth and 12-14 percent growth in return on invested capital. On the economic front, a survey by Zew showed that German economic sentiment rose for the second straight month. The indicator of economic sentiment for Germany rose 7.6 points to 49.6 in August. Economists expected a more modest improvement to 45. Meanwhile, a report released by the Office for National Statistics showed that U.K. annual inflation slowed to 2.7 percent in August from 2.8 percent in July. The inflation rate was in line with expectations. A separate report showed that producer price inflation in the U.K. slowed more than expected. Data released by the European Automobile Manufacturers' Association showed that new car sales in Europe fell 5 percent year-over-year in August. | ||||||||||||
| Asian Markets | ||||||||||||
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The
major Asian markets closed on a mixed note, with the Japanese, Chinese,
Hong Kong, Indonesian, South Korean and Taiwanese markets retreating,
while the Australian, New Zealand, Singaporean and Malaysian markets
advanced. The underlying sentiment was one of caution, as traders waited
for the outcome of the 2-day FOMC meeting beginning today with bated
breath.
Japan's Nikkei 225 average showed some volatility in early trading but held mostly above the unchanged line till late trading. Thereafter, buying interest waned and the average fell below the unchanged line and languished in negative territory before closing down 93 points or 0.65 percent at 14,312. Telecom, pharma, utility, construction, real estate, retail and food stocks moved to the downside, while export and resource stocks ended mostly higher. Australia's All Ordinaries ignored some early weakness and recovered steadily throughout the session before closing up 9.70 points or 0.19 percent at 5,251. Financial and utility stocks rose strongly, helping to offset weakness in the material and energy spaces. Hong Kong's Hang Seng Index closed at 23,181, down 71.89 points or 0.31 percent and China's Shanghai Composite Index fell 45.84 points or 2.05 percent before closing at 2,186. On the economic front, the minutes of the Reserve Bank of Australia's September meeting showed that the central bank is still mulling the possibility of further easing while also suggesting that a rate cut may not be imminent. The members of the monetary committee are of the view that it is important to be able to take further steps, should they become necessary. New motor vehicle sales in Australia rose 0.8 percent month-over-month in August, according to a report released by the Australian Bureau of Statistics. Sales were down 3.5 percent in July. Annually, car sales were up 0.2 percent. A report released by the Chinese Ministry of Commerce showed that foreign direct investment rose merely 0.62 percent year-over-year in August and was down about 9 percent from the previous month. | ||||||||||||
| Currency and Commodities Markets | ||||||||||||
Crude oil futures are slipping $0.59 to $106 a barrel after declining $1.62 to $106.59 a barrel on Monday. Gold futures are currently moving up $2.80 to $1,320.60 an ounce. In the previous session, Gold added $9.20 to $1,317.80 an ounce.
Among currencies, the U.S. dollar is trading at 99.18 yen compared to the 99.08 yen it fetched at the close of trading on Monday. Against the euro, the dollar is valued at $1.3361 compared to yesterday's $1.3334. | ||||||||||||
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