News Column

Wall Street Apprehensive Amid Rise In Risk Aversion

May 7, 2014

WASHINGTON (Alliance News) - The mood on Wall Street continues to remain cautious on Wednesday after yesterday's backlash suffered by stocks. Global cues are negative, with Asian stocks dropping notably, while the European stocks are also seeing weakness. The sentiment in the domestic markets is likely to be dictated by Fed Chair Janet Yellen's testimony before a Congressional committee and reaction to some earnings announcements. Any development in Ukraine could also impact sentiment.

At 6:15 am ET, the Dow futures are declining 4 points, the S&P 500 futures are moving down 0.25 points and the Nasdaq 100 futures are down 5.25 points.

US stocks moved to the downside on Tuesday, as traders remained cautious amid the lack of any compelling catalysts.

On the economic front, the Labor Department is scheduled to release its preliminary first quarter productivity and costs report at 8:30 am ET. The consensus estimate calls for a 1.2% quarter-over-quarter drop in productivity, while unit labor costs may have risen 2.8%. Yellen is due to testify before the Joint Economic Committee in Washington at 10 am ET.

The Energy Information Administration will release its petroleum status report for the week ended May 2nd at 10:30 am ET. The Treasury is set to announce the results of its auction of 10-year notes at 1 pm ET.

The Federal Reserve is scheduled to release its consumer credit report for March at 3 pm ET. Economists expect outstanding consumer credit to have increased by USD15.1 billion in March compared to a USD16.5 billion in February.

In corporate news, Disney (DIS) reported better than expected second quarter results. Activision Blizzard (ATVI) also reported above consensus results for its first quarter and issued strong revenue guidance for 2014, while its earnings guidance was weak. Peer Electronic Arts' (EA) fourth quarter results also exceeded expectations and its guidance for fiscal year 2015 was strong.

Liberty Global (LBTYA) reported a loss for its first quarter, while its revenues were about in line with the consensus estimate. Allstate's (ALL) first quarter operating income per share was ahead of expectations.

Papa John's (PZZA) reported first quarter earnings that trailed expectations, while its revenues were ahead of estimates. The company reaffirmed its 2014 guidance.

Marathon Oil's (MRO) first quarter results were better than expected. FMC Corp. (FMC) also reported first quarter earnings and revenues that beat estimates. The company also reaffirmed its 2014 earnings guidance.

Avis Budget (CAR), (CTRP), Dynegy (DYN), Expeditors International (EXPD), Hain Celestial (HAIN), Protective Life (PL), Prudential (PRU) and tw Telecom (TWTC) are among the companies due to release their quarterly results after the close of trading.

The Asian markets closed mostly lower, hit by the negative lead from Wall Street overnight and the intensifying tensions between Ukraine and Russia. The Japanese market retreated sharply, as the safe haven yen rose in response in the increase in risk aversion.

Japan's Nikkei 225 average opened notably lower and moved roughly sideways thereafter. The index closed down 424.06 points or 2.93% at 14,034, its lowest level since April 14th. Australia's All Ordinaries ended 43.60 points or 0.80% lower at 5,419. A majority of stocks moved to the downside, led by healthcare, material and financial stocks. Hong Kong'sHang Seng Index ended at 21,746, down 230.07 points or 1.05% and China's Shanghai Composite Index fell 17.95 points or 0.89% before closing at 2,010.

On the economic front, revised estimates released by Markit Economics showed that China's service sector growth slowed in April. The service sector purchasing managers' index eased to 51.4 in April from 51.9 in March. The HSBC composite output index came in at 49.5 in April, suggesting contraction in private sector activity.

A report released by the Australia Bureau of Statistics showed that retail sales in Australia rose 0.1% month-over-month in March, shy of forecast for a 0.4% increase.

European stocks are trading on a lackluster note and are currently lower, although they have come off their lows amid the release of a flurry of earnings.

In corporate news, Siemens (SI) reported first quarter earnings that were below estimates by most analysts. Dutch insurer ING also reported weak first quarter results. Meanwhile, Alstom, which is being pursued by Siemens and General Electric (GE), reported fairly positive first quarter results and announced its plan to scrap its dividend. Among banks, Societe Generale reported a decline in its first quarter profits, while Credit Agricole's earnings rose. Meanwhile, Commerzbank reported below consensus profits for its first quarter.

On the economic front, the German Federal Statistical Office reported that German factory orders fell 2.8% month-over-month, belying expectations for a 0.3% increase. Meanwhile, German construction sector activity moved into contraction zone in April, the results of a survey by Markit showed, with the purchasing managers' index slipping 2.8 points to 49.7. A separate report showed that French trade deficit widened more than forecast in March.

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Source: Alliance News

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