News Column

MARKET ANALYSIS: Sentiment Weak As Markets Seek Trading Cues

May 9, 2014

WASHINGTON (Alliance News) - The major US index futures are pointing to a lower opening on Friday, with sentiment seeing modest weakness, as traders express apprehension, given the lack of any major catalysts. The reporting season is slowly drawing to close, with earnings flow trickling down. The lone piece of economic evidence due for the day is the wholesale inventories report, which has limited ability to move markets. The markets may see a lack of direction against the backdrop of limited trading catalysts. Spurred by tame Chinese inflation data, Asian stocks managed to mitigate some of the weakness triggered by the uncertainty, while the European markets are seeing weakness.

US stocks closed Thursday's session on a mixed note amid nervousness about the overbought levels even as Fed Chair Janet Yellen's dovish Congressional testimony and corporate news along with positive overseas economic data offered encouragement. The major averages opened higher and advanced until the mid-session. Thereafter, the averages began to give back their gains, dropping below the unchanged line by late afternoon trading. The Dow Industrials recovered from its brief sojourn below the flat line before closing up 32.43 points or 0.20% at 16,551.

Meanwhile, the S&P 500 Index and the Nasdaq Composite Index continued to languish below the unchanged till the close. The former ended down 2.58 points or 0.14% at 1,876 and the latter closed at 4,052, down 16.18 points or 0.40%.

Eighteen of the thirty Dow components closed higher, while the remaining stocks declined. Disney (DIS), Goldman Sachs (GS), Nike (NKE), AT&T (T), Visa (V), Verizon (VZ) and Wal-Mart Stores (WMT) were among the biggest gainers of the session, while Merck (MRK), UnitedHealth Group (UNH) and Chevron (CVX) fell notably.

Biotechnology, utility, brokerage and energy stocks came under selling pressure.

On the economic front, the Labor Department reported that jobless claims fell to 319,000 in the week ended May 3rd from 345,000 in the previous week. The four-week average declined to 325,000 from 320,000. Continuing claims calculated with a week's lag fell 76,000 in the week ended April 26th.

The Dow Industrials ground higher yet again and settled just below a resistance around 16,572. Ahead of the level, the index also has resistance around 16,640. On the downside, the index has support around 16,514, 16,445, its 21-day MA (currently at 16,422) and its 50-day MA (currently at 16,371).

Commodity, Currency Markets

Crude oil futures are rising USD0.34to USD100.60 a barrel after receding USD0.50 to USD100.27 a barrel on Thursday. Meanwhile, gold futures are currently moving up USD3.90 to USD1,291.60 an ounce. In the previous session, gold fell USD1.20 to USD1,287.70 an ounce.

Among currencies, the US dollar is trading at 101.70 yen compared to the 101.66 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at USD1.3780 compared to yesterday's USD1.3840.


The Asian markets closed mixed, with the Australian, Chinese, New Zealand and Chinese markets declining, while the rest of the major markets in the region advanced. With the Chinese inflation data triggering hopes of stimulus, some optimism emerged despite the mixed lead from Wall Street overnight and the ongoing Ukrainian crisis.

Japan's Nikkei 225 average held above the unchanged for much of the session before closing up 35.81 points or 0.25% at 14,200, thereby building on its gains. Most export stocks advanced, while defensive sectors moved to the downside.

Hong Kong'sHang Seng Index ended at 21,863, up 25.87 points or 0.12%, while Australia's All Ordinaries languished below the unchanged line throughout the session before closing down 13.90 points or 0.25% at 5,442. Material and financial stocks moved notably to the downside, while healthcare stocks gained some ground.

China'sShanghai's Composite Index closed at 2,011, down 4.14 points or 0.21%.

On the economic front, a report released by China's National Statistical Office showed that China's annual consumer price inflation slowed to 2% in April from 2.4% in March, while economists expected a 2.1% rate for the month. Meanwhile, a separate report showed that the slowdown in the producer price index eased, although by less than expected.

Preliminary report released by Japan'sCabinet Office showed that its leading economic index fell to 106.5 in March from 108.7 in February, below expectations for a reading of 106.7.

Meanwhile, the Reserve Bank of Australia stated in its quarterly monetary policy statement that the current accommodative monetary policy setting is likely to be appropriate for some time yet. The growth outlook for 2014 was raised slightly, while that for 2015 was lowered by 25 basis points.


European stocks are retreating after yesterday's rally amid the earnings flow and simmering tensions in Ukraine

In corporate news, Telefonica reported higher OIBDA for the first quarter and reiterated its guidance for 2014. Steel maker Arcelor Mittal (MT) reported higher first quarter earnings and affirmed its earnings guidance for the year. Meanwhile, Alcatel-Lucent reported a narrower loss for its first quarter. Wind turbine maker Vestas reversed to a profit in its first quarter. IAG, the parent company of British Airways, reported a narrower loss for its first quarter.

On the economic front, a report released by the German Federal Statistical Office showed that exports fell for the second straight month in March, declining 1.8% month-over-month. Imports also fell, down 0.9%, resulting in a decline in the trade surplus to 14.8 billion euros from 15.8 billion euros in February. A separate report showed that manufacturing turnover in Germany fell 0.6% month-over-month in March compared to expectations for a 1.1% drop in February.

Meanwhile, UK manufacturing output rose 0.5% month-over-month in March, according to a report released by the UK Office for National Statistical Office. The growth exceeded expectations. Industrial output as a whole fell 0.1%, while economists expected a steeper 0.2% drop.

A separate report showed that UK trade deficit for March came in narrower than expected at 8.5 billion pounds.

US Economic Reports

The Commerce Department is scheduled to release its wholesale inventories report for March at 10 am ET. Economists expect wholesale inventories to have risen by 0.5% month-over-month.

Wholesale sales rose 0.7% month-over-month in February and climbed 3.1% year-over-year. Wholesale inventories were up 0.5% month-over-month and 4.5% higher than in the year-ago period. The wholesale inventories to sales ratio came in at 1.19 compared to 1.17 in the year-ago period.

Dallas Federal Reserve Bank President Richard Fisher is scheduled to speak on monetary policy, in New Orleans at 12 pm ET.

Stocks in Focus

Omnicom (OMC) and Publicis Group announced the termination of their proposed merger by mutual agreement, citing the difficulty in completing the transaction within a reasonable timeframe.

CSC (CSC) reported first quarter earnings that exceeded estimates but its revenues were shy of estimates. The company issued in line earnings guidance for 2014.

Graphics chipmaker NVIDIA (NVDA) reported better than expected first quarter results and its revenue guidance for the second quarter was positive.

Allscripts Healthcare (MDRX) reported first quarter non-GAAP earnings that were in line with estimates, while its revenues were shy of estimates. CBS (CBS) reported higher profits for its first quarter despite a decline in revenues.

Scientific Games' (SGMS) first quarter results trailed estimates. Symantec (SYMC) reported better than expected fourth quarter results and in line revenues. The company's full year guidance was upbeat.

Gap (GPS) reported that its net sales rose 10% year-over-year in April, with comparable store sales rising 9% compared to the 7% increase in the year-ago period.

Consolidated Edison (ED) reported first quarter ongoing earnings of USD1.17 per share, ahead of the consensus estimate. The company's operating revenues of USD3.79 billion also exceeded estimates. The company reiterated its 2014 guidance.

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Source: Alliance News

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