News Column

MARKET ANALYSIS: Lack Of Catalysts May Lead To Indecision

June 20, 2014





WASHINGTON (Alliance News) - The major US index futures are pointing to a higher opening on Friday, with sentiment reflecting nervousness of traders, as they weigh the recent market advances against the economic uncertainty. Adding to concerns would be disappointing earnings from Oracle, which reported sub-par earnings and revenues. Barring a few earnings announcements, there aren't any major trading cues for the markets to digest. Nevertheless, the markets could witness some volatility associated with quadruple witching.

US stocks closed a volatile session on a narrowly mixed note on Thursday amid the release of some positive economic readings. The major averages opened mixed and after seeing modest strength in early trading following the release of in line jobless claims data and positive regional manufacturing data, the averages declined in late morning trading and fell to their intra-day lows by the late afternoon. The averages trimmed their losses over the remainder of the session before closing mixed.

The Dow Industrials ended up 14.84 points or 0.09% at 16,922 and the S&P 500 Index closed 2.50 points or 0.13% higher at a new record closing high of 1,960, while the Nasdaq Composite ended at 4,359, down 3.51 points or 0.08%.

Seventeen of the thirty Dow components closed higher, while the remaining thirteen stocks declined. Chevron (CVX), General Electric (GE), Johnson & Johnson (JNJ) and United Technologies (UTX) were among the biggest gainers of the session.

Gold and utility stocks rose sharply on the day, while computer hardware and brokerage stocks came under selling pressure.

On the economic front, the Labor Department reported that jobless claims fell to 312,000 in the week ended June 14th from 318,000 in the previous week. The four-week moving average also declined to 312,000 from 316,000. Continuing claims calculated with a week's lag dropped by 54,000 to 2.561 million in the week ended June 7th, hitting the lowest level since October 2007.

The results of the Philadelphia Federal Reserve's manufacturing survey showed that its diffusion index of business activity rose to 17.8 in June from 15.4 in May, marking the highest level since September. The new orders index rose 6.3 points to 16.8, the shipments index was up 1.3 points to 15.5 and the order backlogs index climbed 14 points to 11.5. The employment indexes also improved, with both the number of employees index and the average workweek index rising from the previous month. The 6-month outlook index for business activity also jumped to 52 from 37.4.

The Conference Board reported that its leading economic indicators index rose 0.5% month-over-month in May following a 0.3% increase in April. The Conference Board noted that the index still points to an expanding economy despite being held back slightly by housing permits. The lagging economic indicators index was up 0.4% compared to a 0.3% increase by the coincident economic indicators index.

Notwithstanding valuation concerns, the major averages managed to stay afloat yesterday. Immediate resistance for the Dow Industrials lies around 16,940. If the index convincingly breaks above that level, it could make an attempt at the 16,980 level. On the downside, 16,844, 16,776 and 16,719 could serve as support levels.


Commodity, Currency Markets

Crude oil futures are rising USD0.46 to USD106.51 a barrel after advancing USD0.46 to USD106.43 a barrel on Thursday. Meanwhile, gold futures are sliding USD0.90 to USD1,313.20 an ounce. In the previous session, gold jumped USD41.40 to USD1,314.10 an ounce.

Among currencies, the US dollar is trading at 102.06 yen compared to the 101.94 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at USD1.3579 compared to yesterday's USD1.3608.

Asia

The major Asian markets closed mixed, mostly reversing the previous session's move, as the Fed optimism ebbed. The Australian, Japanese, New Zealand, South Korean and Taiwanese markets retreated, while most other major markets, including China and Hong Kong, advanced.

The Japanese market went about in a listless manner before closing marginally lower. The Nikkei 225 average opened little changed and moved back and firth across the unchanged line for much of the session before closing down 11.74 points or 0.08% at 15,349.

Export stocks closed mostly to the upside, with Isuzu Motors and NGK Insulators leading the gains. On the other hand, banking, utility, telecom, resource and construction stocks came under selling pressure.

Australia's All Ordinaries opened lower and declined steadily throughout the session, ending down 44.80 points or 0.82% at 5,402. Most sectors moved to the downside, with the exception of real estate stocks.

Meanwhile, Hong Kong'sHang Seng Index ended at 23,194, up 26.33 points or 0.11%, and China's Shanghai Composite Index closed 2.94 points or 0.15% higher at 2,027.

Europe

European stocks are seeing some volatility in early trading and are currently trading mixed.

In corporate news, Siemens (SI) and Mitsubishi sweetened their offer for Alstom by raising the cash component of the offer by 1.2 billion euros to 8.2 billion euros. This comes close on heels of General Electric (GE) announcing proposals to increase the attractiveness of its offer. The US conglomerate proposes to stitch up three joint ventures with Alstom in fields such as offshore wind power and nuclear turbines and accordingly trim its offer price.

Meanwhile, Shire (SHPG) acknowledged the receipt of a buyout proposal from AbbVie (ABBV). UK department store Debenhams said its like-for-like sales rose 0.7% in the 14 weeks ended June 7th.

On the economic front, a report released by Destatis showed that German producer prices fell 0.8% year-over-year in May, slower than the 0.9% drop in April. Economists expected a more modest 0.7% drop. On a monthly basis, producer prices edged down 0.2% compared to expectations for stagnant prices.

The Eurostat reported that the eurozone current account surplus rose to a seasonally adjusted 21.5 billion euros from 19.6 billion euros in March. The trade surplus was up at 16.9 billion euros.

US Economic Reports

There are not any major US economic reports due for release on the day.

Stocks in Focus

Oracle (ORCL) said its fourth quarter non-GAAP earnings rose 6% to 92 cents per share on revenues of USD11.3 billion, up 3% year-over-year. New software license revenues were unchanged at USD3.8 billion. The results trailed estimates.

TIBCO Software (TIBX) reported second quarter non-GAAP earnings of 14 cents per share, lower than 18 cents per share last year. The earnings were in line. Revenues on a non-GAAP basis rose 3% to USD254 million. Separately, the company also announced the appointment of Todd Bradley as president.

Darden Restaurants (DRI) reported fourth quarter results that trailed expectations. Meanwhile, CarMax (KMX) reported first quarter results that beat estimates.



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Source: Alliance News


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