News Column

MARKET ANALYSIS: Weak Data Could Aggravate Market Worries

June 25, 2014

WASHINGTON (Alliance News) - The major US index futures are pointing to a mixed opening on Wednesday, with the already fragile mood of the markets hurt further by some sore data and mixed earnings released earlier in the day. Among the duo of reports released earlier in the day, durable goods orders unexpectedly fell, while first quarter growth was downwardly revised. The markets could use the catalysts and geopolitical tensions arising out of the continued insurgency in Iraq as reasons to sell stocks.

US stocks turned lower over the course of the trading session on Tuesday despite the release of strong domestic data. Elevated crude oil prices in the wake of geopolitical concerns surrounding the unrest in Iraq provided a reason for traders to liquidate holdings in the overbought markets.

After opening lower, the major averages recovered following the release of the positive economic readings and remained higher until late afternoon trading. Thereafter, the averages declined steadily before closing lower for the session.

The Dow Industrials ended down 119.13 points or 0.70% at 16,818, the S&P 500 Index closed 12.63 points or 0.64% lower at 1,950 and the Nasdaq Composite ended at 4,350, down 18.32 points or 0.42%.

Twenty-six of the thirty Dow components closed lower, with United Technologies (UTX), Exxon Mobil (XOM), JP Morgan Chase (JPM), Goldman Sachs (GS), Boeing (BA) and American Express (AXP) leading the slide.

Resource and financial stocks were among the worst performers of the session, moving lower along with most of the other major sectors.

On the economic front, the Conference Board reported that its consumer confidence index rose 3 points to 85.2 in June, reaching the best level since January 2008. The present situation index rose 4.8 points to 85.1 and the expectations index was up 1.7 points to 85.2.

Additionally, the Commerce Department reported that new home sales rose to a seasonally adjusted annual rare of 504,000 in May from 425,000 in April, hitting the highest level since May 2008. Inventories measured in terms of months of supply declined to 4.5 months from 5.3 months. The median price of a new home rose 6.9% year-over-year to USD282,000.

Commodity, Currency Markets

Crude oil futures are climbing USD0.06 to USD106.09 a barrel after sliding USD0.14 to USD106.03 a barrel on Tuesday. An ounce of gold is currently fetching USD1,318.30, down USD3 from the previous session's close of USD1,321.30. On Tuesday, gold rose USD2.90.

Among currencies, the US dollar is trading at 101.68 yen compared to the 101.97 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at USD1.3644 compared to yesterday's USD1.3606.


The major Asian markets closed lower, hurt by the negative close on Wall Street overnight and the brewing geopolitical tensions in Ukraine and Iraq.

The Japanese market retreated, as the yen firmed up amid the risk aversion. The Nikkei 225 average opened lower and languished below the unchanged line throughout the session. The index closed 109.63 points or 0.71% lower at 15,267.

Australia's All Ordinaries also spent the entire session below the unchanged line before closing down 28.30 points or 0.52% at 5,387. Most sectors retreated, with the exception of telecom and IT stocks.

Hong Kong'sHang Seng Index ended at 22,867, down 13.94 points or 0.06%, and China's Shanghai Composite lost 8.43 points or 0.41% before closing at 2,026.

On the economic front, a report released by the Bank of Korea showed that consumer sentiment in Korea improved slightly. The consumer confidence index rose 2 points to 197 in June.


European stocks opened lower and have been seeing weakness since then, with the three major averages in the region currently notably lower. The markets chose to ignore positive German consumer sentiment data released earlier in the day.

In corporate news, the UK'sBunzl Group said overall trading is consistent with expectations for the six months ending June 30. The company also expects positive underlying revenue growth and improved operating margins.

Stagecoach reported higher profits for fiscal year 2014 and also said its current trading is in line with expectations. The company also raised its dividend.

On the economic front, the results of a survey by market research group GfK showed that German consumer confidence is set to improve in July. The forward looking consumer confidence index based on the survey is expected to improve to 8.9 in July from 8.6 for June.

US Economic Reports

With orders for transportation equipment showing a notable decrease, the Commerce Department released a report showing an unexpected drop in new orders for US manufactured durable goods in the month of May.

The Commerce Department said durable goods orders fell by 1.0% in May following a 0.8% increase in April. The pullback came as a surprise to economists, who had expected orders to increases by another 0.4%. Excluding the steep drop in orders for transportation equipment, orders fell by a more modest 0.1% in May compared to a 0.4% increase in April.

Economic activity in the US decreased by much more than previously estimated in the first quarter of 2014, according to a report released by the Commerce Department on Wednesday.

The report showed that US gross domestic product tumbled by 2.9% in the first quarter compared to the previously estimated 1.0% drop. Economists had expected the revised data to show a 1.8% decrease. The much steeper than previously estimated drop primarily reflected downward revisions to consumer spending and exports and an upward revision to imports.

Markit is scheduled to release flash estimates of its non-manufacturing purchasing managers' index for June at 9:45 am ET.

The Energy Information Administration will release its petroleum status report for the week ended June 20th at 10:30 am ET.

Crude oil stockpiles decreased by 0.6 million barrels to 386.3 million barrels in the week ended June 13th. However, inventories were in the upper half of the average range for this time of the year.

Meanwhile, distillate stockpiles rose by 0.4 million barrels yet were below the lower limit of the average range. Additionally, gasoline inventories increased by 0.8 million barrels, rising to the upper half of the average range.

Refinery capacity utilization averaged 88.9% over the four weeks ended June 13th compared to 89.3% over the four weeks ended June 6th.

The Treasury Department is due to release the results of its auction of USD35 billion worth of 5-year notes at 1 pm ET.

Stocks in Focus

Apogee (APOG) reported first quarter earnings of 21 cents per share on revenues of USD210.9 million, up 18%. The earnings trailed expectations, while the revenues were ahead of expectations. The company also raised its 2015 earnings per share guidance to USD1.40-USD1.50 from USD1.35-USD1.50, while it continues to expect revenues to grow 15-20%. The guidance was in line.

Apollo (APOL) reported third quarter earnings that beat estimates, while its revenues missed estimates. The company narrowed its revenue outlook range for the full-year 2014.

General Mills (GIS) reported fourth quarter adjusted earnings per share and top line missed analysts' estimates. Looking ahead to fiscal 2015, the company projects single digit rate growth in earnings and sales.

Monsanto (MON) reported third quarter earnings that were ahead of expectations, while its revenues were slightly shy of estimates. The company raised the lower end of its full year earnings outlook and announced a USD10 billion stock buyback program.

In conjunction with its investor day, PAREXEL (PRXL) reconfirmed its fourth quarter and full year guidance. The company expects fourth quarter earnings of 59-63 cents per share on revenues of USD507 million to USD513 million. For the full year, the company expects non-GAAP earnings of USD2.11-USD2.15 per share on revenues of USD1.936 billion to USD1.942 billion. The company also provided 2015 guidance, forecasting earnings of USD2.51-USD2.75 per share on revenues of USD2.120 billion to USD2.150 billion. The guidance was in line.

Valmont Industries (VMI) lowered its 2014 earnings guidance to USD9.35-USD9.65 per share from USD10-USD10.50 per share, citing a challenging environment in its North American utility structures business and the continued weakness in the Australian economy. The guidance trailed expectations.

Lockheed Martin Corp. (LMT) won a USD1.86 billion fixed-price contract from the US Air Force to produce two Space Based Infrared System missile defense early warning satellites.

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Source: Alliance News

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