News Column

Wall Street Awaits Direction

July 7, 2014

WASHINGTON (Alliance News) - After strong data propelled the markets higher, Wall Street would be on 'wait-and-watch mode' on Monday in the absence of any major catalysts. Global markets also showed indecision, with the Asian markets trading in a lackadaisical manner, while European stocks are trading weak. The overbought levels of the markets could force traders to stay on the sidelines or take profits of recent gains, especially ahead of the unfolding of the second quarter reporting season and some Fed speeches scheduled for the week.

At 6:15 am ET, the Dow futures are slipping 21 points, the S&P 500 futures are moving down 2.50 points and the Nasdaq 100 futures are declining 7.50 points.

US stocks rallied strongly in the truncated week ended July 3rd, as strong data helped to soothe growth concerns, sending two of the three major averages into record territory. The markets were closed on Friday in observance of Independence Day.

On the economic front, after a strong jobs report released last week underlined the strength of the US economy, we move into a week that is fairly light both in terms of numbers and importance of data. Nevertheless, traders are likely to focus on a slew of Fed speeches scheduled for the day and the minutes of the June FOMC meeting. These are likely to provide additional insights into the Fed's thinking on how the economy is evolving and the appropriate monetary policy stance.

The weekly jobless claims report, the Commerce Department report on wholesale inventories for May, the Federal Reserve's consumer credit report for May, the results of the Treasury auctions of 3-year and 10-year notes and 30-year bonds and the Treasury Budget for June round up the economic events of the week.

Expedia (EXPE) announced an agreement to acquire Australian online trace company Holdings for USD658 million. The company expects the deal to close during the fourth quarter of 2014.

ACE (ACE) said it has signed a definitive agreement to buy the corporate property and casualty business of Itau Seguros from Brazil'sItau Unibanco for about USD685 million. The deal is expected to close in the first quarter of 2015 and be immediately accretive to the company's earnings.

CBS (CBS) announced that it is offering to exchange of CBS Outdoor Americas (CBSO), owned by CBS for outstanding shares of CBS Class B common stock.

The major Asian markets moved about in a lackluster manner following their recent gains. The indecisive mood was also due to the lack of lead from Wall Street, which remained closed on Friday.

The Japanese market retreated due to profit taking, as the Nikkei 225 average opened little changed but managed to stay afloat for much of the morning before pulling back in the afternoon. The index ended down 57.69 points or 0.37% at 15,379. Oil, export and financial stocks moved mostly to the downside.

After opening higher and remaining above the unchanged line until early afternoon trading, Australia's All Ordinaries retreated and spent much of the remainder of the session below the flat line. At the close of trading, the index was down 5.50 points or 0.10% at 5,506. Most sectors declined, with the exception of consumer, IT and real estate stocks.

Hong Kong'sHang Seng Index ended at 23,541, down 5.44 points or 0.02%, while China's Shanghai Composite Index closed 0.55 points or 0.03% lower at 2,060.

On the economic front, preliminary estimates released by Japan'sCabinet Office showed that its leading indicators index for Japan declined 0.8 points to 105.7 in May, the lowest reading since February 2013. Economists expected a more modest drop to 105.9.

European stocks opened lower and have been showing weakness since then, as traders adopt a wait-and-watch attitude before the emergence of the next meaningful catalysts.

In corporate news, Miner Anglo American said it would sell its 50% stake in Lafarge Tarmac to its joint venture partner Lafarge for 885 million pounds. The move would allow Lafarge to sell the unit, a regulatory requirement to complete its proposed merger with Holcim. Renault said its sales for the first half rose 4.7%, helped by strong performance in Europe.

On the economic front, German industrial production continued to decline, according to data released by the German Federal Statistical Office. Industrial output fell 1.8% month-over-month, declining for the third straight month and belying expectations for a 0.2% increase.

Eurozone investor sentiment recovered unexpectedly in July after weakening in the previous two months, led by an improvement in economic expectations, according to the Sentix survey of financial analysts and institutional investors. The sentiment indicator rose to 10.1 from June's 8.5. Economists had forecast a lower score of 7.7.

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Source: Alliance News

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