News Column

MARKET COMMENT: US Stocks To Open Cautiously Higher After Sell-Off

August 4, 2014

Jon Darby

LONDON (Alliance News) - US stocks are set to open a little higher Monday following a heavy sell-off towards the end of last week, although investor sentiment may remain cautious given that there is very little in the data calendar to provide fresh impetus until Tuesday.

The DJIA dipped into negative territory for the year-so-far on Friday amid concerns that a strong bounce back in second quarter growth could lead the Federal Reserve to increase interest rates sooner than expected. While those fears abated a little on Friday, lifting stocks off their lows, the market still lost almost 3% over the week.

Futures trading currently indicates that the DJIA will open 35 points higher Monday, while the S&P 500 will open 5 points higher.

"Despite this slightly positive start to the week, there does appear to be a little caution in the markets," said Alpari market analyst Craig Erlam. "Investors are a little concerned that the sell-off which started last week is not over and could lead to something much bigger."

There's little in the US economic calendar of interest Monday, with just the ISM New York index for July at 1445 BST. In June, the index registered a high since January of 60.5.

About 75% of S&P 500 companies have now reported their second quarter earnings, with the majority beating expectations.

"So far, the news is positive on the growth front. All sectors have reported an increase in sales and earnings growth. Sales growth was particularly strong in the consumer services sector, which bodes well for overall GDP," said research director Kathleen Brooks.

American International Group is amongst the biggest names to report Monday, although the numbers aren't due until after the New York closing bell.

In the UK, the banking stocks are supporting the FTSE 100, following a positive reaction to HSBC's interim results, despite the bank announcing a drop in first half profit to USD12.34 billion from USD14.07 billion in the previous year. HSBC also said it set aside USD234 million in provisions for the miss-selling of various products, a significant reduction from the USD412 million it set aside the year before.

"This was a good performance in the face of further margin contraction, additional conduct provisions and lower Asia growth rates," said Numis Securities analyst Mike Trippitt.

HSBC shares are up 1.7%, while the FTSE 350 banking sector as a whole is up 1.5%. Standard Chartered is the only one of the FTSE 100 listed banks still to report its interim numbers, with the numbers due on Wednesday.

Heading toward the Wall Street opening bell, the FTSE 100 is up 0.5% at 6,711.24, the FTSE 250 is down 0.1% at 15,383.42, and the AIM All-Share is down 0.6% at 757.98.

The currency market has remained very subdued so far Monday, with the pound a marginal outperformer following a strong UK construction PMI print of 62.4 in July, which was slightly ahead of the forecast 64.0. The report also highlighted the strongest growth in UK residential housebuilding in more than a decade.

The pound currently trades at USD1.6833, and the euro trades at USD1.3419.

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Source: Alliance News

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