Ahead of the Bell: Dow futures are trading down 136 points and S&P futures are trading down 16 points. Financial markets remain jittery, following plans by the Federal Reserve to roll back its stimulus program, along with growing fears over China's outlook. The People's Bank of China is applying pressure on local banks to do a better job of managing their cash and lending. The PBOC has been allowing short term interest rates to rise in a move to end funding of speculative investments. The initiative is seen as adding fears to an already slowing economy. German business confidence rose for a second straight month in June, but it has done little to stem concerns about falling demand from the world's second largest economy.
- On the economic calendar today, Dallas Fed Manufacturing Survey for June will be out after the opening bell and it is forecasted to be flat compared with -10.5 for May. The dollar is up against the British pound and down against the euro and Japanese yen. Gold is trading at $1,284. Crude oil is currently trading at $93 a barrel.
- Last week, stocks slumped and posted a second straight week of losses after the Federal Reserve announced it has no change in its policy and the agency would maintain its $85 billion monthly bond-buying program. Stocks finished one of the worst weeks since last November. The central bank provided no specific indication when it would roll back its quantitative easing program, but said it would increase or reduce its stimulus program according to the economic data. For the week the Dow fell 1.8% and S&P was down 2.1%. The economic data continues to show improvement. According to the National Association of Home Builders, permits for new single-family homes rose in May to its highest since May 2008, a measure of builder confidence climbed in June to its highest level since March 2006. The Labor Department reported that Consumer Price Index edged up in May after two straight months of declines and a separate report from the Commerce Department showed housing starts rose less than expected in May, likely reflecting labor and material costs. However, weekly jobless claims were higher than forecasted as more Americans filed applications for unemployment benefits.
- The week ahead could bring more volatility with wild intraday swings as market participants digest the Federal Reserve's decision to scale back its ultra-loose monetary policy. The equity markets have been on a roller coaster and the uncertainty has fueled speculation that the uneven economic data might not support the central bank's plans. Some traders think this is a short term correction, which is healthy for equities and could be an opportunity for bargain hunters as portfolio managers reallocate asset classes. Second quarter earnings is on the horizon and investors have another concern to think about. The sequester and the payroll tax earlier this year is expected to impact growth and companies are starting to lower guidance. According to Thompson Reuters, earnings forecast for S&P 500 companies have declined from 6.1% in April to 3.2% a week ago. This week has a few key pieces of important economic data, including durable goods, new home sales, jobless claims, and personal income. The economic data will be scrutinized as economists’ forecast growth is expected to pick up in the second half. There are a number of Federal Reserve officials on the speaking circuit. Fed watchers will be looking for any clues as to the exact date when the central bank plans to end its stimulus program. Also, were there dissenter’s among FOMC members at the Fed’s last meeting? According to Federal Reserve Chairman, Ben Bernanke most Fed members agreed at the last meeting to roll back its QE program if the economic data improves. The Treasury Department will auction off $35 billion of 2-year notes, $35 billion of 5-year notes, and $29 billion of 7-year notes during the week. The 10 year treasury will be in the spotlight, the yield on the long bond has been on the rise ever since the Fed signaled it could scale back its asset purchase program. In addition to the spotty economic data, the Chinese credit markets are showing stress and interest rates are on the rise.
- On CNBC today, Bob Doll, chief equity strategist at Nuveen Asset Management, talked about the wild swings in the equity markets. Doll said the equity markets are pausing at the moment and it will last a while, as we got overbought and a little ahead of ourselves. He added China is a problem and we are not sure what the Fed will do. This pause in the equity markets could last for the rest of the summer and Doll believes pauses are normal. Investors have gotten spoiled, complacent and carried away because the markets were going up every day. Doll does not think 2.50% on the 10 year treasury is a problem for the bond market; the issue is how quickly we got there. He is worried about a financial accident, as we have had a long period of calm markets and a quick rise in interest rates could disrupt markets. Finally, Doll said China is a huge unknown right now.
- Disney's "Monsters University" was the top preforming movie at the Box Office this past weekend.
- Happy Monday and have a wonderful week!
Friday’s Close
DJIA up 48.08 pts/+0.28%/ 14,799.40
S&P up 4.24 pts/+0.27%/ 1,592.43
Nasdaq down 7.93 pts/-0.22%/ 3,357.25
Monday’s Futures
Dow Futures down 136.27 pts/-0.92%
S&P Futures down 16.50 pts/-1.01%
Nasdaq Futures up 27.25 pts/-0.77%
Overseas Markets
FTSE -1.36%
CAC 40 -1.96%
NIKKEI 225 -1.26%
HANG SENG -2.22%
Overseas: World stock markets are down today. European and Asian markets are down on fears the Federal Reserve will taper its quantitative easing program and slowdown in China.
Economic Reports: Chicago Fed National Activity Index expected to be -0.25 at 8:30 a.m., Dallas Fed Mfg Survey expected to be flat at 10:30 a.m., later in the week Durable Goods Orders, S&P Case-Shiller HPI, New Home Sales, Consumer Confidence, GDP, Weekly Jobless Claims, Personal Income and Outlays, Pending Home Sales Index, Chicago PMI, and Consumer Sentiment.
Top Headlines:
- Tenet Healthcare Corporation (THC) said it is buying Vanguard Health Systems Inc. (VHS) for $21 per share or $4.3 billion including debt.
- Vodafone Group Plc (VOD) announced it is acquiring Germany's largest cable operator Kabel Detschland for $7.7 billion euros.
- A growing number of US senators are raising concerns over China's Shuanghui Group proposed acquisition of Smithfield Foods (SFD), particularly since China imposes restrictions on imports of US meats.
- Peak annual meeting season is pretty much over and the results indicate shareholders continued to have their say on executive compensation matters, board leadership/structure, and environmental and social issues. To see how this year’s proxy season stacked up, view this interview and proxy voting report.
- Reports indicate US banks have given a proposal to the Federal Reserve in a private meeting on how to pay for restructuring too-big-to-fail institutions in the event of a future financial crisis.
Commodities/Currency:
Gold:down $7.90 to $1,284.50
Oil:down 0.04 to $93.65
EUR/USD 1.3109 +0.0008
USD/JPY 97.9400 +0.0150
GBP/USD 1.5359 -0.0033
Volatility Index (VIX): As of the close of business Friday, June 21, 2013 the VIX is down 1.59 at 18.90
Companies Reporting Quarterly Earnings:
None as of yet.
Today’s Opening and Closing Bells:
RCS Capital for its delayed IPO Celebration (Listed on June 5, 2013) will ring the opening bell.
Gol Linhas Aéreas Inteligentes S.A. will ring the closing bell.
Paras Madho
Corporate Actions & Market Watch
NYSE Euronext | Global Corporate Client Group
11 Wall Street | New York NY 10005
P: (212) 656-5404
pmadho@nyx.com
Exclusive Market Intelligence, Insight, and Network: www.NYSEConnect.com
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