Markets May Show Lack Of Momentum As Traders Wait For Data - RTTNews Daily Market Analysis

(RTTNews) - The major U.S. index futures are currently pointing to a mixed opening on Tuesday, with stocks likely to show a lack of direction in early trading after falling sharply in the previous session. While some traders may look to go bargain hunting following Monday's sell-off, a notable increase by the price of oil is likely to keep buying interest somewhat subdued. Some traders may also stay on the sidelines ahead of the release of key reports on consumer confidence and new home sales as well as the release of the minutes of the Federal Reserve's August meeting.

U.S. stocks began Monday's session notably lower, with the selling pressure intensifying over the course of trading, as negative views on insurer and Dow component AIG (AIG | Quote | Chart | News | PowerRating) sparked tensions about the broader credit market. The Dow Industrials declined 241.81 points or 2.08% to 11,386 and the S&P 500 Index fell 25.36 points or 1.96% to 1,267, while the technology-weighted Nasdaq Composite Index plummeted 49.12 points or 2.03% to 2,366.

All thirty of the Dow components ended the session in negative territory, with AIG leading the blue chip index lower. Bank of America (down 4.14%), JP Morgan Chase (JPM | Quote | Chart | News | PowerRating) (down 4.09%), Citigroup (C) (down 2.92%), Chevron (CVX | Quote | Chart | News | PowerRating) (down 2.94%) and General Motors (GM | Quote | Chart | News | PowerRating) (down 2.97%) were among the worst decliners.

Among the sector indices, the Amex Securities Broker/Dealer Index and the KBW Bank Index receded 2.99% and 3.40%, respectively. While the Dow Jones Transportation Average fell 1.95%, the Amex Airline Index declined 2.57%. The S&P Retail Index lost 2.38% compared to a 3.25% decline by the Philadelphia Housing Sector Index. Utility, oil, gold, biotechnology and technology stocks also came under selling pressure.

On the economic front, the National Association of Realtors released a report on existing home sales that showed a 3.1% monthly increase in existing home sales in July to a seasonally adjusted 5 million annualized unit rate. Meanwhile, the previous month's sales were revised down an additional 0.2% to represent a decline of 2.8% in June. On the other hand, existing home sales for July were down 13.2% year-over-year. Inventories at the end of July rose 3.9% to an all time record high of 4.67 million homes, representing an 11.2-month supply at the current sales pace.

The national median price of existing homes fell 7.1% to $212,400 from a year-ago. Regionally, sales increased in the West (up 9.7%), Northeast (up 5.9%) and Midwest (up 0.9%), while sales edged down 0.5% in the South.

Currency, Commodity Markets

Crude oil futures are trading up $0.43 at $115.54 a barrel after the commodity advanced $0.52 to $115.11 a barrel on Monday. Meanwhile, gold futures, which declined $7.80 to $825.70 an ounce in the previous session, are currently falling $9.30 at $816.40 an ounce.

On the currency front, the U.S. dollar is currently trading at 109.6850 yen compared to the 109.30 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is currently trading at $1.4624.

Asia

The stock markets across the Asia-Pacific region closed lower on Tuesday on renewed concerns about the strength of the U.S. financial sector. Wall Street tumbled overnight, contributing to the downward momentum for the markets.

The Japanese stock market closed lower, as investors locked in profits following Monday's sharp gains. After opening lower, the market came off the day's lows in the afternoon session as the dollar rose to the upper 109-yen levels. The benchmark Nikkei 225 index closed down 99.95 points or 0.8% at 12,779.

On the economic front, the Bank of Japan said that Japan's corporate service price index climbed 1.3% year-over-year in July, reaching a reading of 95.6. The increase was slightly below analyst expectations for an increase of 1.4% on year, but was higher compared to the 1.2% annual increase in June. The data also represented the 24th straight month of growth for the index. The index eased 0.1% from a month ago.

Financial stocks finished lower on worries about the U.S. financial sector. Mitsubishi UFJ lost 1.3%, Mizuho Financial declined 0.4%, Sumitomo Mitsui dropped 1.5% and Resona Holdings lost 0.9%. Top brokerage Nomura Holdings fell 2.1% and Daiwa Securities Group gave back 1.3%. Sompo Japan Insurance shed 2.0% and Mitsui Sumitomo Insurance slid 1.5%.

Among export-oriented stocks, electronics giant Sony dropped 1.6%, Canon lost 1.0%, Komatsu declined 1.5% and Toyota Motor slipped 0.2%. Nikon closed unchanged and Honda Motor gained 0.6%.

The South Korean market also closed lower after it snapped a five-day losing streak on Monday. Wall Street's plunge overnight and a steep drop by the won against the greenback weighed on most blue chips. The benchmark Korea Composite Stock Price Index or KOSPI closed down 11.86 points or 0.79% at 1,490.25. The key index tumbled to the 1,450-level in the morning, but it managed to trim its losses as bargain hunting set in at lower levels.

On the economic front, the central bank's minutes showed that policymakers at the Bank of Korea unanimously voted to hold the key interest rate steady in July as concerns over spiraling inflation outweighed worries about the slowing economy. In a rate-setting meeting on July 10, the central bank froze the benchmark 7-day repo rate at 5% for the 11th straight month.

Among builders, Daewoo Engineering & Construction shed 1.2% and Hyundai Engineering & Construction fell 2.5%. In the tech sector, market heavyweight Samsung Electronics tumbled 3.6% and its smaller consumer electronics rival LG Electronics lost 1.9%.

Significant weakness was also visible among Chinese stocks, with the benchmark Shanghai Composite Index closing down 63.29 points or 2.62% at 2,350.08, near a 20-month closing low. Brokerages finished sharply lower, as stock market turnover remained low, while airlines and oil refiners fell following a rise in crude oil prices.

Haitong Securities tumbled 7.8% and Changjiang Securities plunged 7.2%. Among refiners, China Petroleum & Chemical Corp fell 0.9% and index heavyweight PetroChina dropped 1.8%. In the airline sector, China Southern Airlines slumped 7.2%.

The Hong Kong market closed off the day's lows, helped by gains in mainland insurers after China Life Insurance announced better-than-expected earnings for the first half. Nonetheless, the benchmark Hang Seng index still closed down 48.13 points or 0.23% at 21,056.66.

China Unicom fell over 7% and China Netcom dropped more than 5% after the two mainland telecom firms reported weak first-half results. China Mobile closed down 1% ahead of its results.

The Australian stock market closed slightly lower, recovering substantially from a sharp drop in early trading. The market opened with a deep cut, but it recovered over the course of the trading session to end slightly below the flat line as big miners recovered and banks trimmed their losses.

Europe

The major European markets have come under pressure on Tuesday, adding to the losses posted in the previous session. The French CAC 40 index and the German DAX index are down 0.5 percent and 0.1 percent, respectively. The U.K.'s FTSE 100 index is down by a more substantial 1.3 percent after the U.K. market was closed on Monday.

The weakness in the markets is partly due to release of some disappointing economic data, including a report from Germany's Federal Statistical Office showing that the German economy contracted 0.5% in the second quarter after expanding 1.3% in the first quarter. This marked the first contraction in German economic activity since the third quarter of 2004.

Separately, the latest German consumer confidence survey by the market research group GfK showed that its forward-looking consumer climate index for September slipped to 1.5 from a revised reading of 1.9 in August. According to GfK, the index fell to its lowest level since the summer of 2003.

In Paris, Vallourec, Renault, and Peugot are turning in some of the market's worst performances, while EADS and Carrefour are bucking the downtrend. While Thyssen Krupp and BMW are leading the German market lower, Deutsche Postbank and Metro are posting notable gains.

Additionally, Ferrexpo is helping to lead the U.K. market lower, with Enterprise Inns, Cairn Energy, and Anglo American also posting significant losses. Meanwhile, Liberty International is turning in one of the market's best performances.

U.S. Economic Reports

The Conference Board is scheduled to release its consumer confidence report for August at about 10 am ET on Tuesday. The report, which is based on a survey of 5,000 U.S. households, is expected to show that the consumer confidence index rose to 53 in August.

The consumer confidence index for July rose to 51.9 from an upwardly revised reading of 51 in June. While the expectations index rose to 43 from a record low of 41.4 in June, the present situations index was almost unchanged at 65.3.

The Commerce Department is also due to release its new home sales report for July at 10 AM ET. The consensus estimate calls for a drop in new homes sales to 525,000.

In June, sales of new one-family houses declined by 0.6% from the previous month to a seasonally adjusted annual rate of 530,000. Annually, new home sales were down a steeper 33.2%. The median sales price of new houses sold in June was $230,900, while new home inventories at the end of June totaled 426,000, representing a supply of 10 months at the current sales rate.

The Federal Reserve is also scheduled to release the minutes of its August 5th meeting at 2 PM ET.

As expected, the Fed left the fed funds target rate unchanged at 2% at its August meeting. Dallas Fed President Richard Fisher cast the only dissenting vote against the decision to remain on hold. The post-meeting policy statement relayed a balanced outlook on growth and inflation, but it did not provide much clarity on the future rate outlook.

On growth, the Fed noted that economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports. That said, the central bank retained its comments that labor markets have softened further and remain under considerable stress, while it also repeated its comments that tight credit conditions, housing and energy prices will weigh on growth over the next few quarters.

Compared to the previous statement, the FOMC shifted up the positioning of the phrase, "Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth."

While reiterating that it expects inflation to moderate later this year and next year, the committee also commented on the highly uncertain inflation outlook against the backdrop of continued increases in energy and commodities prices.

The Committee left out a phrase about its belief that the monetary policy easing along with its ongoing liquidity boosting measures should help to promote moderate growth over time. Meanwhile, the Fed modified the statement on perceived risk to "Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the Committee."

Stocks in Focus

Anadarko Petroleum (APC | Quote | Chart | News | PowerRating) may trade higher after it announced that it would buy back up to $5 billion worth of its shares over the next three years. Aetna (AET | Quote | Chart | News | PowerRating) could be in focus after it said in a filing that it is reaffirming its third quarter and full year 2008 guidance. The company expects third quarter operating earnings of $1.12 per share and full year operating earnings of $4 per share. Analysts expect earnings of $1.12 per share for the quarter and $4.01 per share for the year.

Charming Shoppes (CHRS | Quote | Chart | News | PowerRating) is likely to move in reaction to its announcement that it is selling its non-core misses catalog clothing unit and related credit card receivables. The unit is scheduled to be sold for $75 million in cash and is expected to close by the end of September. The company also announced its intention to sell Crosstown Traders to Orchard Brands for $35 million. The announcement is seen as a step towards focusing on its core brands.

Coach (COH | Quote | Chart | News | PowerRating) could trade higher after it announced that its board has authorized the buyback of $1 billion worth of its common stock. The company said it expects to complete the buyback by June 26, 2010. Wausau Paper Corp. (WPP | Quote | Chart | News | PowerRating) is likely to react to its announcement that it will shutdown one of its two paper machines at its specialty products mill in Jay, Maine. The company attributed the decision to higher costs and difficult market conditions. The company expects the shutdown to result in pre-tax charges of about $10 million.

American Eagle Outfitters (AEO | Quote | Chart | News | PowerRating) may see notable weakness after the apparel retailer reported a decrease in second quarter earnings. The retailer said that net income for the second quarter was $0.29 per share, down from $0.37 per share in the same quarter last year.

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