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Broadgate: Market News 10/1

10 January 2013

Stocks rose on Wednesday, rebounding from two days of losses, as investors turned their focus to the first prominent results of the earnings season.

Stocks had retreated at the start of the week from the S&P 500’s highest point in five years, hit last Friday, on worries about possible earnings weakness.

Shares of Alcoa Inc were down 0.5 percent to $9.08 after early gains, following the company’s earnings release after the bell on Tuesday. The largest U.S. aluminum producer said it expects global demand for aluminum to grow in 2013.

Herbalife Ltd stock rose 4.2 percent to $39.95 in its most active day of trading in the company’s history after hedge fund manager Dan Loeb took a large stake in the nutritional supplements seller. Prominent short-seller Bill Ackman had previously accused the company of being a “pyramid scheme,” which Herbalife has denied.

Traders have been cautious as the current quarter shaped up like the previous one, with companies recently lowering expectations, said James Dailey, portfolio manager of Team Asset Strategy Fund in Harrisburg, Pennsylvania. Lower expectations leave room for companies to surprise investors even if their results are not particularly strong.

“The big question and focus is on revenue, and Alcoa had better-than-expected revenue,” which calmed the market a little, Dailey said.

Overall, corporate profits were expected to beat the previous quarter’s meager 0.1 percent rise. Both earnings and revenues in the fourth quarter are expected to have grown by 1.9 percent, according to Thomson Reuters data.

The Dow Jones industrial average gained 61.66 points, or 0.46 percent, to 13,390.51. The Standard & Poor’s 500 Index rose 3.87 points, or 0.27 percent, to 1,461.02. The Nasdaq Composite Index gained 14.00 points, or 0.45 percent, to 3,105.81.

Facebook Inc shares rose above $30 for the first time since July 2012, trading up 5.3 percent at $30.59. Facebook, which has been tight-lipped about its plans after its botched IPO in May, invited the media to its headquarters next week.

Clearwire Corp shares jumped 7.2 percent to $3.13 after Dish Network bid $2.28 billion for the company, beating out a previous Sprint offer and setting the stage for a takeover battle for the wireless service provider that owns crucial mobile spectrum.

Apollo Group Inc slid after heavier early losses, a day after it reported lower student sign-ups for the third straight quarter and cut its operating profit outlook for 2013. Apollo’s shares were last off 7.8 percent at $19.32.

Volume was below the 2012 average of 6.42 billion shares traded per day, as 6.10 billion were traded on the New York Stock Exchange, NYSE MKT and Nasdaq.

Advancing stocks outnumbered declining ones on the NYSE by 2,014 to 963, while on the Nasdaq advancers beat decliners 1,603 to 859.

Currencies

The yen was on the defensive near a 2 1/2-year low on Thursday on expectations Bank of Japan policy will take a fresh and bold approach to boost inflation later this month.

The yen last stood at 87.97 yen to the dollar, down slightly from late U.S. levels, and edging near a 2 1/2-year low of 88.48 yen.

Its price action could become volatile as the BOJ January 21-22 policy meeting nears, as seen in the yen’s roughly 1.2 percent rebound from that low earlier this week.

“I feel it’s about time a for correction to set in after a big fall in the yen. Short-term players will likely take profits as soon as the yen stops falling,” said Teppei Ino, currency strategist at the Bank of Tokyo-Mitsubishi UFJ.

“But then again, there’s also chance expectations of BOJ easing could keep the yen under pressure until the bank’s policy meeting,” he added.

The bank is widely expected to heed Prime Minister Shinzo Abe’s call for adopting a 2 percent inflation target at its next policy meeting.

Expectations that Abe would push the BOJ to adopt more forceful monetary stimulus measures have driven the yen sharply lower in recent months.

At Friday’s peak, the dollar had gained nearly 12 percent against the yen since early November, and traders said the rally was due for a pause.

“After a 10-12 percent rise, there is bound to be some consolidation and a shakeout could possibly see dollar drop to 84 yen,” said Howard Jones, partner at money manager RMG Wealth Management in London.

“But any consolidation will be short-lived. From a macro view, with a huge change of policy taking place in Japan and the government determined to drive the yen lower, one must not underestimate them. We are looking at the dollar hitting 100 yen during the course of this year.”

The euro stood at $1.3060, edging closer to a four-week low of $1.2998 hit last Friday.

But it could be supported for now as the European Central Bank is expected to keep interest rates on hold at its first policy meeting of the year on Thursday, even though some market players think the bank may cut them some time in coming months.

Against the yen, the euro stood at 115.08 yen, just less than one yen below a 1 1/2-year high of 115.995 yen.

In Asia, a big focus is on Chinese trade data. Further signs of recovery in the Chinese economy could help the Aussie dollar, as Australia tends to benefit from Chinese demand for raw materials.

The Aussie last stood at $1.0503, slightly below late U.S. levels but still within reach of three-week high of $1.0536 hit on Wednesday.

Source:  Reuters.com

The information set out herein has been obtained from various public sources and is by way of information only. Broadgate Financial can accept no liability of any sort in relation thereto and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

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