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Broadgate: Market News 12/7

12 July 2012

The Dow and the Nasdaq lost ground on Wednesday as minutes from the Federal Reserve’s June meeting showed policymakers are open to the idea of more economic stimulus, but that conditions might need to worsen first.

The S&P 500 ended unchanged, breaking a four-day losing streak, after paring losses into the close. Technology and industrials led the S&P’s losers, as the market was hit by a number of high-profile earnings warnings in recent days.

Investors were hoping the Fed’s June minutes would suggest the central bank was getting closer to another round of stimulus. The lack of clues prompted selling in all three major indexes, though stocks pared losses just ahead of the close.

“A few Fed members noted additional policy action could be warranted if the economy were to lose momentum; however, it doesn’t seem like anything concrete is imminent,” said Michael Sheldon, chief market strategist of RDM Financial, in Westport, Connecticut.

“That, along with the FOMC’s citing that risks have increased and volatility is higher, are probably the culprits for the market’s afternoon swoon.”

The Nasdaq was the worst performer of the three major indexes. Network gear maker Adtran Inc warned about third-quarter revenue, driving its stock down 15.4 percent to $23.01 and hitting shares of its rivals. Juniper Networks fell 1.1 percent to $14.68, and Ciena lost 7.9 percent to $14.15.

The warning followed weaker forecasts earlier this week from chipmakers, including Advanced Micro Devices. Its stock slid 2 percent to $4.89 on Wednesday.

Some analysts expect earnings disappointments from major technology companies this earnings season. They say estimates for tech names are likely to go down.

The Dow Jones industrial average shed 48.59 points, or 0.38 percent, to end at 12,604.53. The Standard & Poor’s 500 Index dipped just 0.02 of a point to finish at 1,341.45. The Nasdaq Composite Index slipped 14.35 points, or 0.49 percent, to close at 2,887.98.

It was a fifth day of losses for the Dow.

Helping to support the S&P 500 were financials, which gained after four days of losses. The financial index was up 0.8 percent. Some banks, including JPMorgan Chase & Co, up 1 percent at $34.59, are due to report results on Friday.

Other earnings warnings included Hhgregg Inc, an appliance and consumer electronics retailer, which forecast a wider-than-expected loss for the first quarter and cut its full-year outlook. Its stock sank 36.4 percent to $7.34. Rival Best Buy Co Inc slumped 8.4 percent to $19.37.

Among the day’s economic data, the U.S. trade deficit narrowed by 3.8 percent in May, helped by a rise in exports, including those bound for Europe and China. But economists warned it might not last.

After the close, shares of hotel chain Marriott International dipped 0.5 percent to $37.84 following the release of its results.

Volume was lighter than average. About 6.02 billion shares changed hands on the New York Stock Exchange, the Nasdaq and Amex, compared with the year-to-date daily average of 6.85 billion shares.

Advancers beat decliners on the NYSE by a ratio of about 16 to 14. On the Nasdaq, decliners slightly outnumbered advancers.

Commodities

Crude oil futures surged on Wednesday, ending more than 2 percent higher after a volatile session despite a mixed message from the U.S. Federal Reserve that it may opt for more easing policies, but only if the economy weakens further.

In London, Brent crude for August delivery settled at $100.23 a barrel, up $2.26, after hitting an intraday high of $100.50. In post-settlement trading, the contract further extended the day’s high to $100.83.

U.S. crude gained $1.90 to settle at $85.81, after hitting a session high of $86.49.

Gold rose on Wednesday, rebounding from the previous day’s 1.4 percent drop with lift from rising grains and energy prices, but the precious metal remained near its one-year low, and analysts said more losses could be in store.

Gold is just $40 above its one-year lows near $1,530-1,540 an ounce, and analysts said a failure to hold that support level could lead to a steep price correction.

Spot gold was up 0.5 percent on the day at $1,575.26 an ounce by 11:42 a.m. EDT (1542 GMT).

U.S. COMEX August gold futures were down $4.30 at $1,575.50 an ounce, narrowing the difference between the futures price and spot gold.

Currencies

The dollar enjoyed a short-lived rise against the yen on Thursday after the Bank of Japan made a technical change to its asset buying program, and remained not far from a two-year high against the euro.

The euro took a breather from recent losses, holding steady at $1.2242 after it tumbled overnight to a two-year low of $1.2212 on the EBS trading platform after the Fed minutes.

The Australian dollar was last down 0.6 percent from late U.S. trade on Wednesday at $1.0185, down from around $1.0240 just before the data were released, as investors priced in a greater chance of further interest rate reductions

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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