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Broadgate: Market News 7/2

7 February 2013

Stocks ended mostly flat on Wednesday, taking another pause in the recent rally that has driven the S&P 500 to five-year highs, as transportation and technology shares lost ground.

Transportation stocks were among the worst performers. Shares of CH Robinson Worldwide fell 9.7 percent to $60.50 and the stock was the biggest percentage loser on the Nasdaq 100 after the freight transport company posted a lower-than-expected adjusted quarterly profit.

Without a strong catalyst, the market could struggle to continue its rally, analysts said. The benchmark S&P 500 index has advanced 6 percent this year, reaching its highest since December 2007, while the Dow Jones industrial average has risen above 14,000 recently.

Bank of America-Merrill Lynch analysts see a near-term pullback likely, based on strong equity inflows at the start of the year, said Dan Suzuki, the bank’s equity strategist in New York.

“The fact that we’ve gone since November without seeing one, from a timing perspective, it wouldn’t be a surprise to see one now.”

With fourth-quarter earnings nearing an end, the market will be losing one of its big supports, said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago. “That’s one thing that’s been holding the market up,” he said.

Shares of Time Warner Inc jumped 4.1 percent to $52.01 after reporting higher fourth-quarter profit that beat Wall Street estimates, as growth in its cable networks offset declines in film, TV entertainment and publishing units.

The Dow Jones industrial average was up 7.22 points, or 0.05 percent, at 13,986.52. The Standard & Poor’s 500 Index was up 0.83 points, or 0.05 percent, at 1,512.12. The Nasdaq Composite Index was down 3.10 points, or 0.10 percent, at 3,168.48.

Amazon.com shares, down 1.7 percent at $262.22, led the decline on the Nasdaq.

Also causing some strain on the market, investors have been speculating about leadership changes in Spain and Italy and watching for comments from European leaders, analysts said. European Central Bank policymakers are due to meet Thursday.

The Dow Jones Transportation average was down 0.2 percent after hitting another record high on Tuesday. The average is up 10.7 percent for the year so far and has made a series of new highs since mid-January.

According to Thomson Reuters data, of 301 companies in the S&P 500 that have reported earnings, 68.1 percent have exceeded analysts’ expectations, above a 62 percent average since 1994 and 65 percent over the past four quarters. In terms of revenue, 65.8 percent of companies have topped forecasts.

Fourth-quarter earnings for S&P 500 companies are estimated to have risen 4.7 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.

Walt Disney Co’s stock was up 0.4 percent at $54.52, after the company beat estimates for quarterly adjusted earnings and gave an optimistic outlook for the next few quarters.

Volume was roughly 6.5 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.

Advancers outpaced decliners on the NYSE by roughly 17 to 12 and on the Nasdaq by about 13 to 11.

Currencies

The euro fell against the dollar and a resurgent yen on Thursday, while sterling wallowed at multi-month lows as cautious investors awaited outcomes of central bank policy meetings in Europe and Britain.

Both the European Central Bank and Bank of England are widely expected to keep interest rates unchanged later on Thursday, but any dovish hints could put both currencies under pressure.

Also overshadowing the meetings are incoming BOE Governor Mark Carney’s testimony before the UK parliament as well as an Italian banking scandal, which is likely to be a distraction at the ECB’s media conference.

“The overall trend for the euro hasn’t changed, but it has paused,” said Kimihiko Tomita, head of forex at State Street in Tokyo.

“The scandal stirs memories of past scandals, and there’s the possibly that it, too, could become a bigger matter, so this is making some investors cautious,” he said.

With the Bank of Japan committed to open-ended asset purchases from 2014 and aiming for a 2 percent inflation target, pressure on the yen is likely to continue, market participants said. U.S. speculative accounts were still actively buying the dollar on drips, with stop-loss orders said to be placed at 93.20 yen and just below 93 yen.

The euro moved away from a 34-month high of 127.71 yen hit on Wednesday, shedding 0.3 percent to 126.22 yen.

Against the dollar, the euro was last down 0.1 percent at $1.3506, back near this week’s trough of $1.3458 plumbed Tuesday and moving away from a 15-month peak of $1.3711 set on February 1.

Sterling traded nearly flat at $1.5647, not far from a 4-1/2 month low of $1.5630 set Tuesday.

While markets appeared to be positioning for dovish comments from the ECB, some analysts suspect the bank will not be that bothered about the recent strength in the euro

Vassili Serebriakov, strategist at BNP Paribas, said in a client note that the majority on the Governing Council will probably reason that the euro’s strength is a result of real improvement in the financial markets and economic outlook, thus not warranting immediate action.

This could temper demand for the euro, which has risen more than 2 percent against the greenback so far this year and over 10 percent on the yen.

The overnight pullback in the single currency helped the dollar index .DXY climb to a one-week high of 79.864 on Wednesday, though it fell to 79.799 as the greenback took a breather against the yen.

The dollar retreated 0.3 percent to 93.36 yen from a 33-month peak around 94.075 yen hit on Wednesday.

The Australian dollar briefly jumped a quarter of a cent to $1.0333 after a mixed jobs report, before pulling back to $1.0310, not far from a near three-month low of $1.0296 hit on Wednesday.

Australian employment rose by 10,400 in January while the jobless rate held steady at 5.4 pct, modestly beating market expectations. However, all the jobs growth was in part-time work with full-time jobs lower.

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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