FOMC Meeting, Troubling Data May Push Traders To Sidelines

(RTTNews) - The major U.S. index futures are pointing to a lower opening on Tuesday, with some lackluster domestic economic data stirring anxiety among traders. Housing starts declined by more than expected in May and building permits also fell sharply, suggesting some softness may be creeping into the housing market. Also worrying traders would be the bigger than expected increase in inflation. Crude oil prices are higher, as political tensions simmer on in Iraq. With the FOMC meeting getting underway, traders may choose to remain on the sidelines.

U.S. stocks closed a volatile yet lackluster session slightly higher on Monday. After opening lower, the major averages recovered in early trading, as traders digested positive New York regional manufacturing activity and the U.S. industrial production data. The averages pulled back in late morning trading before recovering once again in the afternoon.

The Nasdaq Composite held mostly above the unchanged line thereafter before closing up 10.45 points or 0.24 percent at 4,321. The Dow Industrials and the S&P 500 Index faltered again in late trading but moved back above the unchanged to close slightly higher. The Dow Industrials added 5.27 points or 0.03 percent before closing at 16,781 and the S&P 500 Index ended at 1,938, up 1.62 points or 0.08 percent.

Sixteen of the thirty Dow components closed higher, while the remaining fourteen stocks declined. Chevron (CVX) and Home Depot (HD) advanced notably, while UnitedHealth (UNH) fell 1.49 percent.

Utilities and computer hardware stocks were among the best performers of the session, while airline stocks lost ground.

On the economic front, the results of a survey by the New York Federal Reserve showed that its general business conditions index for the New York region unexpectedly rose to 19.3 in June from 19 in May. The new orders index rose 8 points to 18.4, its best level since June 2010. Meanwhile, the order backlogs index was flat at -1.1. The number of employees index declined 10 points to 10.8. The 6-month outlook index fell 4 points to 39.8 but remained above the 6-month average of 38.6.

Meanwhile, the Federal Reserve reported that industrial production rose a better than expected 0.6 percent month-over-month in May, and the April reading was upwardly revised. Manufacturing output rose 0.6 percent in May, helped by higher motor vehicle & parts production, machinery output and computer/electronics production. Mining output climbed 1.3 percent. Capacity utilization improved 0.2 points to 79.1 percent.

The National Association of Home Builders' housing market index increased 4 points to 49 in June, ahead of the reading of 47 expected by economists. The present sales conditions index climbed 6 points to 54, and the future sales expectations index was up 3 points to 59. The index measuring prospective buyer traffic also rose 3 points to 36.

The Dow Industrials was little changed on Monday after being supported on the downside by its 21-day moving average (currently at 16,703). Above the 21-day MA, the index has another intermittent support around the 16,741 level. On the upside, the index may face resistance around the 16,843 and 16,946 levels.

Commodity, Currency Markets

Crude oil futures are sliding $0.51 to $106.39 a barrel after edging down $0.01 to $106.90 a barrel on Monday. Meanwhile, gold futures are falling $12 to $1,263.30 an ounce. On Monday, gold rose $1.20 to $1,275.30 an ounce.

Among currencies, the U.S. dollar is trading at 102.14 yen compared to the 101.83 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is trading at $1.3541 compared to yesterday's $1.3594.

Asia

The Asian markets closed mixed yet again, with the Chinese, Hong Kong, Australian and Singaporean markets retreating, while most other major markets in the region ended higher. The resilience shown by U.S. stocks overnight in the wake of positive economic data supported sentiment to some extent, even as apprehensions resurfaced ahead of the FOMC meeting and amid nervousness over the developments in Iraq.

The Japanese market advanced as the yen's rise stalled. The Nikkei 225 average opened higher and held above the unchanged line throughout the session, although it closed off the highs of the session. At the end of trading, the index was up 42.68 points or 0.29 percent at 14,976. Export stocks moved to the upside, but financial, pharma, retail, resource and utility stocks declined.

Australia's All Ordinaries fell sharply in early trading only to claw back and briefly move above the unchanged line by the mid-session. However, the momentum faltered, and the index declined throughout the remainder of the session and ended down 9.90 points or 0.18 percent at 5,381. Material, financial, energy and consumer staple stocks came under selling pressure, while consumer discretionary, real estate and healthcare stocks gained ground.

China's Shanghai Composite closed 19.28 points or 0.92 percent lower at 2,067, hurt by weak foreign direct investment data, and Hong Kong's Hang Seng Index ended at 23,204, down 97.08 points or 0.42 percent.

On the economic front, the Chinese Ministry of Commerce reported that foreign direct investment fell 6.7 percent year-over-year to $8.6 billion in May.

A report released by the Australian Bureau of Statistics showed that auto sales in Australia rose 0.3 percent month-over-month in May following a flat reading in April. Annually, sales were down 2 percent.

The minutes of the Reserve Bank of Australia's June meeting showed that the central bank may be on pause for some more time after holding its official cash rate unchanged at 2.5 percent at the meeting.

Europe

After opening higher and seeing strength for much of the morning, European stocks have given much ground following the release of the U.S. data and are currently trading on a lackluster note.

In corporate news, U.K. hotel operator Whitbread reported higher like-for-like sales for its first quarter, helped by a strong performance by its Premier Inn chain.

On the economic front, demand for new passenger cars in Europe increased for the ninth consecutive month in May, according to a report released by the European Automobile Manufacturers Association. Car sales rose 4.5 percent year-over-year in May, slightly slower than the 4.6 percent increase in April.

The U.K. Office for National Statistics reported that U.K. consumer prices rose 1.5 percent year-over-year in May, marking the lowest rate since October 2009. On a month-over-month basis, consumer prices edged down 0.1 percent.

A separate report showed that U.K. annual output price inflation was at 0.5 percent in May, slower than the 0.7 percent rate expected by economists. On a month-over-month basis, output prices edged down 0.1 percent compared to expectations for a 0.1 percent increase. Meanwhile, input prices fell 5 year-over-year and were down 0.9 percent from the previous month.

U.S. Economic Reports

The 2-day FOMC meeting gets underway, although the monetary policy announcement is not scheduled until tomorrow.

Consumer prices rose by more than expected in the month of May, according to a report released by the Labor Department, with the increase reflecting broad-based price growth.

The Labor Department said its consumer price index rose by 0.4 percent in May after climbing by 0.3 percent in April. Economists had expected the index to edge up by about 0.2 percent.

Core consumer prices, which exclude food and energy prices, increased by 0.3 percent in May after rising by 0.2 percent in the previous month. Core prices had also been expected to tick up by 0.2 percent.

After reporting a sharp jump in new residential construction in the U.S. in the previous month, the Commerce Department released a report showing that housing starts pulled back by more than expected in the month of May.

The report said housing starts fell 6.5 percent to an annual rate of 1.001 million in May after jumping 12.7 percent to a rate of 1.071 million in April. Economists had expected starts to drop to a rate of 1.030 million.

Additionally, the Commerce Department said building permits dropped 6.4 percent to an annual rate of 991,000 in May from the downwardly revised April rate of 1.059 million.

Stocks in Focus

Steel Dynamics (STLD) announced that it expects second quarter earnings of 28-32 cents per share, up sequentially and year-over-year. The company attributed the positive outlook to higher profitability from its steel operations, a rebound in residential construction and an improvement in metal recycling financial results. Analysts estimate earnings of 32 cents per share for the quarter.

FactSet Research (FDS) reported third quarter adjusted earnings that were in line, while its revenues beat estimates. The company's fourth quarter guidance was positive. The company also announced the appointment of Phil Snow as president, effective July 1st, 2014.

Yingli Energy (YGE) reported a narrower loss for its first quarter.

Newell Rubbermaid (NWL) said it would reaffirm its 2014 guidance at the Deutsche Bank Global Consumer Conference in Paris. The company expects normalized earnings of $1.94-$2 per share on core sales growth of 3-4 percent. The estimated results are above consensus estimates.

Korn Ferry International (KFY) reported fourth quarter earnings of 43 cents per share, higher than 25 cents per share in the year ago period. Total revenues rose to $260.8 million from $238.6 million last year. The results exceeded estimates. The company expects first quarter adjusted earnings of 37-43 cents per share, in line with estimates.

Williams (WMB) announced that it intends to commence an underwritten public offering of $3 billion worth of its common stock. The company said it intends to use the net proceeds to finance a portion of its acquisition of the 50 percent general partner interest and 55.1 million limited partner units in Access Midstream Partners.