In the U.S.: Stock futures creep up, but weakness could remain

24 April 2012

The monkey on our backs…”this persistent worry over the euro zone.”

Stock index futures crept higher on Tuesday after sharp losses in the previous session but continued concerns about Europe’s debt crisis could mean gains are short lived.

The Dutch state successfully completed a bond auction a day after the government collapsed in a crisis over budget cuts, but investors demanded a slightly higher risk premium as euro zone yields have edged higher.

“People are defensive, obviously they are worried about what’s going on in Europe,” said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. “We are seeing a lack of buyers coming in to scoop up these oversold levels, which means the caution flag is really up.”

Results from Apple Inc after the close may be a stabilizing factor for theNasdaq during the session. The results will be dissected after a share swoon raised concerns a gravity-defying rally was over. Apple is down 10 percent from its closing peak this year.

AT&T Inc’s profit rose, driven by a rise in wireless margins as it had shelled out less in subsidies to Apple because it sold fewer iPhones. The stock was up 1 percent to $30.90.

S&P 500 futures rose 1.5 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 29 points, and Nasdaq 100 futures dipped 2 points.

The S&P 500 should hold near-term support at 1,340 during the current pullback before extending its rally again, according to Brown Brothers Harriman analysts. The index, which held at 1,340 during a pullback in early March, closed Monday at 1,366.94. The level also coincides with 23.6 percent retracement of the rally from October.

“There is this persistent worry over the euro zone now,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York. “It appears that the markets are trying to force once again the EU to take a more aggressive approach in terms of growth.”

So far, earnings have been solid, with more than 80 percent of S&P 500 companies topping consensus profit estimates as of Monday.

3M Co’s profit rose 4 percent, helped by a strong performance in its transportation business and growth in the Americas. The stock was up 3 percent to $89.71.

Diversified U.S. manufacturer United Technologies Corp’s earnings topped expectations, helped by better-than-expected demand for residential heating and cooling systems in North America. The shares rose 1 percent to $80.51.

One-time market darling Netflix Inc projected slower subscriber growth this quarter for its key U.S. video-streaming service. The stock slid 15.4 percent to $86.16 in premarket trade.

A key European index edged up 0.2 percent early Tuesday following the last session’s losses, but gains could be fragile as fears over the euro zone debt situation persisted, with Spanish and Dutch debt auctions under the spotlight.

European banks, a key barometer of risk appetite, slipped to near session lows. The STXE 600 Bank index fell 0.3 percent.

Texas Instruments Inc forecast second-quarter revenue growth above estimates, signaling the end of a prolonged inventory-related decline in demand. Shares were up 3.5 percent to $33.26 early Tuesday.

Facebook Inc reported its first quarter-to-quarter revenue slide in at least two years, a sign the social network’s sizzling growth may be cooling as it prepares to go public.

On the macro front, investors awaited the S&P/Case-Shiller Home Price Index for February, due at 9 a.m. EDT (1300 GMT), and April consumer confidence and new home sales for March, both due at 10 a.m. (1400 GMT). The Conference Board’s Consumer Confidence measure should soften to 69.7 from 70.2, according to forecast.


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