In the U.S.: U.S. Stock Futures Climb Before Release Of Fed Minutes

11 July 2012

Investors hope that Fed ‘eases’ its stance on monetary support. S&P year end close forecasted at 1400.

U.S. stock futures advanced, indicating the Standard & Poor’s 500 Index will snap four days of losses, as investors awaited minutes of last month’s Federal Reserve meeting for signs of further stimulus measures.

Bank of America Corp. (BAC) and ConocoPhillips rose more than 0.6 percent to pace advances among banks and energy companies. Cliffs Natural Resources Inc. (CLF) added 0.4 percent as it said it would sell its stake in a coal mine in Australia. Goldcorp Inc. (G) fell 6.2 percent after cutting its gold production forecast.

S&P 500 futures expiring in September rose 0.2 percent to 1,338 at 8:41 a.m. in New York. The equity gauge retreated 2.4 percent over the past four days amid concern about corporate profits. Dow Jones Industrial Average futures added 29 points, or 0.2 percent, to 12,614 today.

“The Fed minutes are the most significant event today,” Stephen Wood, the New York-based chief market strategist for North America for Russell Investments, said in a phone interview. His firm oversees $140.8 billion. “The minutes are probably going to show a significant soft patch in the economy and likely communicate that the Fed is ready, willing and able to provide further accommodation should the data warrant it.”

The Fed is scheduled to release the minutes of its June meeting at 2 p.m. in Washington. The Federal Open Market Committee said on June 20 it will expand its Operation Twist program to extend the maturities of assets on its balance sheet, and it stands ready to take further action as needed. The central bank also repeated that economic conditions will probably warrant keeping its benchmark interest rate near zero until at least late 2014.

Earnings Season

The S&P 500 slumped yesterday amid lower sales estimates at Applied Materials Inc. and Cummins Inc. Advanced Micro Devices Inc., a maker of processors for personal computers, plunged after reporting an unexpected drop in revenue.

Profits for S&P 500 companies fell 1.8 percent in the second quarter, according to analyst estimates compiled by Bloomberg. That would be the first decline since 2009, even as revenue is forecast to rise 2.5 percent. Analysts project profit growth of 3.9 percent and 15 percent, respectively, in the third and fourth quarters of 2012.

The U.S. trade deficit narrowed in May as falling crude oil prices and weakening demand for consumer goods trimmed the import bill. The gap shrank 3.8 percent to $48.7 billion, in line with the median estimate of economists surveyed by Bloomberg News, from $50.6 billion in April, Commerce Department figures showed today in Washington.

Separate data from the Commerce Department may show wholesale inventories rose in May at a slower pace than the previous month, economists said.

Banks, Oil

Financial companies advanced. Bank of America gained 0.7 percent to $7.53. JPMorgan Chase & Co. (JPM) rose 0.7 percent to $34.50.

Energy companies climbed as oil rebounded from the lowest close in more than a week.ConocoPhillips (COP) added 0.6 percent to $53.82. Occidental Petroleum Corp., the largest onshore crude producer, gained 0.5 percent to $83.65.

Cliffs Natural Resources rose 0.4 percent to $46.20. The biggest U.S. iron-ore producer said it will sell its 45 percent stake in a coal mine in Queensland, Australia. The company said it expects A$141 million ($145 million) in net proceeds from the sale.

Wendy’s Co. (WEN) jumped 2 percent to $4.67. The hamburger chain was raised to outperform from neutral at Wedbush Securities Inc. by equity analyst Nick Setyan. The 12-month price target is $5.50.

Goldcorp Drops

Goldcorp tumbled 6.2 percent to $34.47. The second-largest producer of the precious metal by market value cut its full-year 2012 gold production forecast by as much as 9.6 percent after delays at a Canadian mine and a water shortage at a Mexican project.

Waste Management Inc. (WM) fell 0.8 percent to $32.79. The stock was cut to underweight, the equivalent of sell, from equalweight at Morgan Stanley.

Blackstone Group LP’s Byron Wien said the S&P 500 may climb past 1,400 this year. Wien, vice chairman of the advisory services unit of the world’s biggest private-equity firm, recommended buying Apple Inc. (AAPL) shares and said the iPad maker is the “most innovative” U.S. company. He said he’s also bullish on gold because the metal will retain its value should global growth slow.

“When everybody is so negative it’s usually a good time to take the other side,” he said today in a television interview on “Bloomberg Surveillance” with Tom Keene. “I think we can do better than 1,400.”

An advance to 1,400 would require a 4.4 percent increase in the U.S. equity benchmark from yesterday’s close. The S&P 500 has gained 6.7 percent this year. Apple shares have surged 50 percent this year, while gold futures in New York are up 0.6 percent.


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