In the U.S.: US Stock Futures Waffle Around Flatline After Fed’s Stress Tests

14 March 2012

Sober start likely in Wednesday’s trading. While S&P opens at highest level since June 2008, Citigroup and SunTrust (et al) do not pass stress tests.

U.S. stock futures hovered around the flatline Wednesday morning, pausing after the recent string of gains, as investors weighed the results of the Federal Reserve’s “stress tests” of the biggest U.S. banks.

Dow Jones Industrial Average futures tacked on 2 points, or less than 0.1%, to 13111. The Dow rose 218 points, or 1.7%, on Tuesday, the biggest one-day gain since Dec. 20, 2011, to close at the highest level since Dec. 31, 2007. The Dow’s five-session win streak is the longest since the five-day streak ending Sept. 16, 2011.

Standard & Poor’s 500-stock index futures inched down 1 point, or 0.1% lower, to 1390 and Nasdaq 100 futures lost 3 points, or 0.1%, to 2691. Changes in stock futures do not always accurately predict stock moves after the opening bell.

The S&P 500 closed Tuesday at the highest level since June 5, 2008, while the Nasdaq Composite closed at the highest level since Nov. 15, 2000.

Passing the “stress tests” cleared the way for many banks to increase shareholder returns. The Fed said 18 of 19 financial firms tested retained enough of a capital buffer to withstand another serious credit crunch, clearing the way for many firms to increase the return of capital to shareholders. The Fed said, however, that at least four of the 19–Citigroup, MetLife, SunTrust Banks and Ally Financial– would have to resubmit capital plans.

Shares of Citigroup fell 4.6% in premarket trading, MetLife lost 4.3% and SunTrust shed 4.3%.

Shares of blue-chip banks Bank of America gained 1.3% in premarket trading while J.P. Morgan Chase slipped 0.2%.

European markets were broadly higher, with the Stoxx Europe 600 up 0.8%, as the Federal Reserve’s upbeat outlook on the U.S. economy and the passing the Fed’s “stress tests” by most of the biggest U.S. banks provided a boost.

Asian bourses were mixed, with Japan’s Nikkei Stock Average rising 1.5% on the back of U.S. gains, but China’s Shanghai Composite slumping 2.6% after Premier Wen Jiabao disappointed investors by reiterating the government’s commitment to cool the housing market.

Crude oil futures eased 0.2% to $106.54 a barrel, while gold futures dropped 2.2% to $1657.20 an ounce. The U.S. dollar rose sharply against the yen and edged higher against the euro.

On the economic calendar, data on import prices in February and the current account deficit in the fourth quarter are scheduled for release at 8:30 a.m. EDT.

Among other banks making post-“stress test” moves, Wells Fargo said it would pay an additional first-quarter dividend of 10 cents a share, which together with the previously declared dividend of 12 cents a share brings the total to 22 cents a share. The stock ticked up 0.2% premarket.

KeyCorp authorized the repurchase of up to $344 million worth of its common stock, and is now evaluating whether it will increase its quarterly dividend.

U.S. Bancorp said that after being notified of the “stress test” results, it decided to approve a 56% increase in its quarterly dividend to 19.5 cents a share. The bank also approved a new 100 million share buyback program.

KeyCorp and U.S. Bancorp shares were still inactive ahead of the open.

Elsewhere, LSI raised its first-quarter revenue outlook and provided an upbeat earnings outlook citing a stronger-than-expected recovery in the hard disk drive market. The stock ran up 5.3% in the premarket.

Reynolds American said it would cut its U.S. workforce by about 10% by the end of 2014 as part of a cost-cutting initiative. The stock was still inactive ahead of the open.

Cheniere Energy said it has agreed to publicly sell 17 million shares of common stock. The energy company’s stock slid 4.4% ahead of the open.

SciClone Pharmaceuticals reported fourth-quarter earnings that beat estimates and provided a 2012 outlook that was above current projections. The stock climbed 23% in the premarket.


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