After the heady performance in the past four weeks, catalyzed by positive earnings and promising economic data, the U.S. markets could swerve towards a basing pattern ahead of the release of several key economic reports during the unfolding week. Global cues are mixed, with Asia latching onto the positive performance by the U.S. markets on Friday, while the European markets are moderately lower in early trading. Crude oil and gold futures are modestly lower, with oil trading at $70.57 a barrel.
As of 6:30 am ET, the Dow futures are down 10 points, the S&P 500 futures are down 1.20 points and the Nasdaq 100 futures are showing a loss of 5.25 points.
In the absence of any major catalysts, trading could show a lack of direction, as traders pause and move to the sidelines to contemplate their next moves. However, the week will witness the release of some key economic reports including the retail sales report, the industrial production report and the weekly jobless claims report.
Apart from these reports, traders may closely watch the outcome of the August FOMC meeting, which is due to be released at 2:15 PM ET on Wednesday. With interest rates near zero level, the focus this time around will be if the Fed will increase the size of its purchase program or extend the schedule of the program.
The rising bond yields may bode well for the Treasury auctions scheduled for the week, as lower bond prices increase their attractiveness to overseas investors. It remains to be seen if the yield on the 10-year Treasury note could breach the 4% level.
In corporate news, the following stocks may see activity in today's session.
Microsoft (MSFT), which recently struck a deal with Yahoo (YHOO) to combine the search platform for both companies, announced an agreement with French ad company Publicis to dispose off its Razorfish digital advertising unit, which it had acquired as a part of its acquisition of aQuantive.
Freddie Mac (FNM) said late Friday that it no longer needs government help at this point of time, as the mortgage lender posted positive networth. Benefiting from accounting adjustments and gains, the company reported a second quarter profit of $821 million for the quarter on a notable increase in revenues to $7.47 billion from the year-ago's $1.59 billion.
Warren Buffett-owned Berkshire Hathaway (BRKA) posted a 14% increase in second quarter earnings, fueled by gains from derivatives trading. The company has reported a decline in earnings in each of the past 6 quarters.
Traders may also stay tuned to the earnings of Dynegy (DYG), Dish Network (DISH), Fluor Corp. (FLR), Priceline.com (PCLN), Sysco Corp. (SYY), Quicksilver Resources (KWK) and E.W. Scripps Co. (SSP).
On Friday, the major U.S. averages turned in a solid showing, with each of the averages rising in excess of 1%, benefiting from the monthly employment report that showed a smaller-than-expected job loss for July and a modest slippage in the jobless rate. Consequently, the major averages ended the week higher for the fourth straight week.
The Dow Industrials and the S&P 500 Index advanced 2.16% and 2.33%, respectively in the week ended August 7th, while the Nasdaq Composite gained 1.10%.
In Asia, the Japanese Nikkei 225 and Hong Kong's Hang Seng Index advanced strongly on Monday, with Japan benefiting from the positive Wall Street lead and a domestic economic report that showed an unexpected increase in core machinery orders. The Nikkei rose above the 10,500 level for the first time in 10 months.
Notwithstanding the IMF raising South Korea's 2009 GDP forecast to a GDP decline 1.75% from its earlier forecast of a 3% decline, the South Korean market squandered much of its early gains and closed slightly higher.
Meanwhile, the sentiment in Europe is more muted, with the major averages in the region all showing moderate losses, as commodities and bank stocks are acting as drags. The French CAC 40 Index, the German DAX Index and the U.K. FTSE 100 Index are receding 0.63%, 0.74% and 0.67%, respectively.