The major U.S. index futures are pointing to a lower opening on Tuesday. With deliberations heating up on the viability and the lasting impact of the U.S. government's decision to buy toxic assets from banks, some traders are likely to take profit on their recent gains. The absence of any major economic and corporate news could lead to some indecision among traders, with most of them expected to move to the sidelines to get more clarity on the economic outlook.
U.S. stocks opened Monday's session sharply higher, encouraged by the government's plan for a private-public partnership investment to buy toxic assets from banks. The buying momentum accelerated further following the release of a positive housing report. After showing sideways movement throughout the mid-session, the major averages climbed sharply in the last two hours of trading to finish notably higher.
The Dow Industrials advanced 497.48 points or 6.84% to 7,776, with the average closing at its highest level since February 13th and recording its biggest gain since late October. The Nasdaq Composite raced to 1,558, representing an advance of 98.50 points or 6.76% and the S&P 500 Index jumped 54.38 points or 7.08% to 823.
All thirty of the Dow components ended the session higher, with Alcoa (AA) (up 13.15%), American Express (AXP) (up 18.76%), Bank of America (BAC) (up 26.01%), Citigroup (C) (up 19.47%) and JP Morgan Chase (JPM) (up 24.67%) recording strong gains.
Among the sector indexes, the Amex Securities Broker/Dealer Index rallied 14.27% and the KBW Bank Index jumped 18.59%. The Amex Oil Index rose 6.87% compared to a 9.92% advance by the Philadelphia Oil Service Index. The Dow Jones Transportation Average soared 7.88%, while the Amex Airline Index, the Dow Jones Utilities Average and the Amex Biotechnology Index gained more than 4% each.
The S&P Retail Index and the Philadelphia Housing Sector Index rose 6.42% and 11.17%, respectively. On the technology front, the Philadelphia Semiconductor Index rallied 7.20%. While the Amex Disk Drive Index jumped 9.16%, the Amex Computer Hardware Index rose 4.87%. The Amex Networking Index, the Amex Software Index and the Amex Internet Index ended up 5.89%, 6.50% and 7.29%, respectively.
On the economic front, the National Association of Realtors reported that existing home sales rose 5.1% in February to a seasonally adjusted annual rate of 4.72 million units. Condominium and cooperative sales rose 11.4% compared to a 4.4% rise in single-family existing home sales. Sales rose across all regions, with the Northeast leading in terms of sales growth by showing a 15.6% jump in sales. The months supply of new homes remained unchanged at 9.7 months, while the median selling price declined 15.5% year-over-year to $165,400, although it rose $600 from the previous month.
However, economists are still skeptical about a housing bottom. Although FTN Financial Markets believes that the housing market may see some bounce in the near term due to declining mortgage rates and additional White House policy, it is still skeptical that the these actions will provide a long-term relief.
The Treasury's public-private investment program will be relying om three separate means to fund the assets. The FDIC will be running auctions of mortgage pools and become a co-owner by entering a partnership with the highest bidder. The partnership will issue FDIC guaranteed debt to finance the pool, with the treasury financing 50%-80% of the equity. Secondly, several investment funds will be formed to buy riskier assets, including some mortgaged-backed securities. The funds will be 50% financed by the treasury. Additionally, the TALF will be expanded to help absorb risky assets dating back several years.
Currency, Commodity Markets
Crude oil futures are receding $0.69 to $53.11 a barrel after rallying $1.73 to nearly a 3-month high of $53.80 a barrel on Monday. Gold futures are slipping $23.10 to $929.40 an ounce. In the previous session, the precious metal fell $1.70 to $952.50 an ounce.
Among the currencies, the U.S. dollar is trading at 98.232 yen, stronger than the 96.9465 yen it fetched at the close of New York trading on Monday. The dollar is currently valued at $1.3524 versus the euro.
The major markets across the Asia-Pacific region ended in the green on Tuesday, buoyed by the cues from Wall Street, where the markets witnessed the biggest one-day rally since October 2008 after the Obama Administration unveiled plans to help banks sell toxic assets and pave way for a revival in credit flow, which is critical for reviving the economy.
In Tokyo, the benchmark Nikkei 225 Index ended 273 points or 3.32% higher at 8,488. On the economic front, minutes from the Bank of Japan's monetary policy meeting held on February 18 and 19 revealed that board members suggested that the Japanese economy may begin to recover from the current recession in the second half of this year at the earliest. At the meeting, the board voted unanimously to keep the overnight call rate unchanged at 0.10%.
The board also decided to expand special funds-supplying operations in order to facilitate a drop in longer-term interest rates that are actually applicable to fund-raising by firms and relieve them from funding concerns.
Among banking stocks, Mitsubishi UFJ, Japan's biggest bank, gained 4.49%, Sumitomo Mitsui rose 3.16% and Mizuho Financial advanced 5.00%. Exporters also gained on the back of a weaker yen. Canon advanced 4.35%, Sharp gained 3.08% and Sony rose 5.72%. Automaker Toyota added 3.61% and Honda moved up 2.42%.
Oil-related stocks also advanced. Inpex edged up 0.14%, Nippon Oil gained 3.35% and Showa Shell added 1.10%. Among trading houses, Mitsubishi Corp. gained 4.23%, Itochu moved up 3.99% and Sumitomo Corp. rose 1.89%.
In Australia, the benchmark S&P/ASX 200 index, having opened strongly and gaining as much as 2.6% in early trading, pared back much of its gains over the course of the session before ending higher by merely 29.7 points, or 0.84% at 3,580, while the broader All Ordinaries Index, following a similar trend, closed the session up 34.20 points or 0.98%, at 3,517.
Mining and oil stocks advanced on higher commodity prices. Financial and retail stocks ended mixed as investors resorted to profit taking at higher levels. Gold miners ended weak after gold closed marginally lower for a second straight session on Monday
In Hong Kong, the benchmark Hang Seng Index gained 462.92 points, or 3.44% to close at 13,910, led by financial stocks, telecom and china-related stocks.
Among financials, HSBC Holdings surged up 9.83%, Hang Seng Bank gained 4.94%, BOC Hong Kong advanced 6.57%, Bank of East Asia rose 6.97%, and Bank of Communications added 4.04%. Insurance stocks also gained. Ping An Insurance rose 4.44% and China Life moved up 0.58% from previous close.
Telecom stocks ended higher; Hutchison Whimpoa advanced 5.62%, China Mobile gained 1.59%, and Tencent Holdings gained 5.12%. China-related stocks ended on a mixed note. China Mercantile Holdings surged 11.18% and China Resources gained 0.49%. However, China Overseas lost 2.65%. Resource stocks also showed mixed sentiment. While Aluminum Company of China, or Chalco, decreased 1.17%. CNOOC and Petrochina gained 4.35% and 0.93%, respectively.
The benchmark KOSPI Index of South Korea gained 22.20 points or 1.85% and closed at 1,222. In an effort to revive the economy by boosting demand, the South Korean government approved an extra budget of 28.9 trillion Won, equivalent to $20.7 billion, earlier in the day.
Among the financials, Woori Finance gained 2.41%, Shinhan Financial Group advanced 3.61% and KB Financial Group, the holding firm of Kookmin bank, moved up 4.63%. Market heavyweight Samsung Electronics rose 1.82%. Among technology stocks, Hynix Semiconductor added 0.97%. LG Electronics gained 3.60% and LG Display moved up 2.04%.
Shipbuilders also ended higher. Hyundai Heavy Industries advanced 1.23%, Samsung Heavy Industries gained 1.90%, and Daewoo Ship building rose 2.97%. Oil-related stocks advanced on higher crude oil prices. SK Holdings gained 4.33% and S-Oil rose 1.37%.
Among the other major markets, China's Shanghai Composite Index rose 12.94 points or 0.50% to 2,338, Indonesia's Jakarta Composite Index closed at 1,436, up 29.47 points, or 2.02%, Singapore's Strait Times Index gained 2.54%, or 42.26 points at 1,706, and Taiwan's Weighted Index added 118.30 points, or 2.30% to close at 5,242.
The major European markets are trading on a mixed note on Tuesday, with the U.K.'s FTSE 100 Index receding 1.11%, while German DAX Index and the French CAC 40 Index are gaining 0.12% and 0.34%, respectively.
Stocks in Focus
Goldman Sachs (GS) is expected to react to a Bloomberg report that said that the company is unlikely to sell its 4.9% stake in ICBC in the near term. The reports follows close on heels of a Wall Street report that said Goldman Sachs is in discussion to sell its stake in ICBC, which may fetch Goldman more than $1 billion. Meanwhile, Goldman is allowed to sell its stake only after late April, when the lock in period for half of the stake expires.
AIG (AIG) could be in focus after New York Attorney General Andrew Cuomo said 9 of the top 10 in bonuses have agreed to give the bonuses back. Of the $165 million bonus amount, employees have agreed to return about $50 million.
Phillips-Van Heusen (PVH) is likely to come under selling pressure after it reported a loss of 74 cents per share for its fourth quarter compared to a profit of 55 cents per share in the year-ago period. On an adjusted basis, the company reported earnings of 30 cents per share. Revenues fell 1% to $577.8 million. The consensus estimates had called for earnings of 28 cents per share on revenues of $584.6 million. The company expects adjusted earnings of 40-50 cents per share for the first quarter on revenues of $530 million to $540 million. The consensus estimates had called for earnings of 60 cents per share on revenues of $567 million.
Sonic Corp. (SONC) could react to its announcement that its second quarter net income was 14 cents per share, lower than 15 cents per share last year. On an adjusted basis, the company reported earnings of 8 cents per share. Revenues declined 3% to $169 million. Analysts estimated earnings of 9 cents per share on revenues of $170.3 million.
McCormick & Co. (MKC) may also be in focus after it reaffirmed its full year earnings per share guidance of $2.24-$2.28 per share, including 5 cents per share of restructuring charges. Sales for the first quarter declined 1% to $718.5 million compared to the consensus estimate of $755.41 million. On an adjusted basis, the company reported earnings of 44 cents per share compared to 41 cents per share last year. Analysts expected earnings of 44 cents per share.
Williams-Sonoma (WSM) is expected to be in focus after it reported that its fourth quarter adjusted earnings were 31 cents per share. Revenues fell 27% to $1.01 billion. The consensus estimates had called for earnings of 16 cents per share on revenues of $976.56 million. The company declared a quarterly cash dividend of 12 cents per share.