US Stock Futures Point To Lower Open Ahead Of Bernanke's Congressional Testimony, Housing Starts Data, Corporate Earnings

 
on July 17 2013 6:25 AM

Investors are expected to tread warily on Wednesday ahead of housing data and quarterly earnings reports from a number of Wall Street majors, and pay attention to what Federal Reserve Chairman Ben Bernanke has to say at his semi-annual testimony before the Financial Services Committee at 3 p.m. in Washington D.C.

Futures on the Dow Jones Industrial Average were down 0.23 percent, while futures on the Standard & Poor's 500 Index were down 0.25 percent and those on the Nasdaq 100 Index were down 0.08 percent.

Investors will keenly watch Bernanke's words on Wednesday, when he is expected to provide more clarity on the continuation of the central bank's easy monetary policy stance, which was assured by the Fed chairman in one his speeches to economists last week.

Analysts expect Bernanke to tread a cautious path and send out a message that would assure the markets of continuing support to the U.S. economy and, at the same time, justify the Fed’s plans to wind down its massive asset-purchase program, which has drawn criticism from within the Fed's own ranks.

“Rather than being more specific on the QE3 tapering timetable in his semi-annual testimony to the House, which might tie the Fed’s hands too much, Fed Chairman Ben Bernanke will probably emphasize the distinction between tapering QE3 (i.e. loosening policy in smaller steps) and raising interest rates (i.e. tightening policy). In regards to the latter, he is likely to go out of his way to stress that higher interest rates are still a distant prospect," Paul Dales, a Capital Economics analyst, said in a report.

"They are trying to finesse this idea of a possible near-term scaling back of QE with the message that they're going to stay super accommodative for a long time," Robert DiClemente, managing director of economic and market analysis at Citigroup, said, according to The Economic Times. "That's a tough line to walk," he added.

Meanwhile, investors are also likely to focus on the Census Bureau’s housing starts and building permits reports, which are due to be released at 8.30 a.m. EDT.

Housing starts, which measure the change in the annualized number of residential buildings that began construction each month, is expected to rise to 959,000 in June from 914,000 in the previous month. In May, housing starts had recorded a year-on-year jump of 28.6 percent.

Building permits, which measure the change in the number of new building permits issued by the government each month, is likely to rise to 990,000 in June, up from 974,000 in May. Permits had declined 3.1 percent in May after jumping 12.9 percent in April.

“With lumber prices now 25 percent lower than two months ago and construction employment taking steady gains, the worst may now be over. Indeed, Tuesday’s news of a second successive monthly surge in the NAHB index, to 57 in July from 51 in June, underlines the strength of the recovery in the housing market,” Paul Diggle, an economist at Capital Economics, said in a report.

On the corporate earnings front, a number of major companies including Bank of America Corp. (NYSE: BAC), PNC Financial Services Group Inc. (NYSE: PNC) and U.S. Bancorp (NYSE: USB) are scheduled to announce their quarterly earnings before market hours. Companies such as American Express Co. (NYSE: AXP), EBay Inc. (Nasdaq: EBAY), Intel Corp. (Nasdaq: INTC) and SLM Corp. (Nasdaq: SLM) will report earnings after market hours.

On Tuesday, Goldman Sachs (NYSE:GS) topped analysts’ expectations to report that its profits more than doubled in the second quarter of 2013.

European markets pared initial gains and traded steeply lower in mid-morning trade on Wednesday, as investors chose to remain watchful ahead of Bernanke’s testimony before Congress.

The Stoxx Europe 600 index was trading down 0.47 percent, London’s FTSE 100 was down 0.56 percent, Germany's DAX-30 was down 0.66 percent and France's CAC-40 was trading down 0.64 percent.

In England, minutes of the Bank of England's Monetary Policy Committee meeting, held earlier in July, showed that the committee members voted unanimously to keep both interest rates and the asset-purchase program unchanged.

Also, in the UK,  the Claimant Count Change, which measures the change in the number of unemployed people in the country, showed that the number fell by 21,200 in the three months ending in June, following a 16,200 drop registered in the three months to May.

In Asia, most markets witnessed choppy trade as investors awaited Bernanke’s comments on the future of the Fed’s monetary policy. 

South Korea’s KOSPI Composite index rallied 1.13 percent, while Japan’s Nikkei ended up 0.11 percent. The Shanghai Composite index ended down 1.01 percent and Australia’s S&P/ASX 200 ended down 0.09 percent. Hong Kong’s Hang Seng Index gained 0.28 percent while India’s BSE Sensex ended the day up 0.49 percent.

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