- The major U.S. index futures are pointing to a higher opening on Wednesday, with sentiment reflecting optimism that was reinforced by deal announcements and recent data showing an upturn in the labor market. With the minutes released yesterday relaying the message that a rate hike is not imminent and there is no danger of the QEII measures rolled up earlier than planned, the markets can now heave a sigh a relief. Accommodative monetary policy stance is here to stay.
The commodity space is getting a boost from the dollar’s weakness and supply concerns. Gold futures have pulled back slightly from their record highs. In the absence of any other major catalysts that can sway the market, markets could consolidate around current levels. Meanwhile, expectations of an interest rate hike by the European Central Bank as early as tomorrow is gaining ground, even as Portugal and other peripheral nations remain entangled in debt crisis.
U.S. stocks closed on a mixed note yet again on Tuesday, as stocks braved some early weakness generated by external economic factors and yet could not sustain the upward momentum built through mid-session. The major averages opened lower, stung by a rating downgrade for Portugal and the decision by the Chinese central bank to raise interest rates.
However, the averages recovered in early trading and rose steadily till the release of the FOMC minutes. The rift among the FOMC members over the likely course of monetary policy in the wake of the strengthening recovery and rising inflation forced traders to move to the defensive, pushing stocks lower.
The Dow Industrials ended down 6.13 points or 0.05% at 12,394 and the S&P 500 Index lost 0.24points or 0.02% before closing at 1,333, while the Nasdaq Composite ended at 2,791, a gain of 2 points or 0.07%.
Sixteen of the thirty Dow components ended the session lower, with Boeing (BA), Caterpillar (CAT), General Electric (GE), Travelers Co. (TRV) and Procter & Gamble (PG) declining sharply. On the other hand, Alcoa (AA), Chevron (CVX), Intel (INTC) and Cisco Systems (CSCO) gained ground.
Among the sector indexes, the NYSE Arca Airline Index fell 1.13%. However, the NYSE Arca Gold Bugs Index rallied 5.04%, the Philadelphia Semiconductor Index firmed up by 2.27%, the Dow Jones U.S. Basic Materials Average rose 1.19%, the NYSE Arca Disk Drive Index gained 1.18% and the S&P Retail Index ended up 1.25%. The NYSE Arca Internet Index and the NYSE Arca Networking Index also advanced over 1% each.
On the economic front, the Institute for Supply Management’s service sector survey showed that activity in the sector expanded at a slower rate in March. Of the 18 industries surveyed, 16 reported growth. The index fell to 57.3 in March from 59.7 in February. The business activity index declined 7.2 points to 59.7 and the new orders index also dipped 0.3 points. On the other hand, the backlog orders index rose 4 points. The employment index dipped about 2 points to 53.7.
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