Wall Street Awaits Alcoa Earrnings, Futures Steady

Wall Street followed European markets higher in premarket trading, only to both reverse and fall sharply. Heading into the start of earnings season tomorrow, a crucial time in the economy, investors didn’t hesitate to continue the markets fall. The Dow saw its lowest close since April 28th, sending the blue chips down 161.27, or 1.9 %, to 8,163.60. The broader Standard & Poor’s 500 index fell 17.69, or 2 %, to 881.03, while the Nasdaq composite index lost 41.23, or 2.3 %, to 1,746.17. Once again energy shares set the tone, with crude ticking lower for the 5th consecutive session. Light, sweet crude fell $1.12 to settle at $62.93 a barrel on the NYMEX.

In the bond market, the yield on the 10 year treasury fell 5 basis points to 3.46%. We have seen a complete reversal over the past few weeks as bond prices have moved higher, while investor optimism over a “robust” economic recovery has fallen by the wayside.

Morning Outlook

In Asia, markets took a severe hit following Wall Street’s losses earlier. Overnight, Japan’s Nikkei 225 stock average lost 227.04 points, or 2.35%, to 9,420.75 as Japanese machinery orders unexpectedly dropped. While the stronger yen hampered exports. Hong Kong’s benchmark Hang Seng closed down 0.79 % to 17,721.07 after losing 141.20 points.

Europe saw its major averages trade relatively flat in the early afternoon, with Britain’s FTSE 100 index flat at 4,186.98. Germany’s DAX was up 3.52 points, or 0.08 %, at 4,601.71 as industrial production in the nation rose to its highest level in 16 years; while France’s CAC-40 index fell 14.65 points, or 0.48 %, to 3,033.92.

Futures on Wall Street have been pretty quiet in the premarket, as traders await Alcoa’s results and comments on the economy before dictating a direction. Following yesterday’s selloff, Dow Jones industrial average futures are advancing 12 points, or 0.2 %, at 8,143, while the broader Standard & Poor’s 500 index futures are up 2.10, or 0.2 %, at 881.40. Nasdaq 100 index futures gained 2.75, or 0.2 %, at 1,410.75

Currencies and Commodities

The greenback continued its gain against European currencies, while losing ground against the lower yielding yen. The dollar traded at 94.40 yen, falling 0.5216% in the forex market. The euro depreciated 0.0011% to $1.3924 while the pound lost 0.285% to $1.6093. Gold fell $8.20 to $920.90 an ounce, while silver lost 1.36% at $13.04. Light, sweet crude for August delivery looks for its first gain since last week; down 41 cents to $62.52 on the NYMEX; a 0.65% decline.

Economic Calendar

10:35 AM
EIA Petroleum Status Report: The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S. Oil prices have ticked up as OPEC continues production cuts to meet its quota, despite continued stockpiles. Trading on the NYMEX has been primarily driven by the direction of equities and the level of optimism of a sooner rather than later economic recovery. The energy sector will be hoping for a reversal of fortune, as crude has fallen 5 consecutive days heading into today’s trading.

3:00 PM
Consumer Credit: Measures the value of consumer credit outstanding. Changes in consumer credit indicate the state of the consumer’s finances and can forecast their future spending patterns. Credit availability is tight in the current environment at the same time as households cut back and deleverage their finances. The consensus for May is a decline of $7.5 billion, after a surprise plunge of $15.7 billion the prior month.