Benzinga Market Primer: Tuesday, August 20: Bond Yields Continue To Rise
US Stocks slipped for the fourth consecutive day on Monday, but bond yields have continued their climb as investors anticipate the Federal Reserve’s stimulus tapering. Heavy selling has boosted long term bond rates and US 10-year treasury yields have risen to 2.9 percent.
In other news around the markets:
As the US Federal Reserve’s plan to taper its stimulus spending approaches, developing nations are struggling to attract capital and sustain growth levels. Now, Indonesian shares have fallen 5.6%, India’s stock market plunged 4% on Friday and another 1.5% on Monday. Shares in Thailand are also down 3.3%
- A real estate fund run by Blackstone Group LP offered to buy Tysan Holdings LTD, a Chinese property developer, for 2.5 billion Hong Kong Dollars. The offer marks one of the first offers the Blackstone Group’s Asian-focused real estate fund has made since its formation earlier in the year.
- The German Bundesbank gave investors reason to doubt the European Central Bank’s earlier forward guidance by issuing a statement claiming that contrary to the bank’s pledge to maintain interest rates in the long term, the ECB would raise rates amid rising inflationary pressure.
- The death toll in Egypt has risen to nearly 900 people as the angry protestors and the Egyptian military clash. The nation’s security forces have reportedly arrested the leader of the Muslim Brotherhood, a group that has supported ousted President Mohamed Mursi.
- The Reserve Bank of Australia’s meeting minutes indicated that there was a possibility of another rate cut but nothing has been planned. The Australian dollar slid 0.76 percent following the minutes’ release.
Asian shares remained depressed overnight as worries about the Federal Reserve’s tapering and its effect on emerging markets hammered companies with heavy exposure to emerging markets. The Japanese NIKKEI index fell 2.63 percent to 13,396.63, a near two week low. In Hong Kong, the Hang Seng index fell nearly as much with a 2.20 percent drop. The Shanghai Composite also suffered a 0.62 percent loss. Only the New Zealand Exchange 50 Free Index saw gains with a 0.11 percent increase.
European shares were lower across the board as caution kept a lid on any big trading moves. The European Stoxx 600 index lost 0.81 percent and the UK’s FTSE slipped 1.24 percent. The Swiss SMI Index fared the best of the European indexes with only a 0.18 percent loss, while the Spanish IBEX sustained the largest losses and slid 1.64 percent.
Energy futures all suffered as investors prepared for the end of easy money with the Fed’s tapering in sight. Brent futures for October delivery, supported by conflict in Egypt and Libya still lost 0.85 percent with a price of $108.97. WTI futures fell to $106.01, a 1.02 percent loss. Natural gas and heating oil futures both slid 0.66 percent and 0.60 percent respectively. Precious metals also lost ground; gold fell 0.37 percent while silver tumbled 2 percent to $22.75 per ounce.
The Indian rupee made waves in the currency market after falling 1.6 percent against the dollar. The central bank has stepped in to sell dollars and try to mitigate losses, but the rupee was trading at 63.635 at 9:21 GMT on Tuesday morning. The euro rose against the dollar to $1.3389 while the yen slid 0.31 percent against the greenback. The dollar to British pound ratio was little changed at $1.5674 dollars to the pound.
Earnings Reported Yesterday
- Notable companies that reported earnings on Monday included:
- Bob Evans Farms, Inc. (NASDAQ: BOBE) reported first quarter EPS of $0.58, in line with expectations, on revenue of $329.4 million which fell just short of the 335.19 million that was expected.
- Urban Outfitters, Inc. (NASDAQ: URBN) reported second quarter EPS of $0.51, beating the expected EPS of $0.48. The reported revenue came in at $758.50 million, just below expectations of $768.76 million
International Rectifier Corporation (NYSE: IRF) reported a fourth quarter loss of $0.09 on $276.50 million in revenue.
Aegean Marine Petroleum (NYSE: ANW) reported second quarter EPS of $0.13, lower than the $0.17 that was expected. Revenue was in line with expectations at $1.69 billion
Stocks moving in the pre-market included:
Carnival Corp (NYSE: CCL) rose 0.22 percent in premarket trade after falling $0.63 on Monday.
- Disney (NYSE: DIS) also jumped 0.47 percent to $62.12 per share in premarket trade after the company’s heavily anticipated virtual reality game hit the shelves on Monday.
- General Motors Co (NYSE: GM) increased 0.14 percent after glowing reviews of the company’s new Corvette Stingray have sparked speculation that the new model could be GM’s turnaround.
Notable companies expected to report earnings Tuesday include:
Dell Inc (NASDAQ: DELL) is expected to report second quarter revenue of $14.18 billion vs. $14.48 billion a year ago.
- Analog Devices, Inc (NASDAQ: ADI) is expected to report third quarter EPS of $0.54 on revenue of $671.70 million vs. EPS of $0.56 on revenue of $683.03 million a year ago.
- Intuit Inc. (NASDAQ: INTU) is expected to report fourth quarter EPS of $0.05 up from last year’s $0.03
- Home Depot, Inc. (NYSE: HD) is expected to report second quarter EPS of $1.20 on revenue of $21.72 billion, up from last year’s EPS of $1.01 on revenue of $20.57 billion.
Tuesday is a slow day for economic releases, but investors will be watching for German Producer Price Index data as well as Hong Kong’s Consumer Price Index and the release of Mexican GDP.
Here’s to a profitable trading Tuesday!
For a recap of Monday's market action, click here.
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