Futures Lower Following Tuesday Gains
U.S. equity futures gave back some of Tuesday's gains in pre-market trade Wednesday. A driver of the sell-off could have been the IMF cutting its China growth forecast to 7.75 percent from 8 percent previously just one day after China's Premier said the country was targeting 7 percent growth over the next decade.
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Top News
In other news around the markets:
- The number of Germans claiming unemployment benefits jumped much more than expected in May, as 21 thousand Germans claimed benefits for the first time vs. only 5 thousand expected. The unemployment rate remained flat at 6.9 percent.
- To quell bond market sell-offs and also as part of its easing program, the Bank of Japan bought 1.02 trillion yen (about $10 billion) worth of bonds overnight with maturities of 1-5 years and 10 years as well as inflation linked bonds.
- Bank of Japan Governor Kuroda spoke overnight saying that the global economy is still reeling from the financial crisis. He did not comment on stimulus measures as expected which could be a factor in the reversal in the yen overnight.
- S&P 500 futures fell 6.4 points to 1,648.20.
- The EUR/USD was higher at 1.2891.
- Spanish 10-year government bond yields rose 3 basis points to 4.33 percent.
- Italian 10-year government bond yields rose 5 basis points to 4.08 percent.
- Gold rose 0.36 percent to $1,384.70 per ounce.
Asian Markets
Asian shares were mixed overnight as Hong Kong shares showed outsized weakness. The Japanese Nikkei Index rose 0.1 percent and the Shanghai Composite Index gained 0.12 percent while the Hang Seng Index lost 1.61 percent. Also, the Korean Kospi rose 0.42 percent and Australian shares added 0.08 percent.
European Markets
European shares were also mixed overnight following mixed economic data. The Spanish Ibex Index rose 1.77 percent and the Italian FTSE MIB Index fell 0.43 percent. Meanwhile, the German DAX rose 1.16 percent and the French CAC 40 gained 1.39 percent while U.K. shares declined 1.22 percent.
Commodities
Commodities were lower overnight following the IMF cutting China's growth forecast overnight. WTI Crude futures declined 0.44 percent to $94.59 per barrel and Brent Crude futures fell 0.15 percent to $104.07 per barrel. Copper futures fell 0.8 percent to $328.85 per pound both on the China news and also following a report from PIMCO that was very negative on Australia's economy, specifically the mining sector. Gold was higher and silver futures fell 0.08 percent to $22.18 per ounce.
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Currencies
Currency markets were on the move overnight reversing some of Tuesday's moves as the yen strengthened. The EUR/USD was higher at 1.2891 and the dollar fell against the yen to 101.67. Overall, the Dollar Index fell 0.12 percent on weakness against the yen, the Swiss franc, the euro, and the pound.
Earnings Reported Yesterday
Key companies that reported earnings Tuesday include:
- Canadian Solar (NASDAQ: CSIQ) reported a first quarter loss of $0.10 per share vs. a loss of $0.78 per share expected on revenue of $263.3 million vs. $197.0 million expected.
- Guidewire Software (NYSE: GWRE) reported first quarter EPS of $0.04 vs. $0.03 expected on revenue of $68.3 million vs. $63.5 million expected.
- Tiffany and Co.(NYSE: TIF) reported first quarter EPS of $0.70 vs. $0.52 expected on revenue of $895.5 million vs. $855.16 million expected.
Pre-Market Movers
Stocks moving in the pre-market included:
- Royal Caribbean (NYSE: RCL) shares declined 1.1 percent pre-market as the company reported a fire on board a ship at sea. Carnival Corp. (NYSE: CCL) shares fell 1.06 percent in tandem.
- Peabody Energy (NYSE: BTU) shares declined 0.63 percent pre-market following comments from BHP (NYSE: BHP) overnight that it is stopping coal investments as the market for coal declines.
- Guidewire Software (NYSE: GWRE) shares gained 6.91 percent pre-market after its earnings release.
- Michael Kors Holdings (NYSE: KORS) shares rose 2.05 percent pre-market ahead of its earnings release Wednesday.
Earnings
Notable companies expected to report earnings Wednesday include:
- The Bank of Montreal (NYSE: BMO) is expected to report second quarter EPS of $1.50 vs. $1.44 a year ago.
- Dollar General (NYSE: DG) is expected to report first quarter EPS of $0.71 vs. $0.63 a year ago.
- DSW Inc. (NYSE: DSW) is expected to report first quarter EPS of $0.90 vs. $0.98 a year ago.
- Michael Kors Holdings (NYSE: KORS) is expected to report fourth quarter EPS of $0.39 vs. $0.22 a year ago.
- The Fresh Market (NASDAQ: TFM) is expected to report first quarter EPS of $0.44 vs. $0.40 a year ago.
Economics
On the economics calendar Wednesday, MBA Purchase Applications are due out as well as the Redbook in the U.S. Abroad, German CPI, Brazilian GDP, and the Canadian Interest Rate Decision are all expected. In addition, the Treasury is set to auction 4- and 52-week bills and Boston Fed President Eric Rosengren is set to speak. Overnight, Spanish GDP, Eurozone Consumer Confidence, and an Italian bond auction could move markets.
Good luck and good trading.