10/26/2011
Market's Bird View for Wednesday, October 26th
Benefiting from some upbeat economic data as well as optimism about the summit of European leaders later today, stocks moved sharply higher at the start of trading on Wednesday. The major averages showed notable moves to the upside after moving sharply lower Tuesday.
The initial strength on Wall Street was partly due to the release of a report from the Commerce Department showing a smaller than expected drop in durable goods orders for September, with the decrease largely due to weakness from the transportation sector.
The report showed that durable goods orders fell by 0.8% in September after edging down by 0.1% in August. Economists had been expecting orders to show a larger drop of 1%.
Excluding a 7.5% decrease in orders for transportation, durable goods orders actually jumped by 1.7% in September, far exceeding economist estimates for a 0.5% increase.
The markets are also benefiting from greater optimism that a meeting of European leaders in Brussels will result in an agreement on the steps needed to resolve the euro zone debt crisis. Ahead of the meeting, Germany's lower house of parliament approved a motion to strengthen the euro zone rescue fund.
Upbeat earnings news is also contributing to the strength on Wall Street, with aerospace giant Boeing (BA) jumping by 5.2% after reporting better than expected third quarter earnings and raising its full year earnings guidance.
Steel stocks are turning in some of the market's best performances in early trading after coming under pressure in the previous session. The NYSE Arca Steel Index is advancing by 2.3% after falling by 3.8% on Tuesday.
Health insurance, airline, housing, and gold stocks have also shown notable moves to the upside, with gold stocks benefiting from an increase by the price of the precious metal. On the other hand, some trucking and retail stocks are bucking the uptrend.
The price of crude oil was steady near its 3-month high Wednesday morning as traders await cues from the official inventories data, due out later during the session. Today during trading hours, the EIA will come out with its U.S. crude oil inventories report for the week ended October 21. Analysts expect crude oil inventories to rise by 1.48 million barrels, while gasoline stocks are seen dipping 1.75 million barrels. Crude for December edged down $0.24 to $92.93 a barrel.
In Europe, markets are marginally higher in afternoon trading. The DAX index is adding 0.13%, the CAC 40 is gaining 0.28% and the FTSE 100 index is advancing 0.16%. However, Switzerland's SMI is retreating 0.22%.
In Germany, SAP is losing 1.1% despite reporting stellar third-quarter results, while Merck is climbing 6% after reporting increases in third-quarter profit and revenue. In Paris, Renault is rising 2.6%and Peugeot is adding 1.1%. Peugeot said its revenues for the third quarter increased 3.5 percent from last year.
In economic news, France's manufacturing business leaders' expectations for domestic as well as export demand significantly declined, a quarterly survey by the statistical office INSEE showed. The October quarter survey showed that indicator reflecting the total demand outlook fell to -6 from 7 in the July survey.
Most Asian markets ended marginally higher amid cautious trade Wednesday as traders awaited cues from today's EU meeting, which is expected to come with a tangible solution for the euro zone debt crisis.
Chinese shares extended gains for a third session after Premier Wen Jiabao said the government will fine-tune its economic policies as needed, cementing speculation the central bank may pause interest-rate increases. Traders hoped for lower the reserve-requirement ratio for small-and medium-size banks before the year-end and cut interest rates in the second quarter next year
The Shanghai Composite index added 16.54 points or 0.69% to 2,426.22. China's biggest cement maker, Anhui Conch gained over 2% after recording a 125 percent jump in its third quarter net income. Developers China Vanke Co. and Poly Real Estate Group Co. rose nearly 4% each on hopes of halt in further interest rate hikes.
In Japan market edged down, with the Nikkei average losing 13.84 points to 8,748.47. Game maker Nintendo Co. shed over 4% amid reports that the company will report a wider loss. Optical equipment company Olympus Corp. dropped over 7% amid allegations of wrongful conduct related to pricey acquisitions. Meanwhile, electronic parts maker TDK Corp. advanced over 8% after Nomura recommended the shares.
