In volatile early morning action following yesterday's massive sell-off, the US equity markets are pointing to a higher open ahead of the afternoon monetary policy statement by the Federal Reserve. Treasuries are lower after rising solidly amid yesterday's flight to safety, showing little reaction to reports that showed 2Q nonfarm productivity declined slightly and unit labor costs rose, while small business optimism deteriorated further. In equity news, MGM Resorts International posted a smaller-than-forecasted loss, while DISH Network Corp missed analysts' profit projections. Overseas, Asia finished broadly lower but showed some relative resiliency, while European markets have come well off of the worst levels of the day as the US markets try to rebound.
As of 8:48 a.m. ET, the September S&P 500 Index Globex future is 14 points above fair value, the Nasdaq 100 Index is 16 points above fair value, and the DJIA is 104 points above fair value. WTI crude oil is $0.91 higher at $82.22 per barrel, and the Bloomberg gold spot price is up $30.13 at $1,749.57 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.5% at 74.39.
MGM Resorts International (MGM $12) reported a 2Q net loss ex-items of $0.05 per share, compared to the shortfall of $0.13 per share that analysts surveyed by Reuters had projected, with revenues rising 17% year-over-year (y/y) to $1.8 billion. The casino and hotel operator said it believes the foundation of the Las Vegas recovery "is solid and our business is building," while its MGM Macau had another record quarter.
DISH Network Corp. (DISH $23) announced 2Q earnings of $0.75 per share, four cents below the expectation on the Street, but revenues rose 13.3% y/y to $3.6 billion, topping the $3.4 billion that analysts had projected. The satellite-TV provider said its net subscribers decreased by about 135,000 during the quarter.
Productivity dips and costs rise, small business optimism fades, Fed meeting on horizon
The preliminary reading on 2Q nonfarm productivity showed a 0.3% decline on an annual basis, from the 0.6% drop seen in 1Q, which was revised from a 1.8% increase, and compared to the 0.9% decline that economists surveyed by Bloomberg expected. Unit labor costs came in at a 2.2% increase, versus a gain of 4.8% that was recorded in 1Q, revised sharply higher from a previous 0.7% rise, and compared to the 2.4% growth that was estimated.
Elsewhere, the NFIB Small Business Optimism Index deteriorated in July, declining from 90.8 in June to 89.9, matching the expectation of economists. The decrease came as the number of firms reporting expectations of higher sales and a better economy deteriorated, along with declines in plans to hire and increases capital spending.
Treasuries are lower in morning action following the data and the steep gains amid yesterday's sell-off in the equity markets, with the yield on the 2-year note up 1 bp to 0.27%, the yield on the 10-year note 7 bps higher at 2.39%, and the 30-year bond gaining 6 bps to 3.71%.
However, the headlining US economic event will likely be the afternoon conclusion to the Federal Open Market Committee's (FOMC) monetary policy meeting. The Fed's statement will be released at 2:15 p.m. EST, and despite the recent tumble in the equity markets, no major changes to the Central Bank's stance are expected. There will be no press conference by Fed Chairman Ben Bernanke to follow, so the focus will be on changes made to the language of its statement in light of the soft global economic data since its last meeting and the festering debt crisis on both sides of the Atlantic Ocean, which have drained confidence among investors. The Fed may acknowledge the recent sell-off in the equity markets and traders will be paying close attention to whether it hints at another round of quantitative easing, or QE3, though it has noted that the threshold for further stimulus remains high as the threat of deflation has mitigated and the employment market has improved compared to last fall when it announced QE2. Although most economists expect the Fed to hold off on signaling the possibility of QE3, it could announce more subtle measures aimed at boosting the economy, such as tweaking the terms of the banking sector's capital reserves held at the Federal Reserve or its reinvestments of principle payments from its various security purchases.
Europe remains stymied by debt and economic concerns
The equity markets in Europe continue to be hamstrung by US and euro-area debt concerns and growing worries about the health of the global economy, with most major markets trading in the red in afternoon action. However, as the US equity markets have been pointing to a slight rebound from yesterday's sharp declines, European stocks have come well off of the worst levels of the day, with equities in France and the UK flirting with positive territory. However, German markets remain solidly lower as some economic reports are exacerbating the already uneasy sentiment. Germany reported that exports fell more than expected in June, while imports unexpectedly rose, resulting in a smaller-than-projected trade surplus. Meanwhile, data out of the UK was mixed with a read on the region's home prices unexpectedly improving in July, while separate reports showed industrial production and manufacturing activity came in below expectations and the UK trade deficit surprisingly widened.
The UK FTSE 100 Index is down 0.3%, France's CAC-40 Index is unchanged, Germany's DAX Index is falling 1.9%, Italy's FTSE MIB Index is declining 1.0%, and Spain's IBEX 35 Index is dropping 1.6%.
Asia pares huge losses but most markets still finish solidly lower
Although stocks in Asia finished solidly below the flatline on the heels of the tumble in the US equity markets yesterday, some late-day resiliency helped spare some markets from huge losses. Japan's Nikkei 225 Index declined 1.7% after being down nearly 5% in early action and South Korea's Kospi Index finished down 3.6%, after falling close to 10% earlier in the session, while Australia's S&P/ASX 200 Index managed to close 1.2% higher, after erasing losses of well over 5%. Moreover, China's Shanghai Composite Index finished flat, recovering from a 3.5% drop during the trading day, as traders digested a plethora of key economic data in the region. China's consumer and producer prices both accelerated in July to 6.5% and 7.5% y/y, respectively, dampening optimism that the government's monetary-tightening campaign may be in the late stages. However, other reports showed that the nation's tighter monetary policy may not be slowing growth as much as some anticipated, with industrial production and retail sales growing over 14% and 16%, respectively, while fixed asset investment rose more than 25%. However, stocks in Hong Kong registered the biggest losses, as the Hang Seng Index fell 5.7%, but still better than the near 8% decline that it saw in earlier trading
As of 8:48 a.m. ET, the September S&P 500 Index Globex future is 14 points above fair value, the Nasdaq 100 Index is 16 points above fair value, and the DJIA is 104 points above fair value. WTI crude oil is $0.91 higher at $82.22 per barrel, and the Bloomberg gold spot price is up $30.13 at $1,749.57 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.5% at 74.39.
MGM Resorts International (MGM $12) reported a 2Q net loss ex-items of $0.05 per share, compared to the shortfall of $0.13 per share that analysts surveyed by Reuters had projected, with revenues rising 17% year-over-year (y/y) to $1.8 billion. The casino and hotel operator said it believes the foundation of the Las Vegas recovery "is solid and our business is building," while its MGM Macau had another record quarter.
DISH Network Corp. (DISH $23) announced 2Q earnings of $0.75 per share, four cents below the expectation on the Street, but revenues rose 13.3% y/y to $3.6 billion, topping the $3.4 billion that analysts had projected. The satellite-TV provider said its net subscribers decreased by about 135,000 during the quarter.
Productivity dips and costs rise, small business optimism fades, Fed meeting on horizon
The preliminary reading on 2Q nonfarm productivity showed a 0.3% decline on an annual basis, from the 0.6% drop seen in 1Q, which was revised from a 1.8% increase, and compared to the 0.9% decline that economists surveyed by Bloomberg expected. Unit labor costs came in at a 2.2% increase, versus a gain of 4.8% that was recorded in 1Q, revised sharply higher from a previous 0.7% rise, and compared to the 2.4% growth that was estimated.
Elsewhere, the NFIB Small Business Optimism Index deteriorated in July, declining from 90.8 in June to 89.9, matching the expectation of economists. The decrease came as the number of firms reporting expectations of higher sales and a better economy deteriorated, along with declines in plans to hire and increases capital spending.
Treasuries are lower in morning action following the data and the steep gains amid yesterday's sell-off in the equity markets, with the yield on the 2-year note up 1 bp to 0.27%, the yield on the 10-year note 7 bps higher at 2.39%, and the 30-year bond gaining 6 bps to 3.71%.
However, the headlining US economic event will likely be the afternoon conclusion to the Federal Open Market Committee's (FOMC) monetary policy meeting. The Fed's statement will be released at 2:15 p.m. EST, and despite the recent tumble in the equity markets, no major changes to the Central Bank's stance are expected. There will be no press conference by Fed Chairman Ben Bernanke to follow, so the focus will be on changes made to the language of its statement in light of the soft global economic data since its last meeting and the festering debt crisis on both sides of the Atlantic Ocean, which have drained confidence among investors. The Fed may acknowledge the recent sell-off in the equity markets and traders will be paying close attention to whether it hints at another round of quantitative easing, or QE3, though it has noted that the threshold for further stimulus remains high as the threat of deflation has mitigated and the employment market has improved compared to last fall when it announced QE2. Although most economists expect the Fed to hold off on signaling the possibility of QE3, it could announce more subtle measures aimed at boosting the economy, such as tweaking the terms of the banking sector's capital reserves held at the Federal Reserve or its reinvestments of principle payments from its various security purchases.
Europe remains stymied by debt and economic concerns
The equity markets in Europe continue to be hamstrung by US and euro-area debt concerns and growing worries about the health of the global economy, with most major markets trading in the red in afternoon action. However, as the US equity markets have been pointing to a slight rebound from yesterday's sharp declines, European stocks have come well off of the worst levels of the day, with equities in France and the UK flirting with positive territory. However, German markets remain solidly lower as some economic reports are exacerbating the already uneasy sentiment. Germany reported that exports fell more than expected in June, while imports unexpectedly rose, resulting in a smaller-than-projected trade surplus. Meanwhile, data out of the UK was mixed with a read on the region's home prices unexpectedly improving in July, while separate reports showed industrial production and manufacturing activity came in below expectations and the UK trade deficit surprisingly widened.
The UK FTSE 100 Index is down 0.3%, France's CAC-40 Index is unchanged, Germany's DAX Index is falling 1.9%, Italy's FTSE MIB Index is declining 1.0%, and Spain's IBEX 35 Index is dropping 1.6%.
Asia pares huge losses but most markets still finish solidly lower
Although stocks in Asia finished solidly below the flatline on the heels of the tumble in the US equity markets yesterday, some late-day resiliency helped spare some markets from huge losses. Japan's Nikkei 225 Index declined 1.7% after being down nearly 5% in early action and South Korea's Kospi Index finished down 3.6%, after falling close to 10% earlier in the session, while Australia's S&P/ASX 200 Index managed to close 1.2% higher, after erasing losses of well over 5%. Moreover, China's Shanghai Composite Index finished flat, recovering from a 3.5% drop during the trading day, as traders digested a plethora of key economic data in the region. China's consumer and producer prices both accelerated in July to 6.5% and 7.5% y/y, respectively, dampening optimism that the government's monetary-tightening campaign may be in the late stages. However, other reports showed that the nation's tighter monetary policy may not be slowing growth as much as some anticipated, with industrial production and retail sales growing over 14% and 16%, respectively, while fixed asset investment rose more than 25%. However, stocks in Hong Kong registered the biggest losses, as the Hang Seng Index fell 5.7%, but still better than the near 8% decline that it saw in earlier trading
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