29/07/10 - 09:00
Ben Potter, Research Analyst
Overnight Market Report - 9.00am
Overnight, US stocks retreated on the back of a disappointing earnings report from Dow component Boeing and the latest Beige Book report, which suggested several districts were experiencing softening growth.
The Dow Jones Industrial Average snapped its four-session winning streak ending lower by 0.4% and the NASDAQ was weaker by 1%. The S&P slipped 0.7% but held itself above the key 1100 level.
After Bernanke’s comment last week, that the economic outlook was “unusually uncertain”, it seems the Beige Book may have confirmed this notion, with some districts reporting that the pace of expansion had slowed over the last month. Areas were dragged down by commercial real estate and the expiration of tax credits for home buyers. If nothing else, the report underscored the Fed’s view that while an economic recovery is still underway, it is progressing at a slower pace than earlier in the year.
In other economic news, durable goods orders unexpectedly fell by 1% in June, while mortgage application dropped 4.4% from a week earlier.
In terms of sector performance, losses were broad based with all but the telecommunications ending the day in negative territory.
The financial sector was the worst performer, largely due to Moody’s lowering its outlook on heavyweight names, Bank of America, Citigroup and Wells Fargo to “negative” from “stable”, citing lower government support for financial institutions under the new regulations. The negative outlook is seen as increasing the companies’ chances of a downgrade over the next 12 months.
Energy prices were softer while base metals were fractionally firmer, yet both the energy and materials sectors were modestly lower.
Looking to the Australian market, we’re seeing a slightly softer open, with it set to unwind 17 points or 0.4% lower at 4512.
Based on US leads, you’d expect the financials to be the major drag on our market, with some possible relative strength coming from the materials space. While the US materials sector finished down 0.5%, both BHP Billiton and Rio Tinto were approximately 1% higher in London overnight, and the BHP’s ADR is pointing to start the day with a small 13c gain. If the materials sector can hold relatively firm this may help stem the expected losses on the open.
Regular Feeds
Chris Weston, Market Analyst, is the face of our video market updates and presents live from our trading floor daily. His expert commentary can also be seen regularly on Sky Business channel, plus Bloomberg, ABC2, the Australia Network’s Business Today program and Yahoo Finance.
Plan your day
More in-depth market news is available within our PureDeal platform, as well as a range of free charting and research tools.
Disclaimer: The above material does not contain (and should not be construed as containing) personal financial or investment advice or other recommendations. The information provided does not take into account your particular investment objectives, financial situation or investment needs. You should assess whether the information provided is appropriate to your particular investment objectives, financial situation and investment needs. You should do this before making an investment decision based on the material above. You can either make this assessment yourself or seek the assistance of an independent financial advisor. IG Markets Limited accepts no responsibility for any use that may be made of these comments and for any consequences that result.