Off the Radar

[mick]

some news items fer read'ins.

US Markets
Debt Fears May Increase Risk Aversion

The major U.S. index futures are pointing to a sharply lower opening on Tuesday, with the negative sentiment reflecting concerns over the ability of the global economy to position itself in the path of sustainable growth. The fears intensified following the release of a bleak economic reading from Germany showing smaller than expected industrial production and reports suggesting that the debt crises in Dubai and Greece are worsening.

Without growth outlook dimming, commodity prices are moving to the downside, which may prove negative for commodity stocks. However, pre-announcements from companies are suggesting that corporate profit outlook may not as bleak as feared. Although industrial conglomerate 3M Co. (MMM) issued a lackluster outlook, Xilinx (XLNX) and Tyco Electronics (TEL) were upbeat in their expectations for the current quarter.

After opening Monday’s session slightly lower, the major U.S. averages advanced in early trading and remained above the unchanged line amid some volatility, as some promising positive pre-announcements and an assurance from Federal Reserve Chairman Ben Bernanke that rates will be kept low generated some buying interest. However, stocks declined sharply in late trading, as uneasiness prevailed over a lack of clarity on the economy’s course.

The Dow Industrials managed to recover, closing up 1.21 points or 0.01% at 10,390. However, the Nasdaq Composite fell 4.74 points or 0.22% to 2,190 and the S&P 500 Index receded 2.73 points or 0.25% to 1,103. At the same time, the yield on the benchmark 10-year Treasury note fell to 3.448% from 3.48% on Friday.

Sixteen of the Dow components ended the session higher, with Boeing (BA) (up 2.08%), AT&T (T) (up 1.34%), Verizon Communications (VZ) (up 1.68%) and Wal-Mart Stores (WMT) (up 1.27%) advancing strongly. On the other hand, Pfizer (PFE) fell 2.33%, JP Morgan (JPM) receded 1.17%, Hewlett-Packard (HPQ) declined 1.16%, Caterpillar (CAT) moved down 1.27% and Bank of America slipped 2.40%.

Among the sector indexes, the Dow Jones Transportation Average fell 1.02%, the Philadelphia Housing Sector Index declined 1.42%, the NYSE Arca Securities Broker/Dealer Index lost 1.52%, the Philadelphia Housing Sector Index receded 1.42% and the KBW Bank Index retreated 1.63%. The NYSE Arca Gold Bugs Index ended down 2.06% compared to a 1.53% decline by the NYSE Arca Internet Index.

S&P Equity Research said in a recent note that it continues to overweight the cyclical sectors at the expense of defensive ones, as it sees the economy gaining strength over the next several quarters. That said, the firm cautioned of a sell-off in the shares of 2009 winners before the year is out. S&P also stated that it would view the year-end tax selling as a temporary pause in a climb above 1,200 for the S&P 500 Index.

In his address to the Economic Club of Washington, Federal Reserve Chairman Ben Bernanke said the U.S. faces significant headwinds to growth. That said, recovery signs have now become widespread, according to the Fed Chairman. The U.S. is likely to continue to see modest growth in 2010. In all, Bernanke’s statements relayed the view that the fed funds futures rate will remain low for an extended period.

A report released by the Federal Reserve yesterday showed that consumer credit outstanding fell by $3.5 billion to $2.483 trillion yen in October. September’s decline was revised to a drop of $8.8 billion from the $14.8 billion decline estimated initially. Revolving credit slipped by $7 billion, while non-revolving credit rose by $3.4 billion. The continued drop in consumer credit outstanding reflects tighter lending standards, consumers’ desire to pay down debt and the moderate pace of consumer spending.