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US markets mixed after last week’s rally

US markets mixed after last week’s rally

After an uneven trading US stock indexes finished Monday session little changed. Investors have adopted a wait and see approach ahead of the Federal Open Market Committee meeting and further corporate earnings reports. The S&P 500 index lost 2.95 points, or 0.2%, to 1961.63. The Dow Jones Industrial Average added 12.53 points, or 0.1%, to 16817.94. The Nasdaq Composite Index gained 2.22, or less than 0.1%, to 4485.93. Investors preferred the safety of defensive stocks over cyclical businesses that tend to be more responsive to changes in the state of overall economy.

The gains in defensive stocks – shares of big companies in consumer staples, utilities and telecom that tend to pay dividends and are more stable in business cycles, were offset by big losses in cyclical shares- energy and materials companies that are more dependent on economy. Energy shares were the most actively traded, and their decline pulled the S&P 500 index down. The S&P 500 Energy sector index declined 2% and has dropped 15.4% in the last three months due to sliding oil prices. Shares of Exxon Mobil fell 0.8%. Investors are waiting to see what the Federal Open Market Committee will decide as the US central bank holds a policy meeting today and Wednesday. The Fed is expected to announce the completion of its quantitative easing program.

It is widely anticipated that the Federal Reserve will likely reinforce its stated willingness to wait a long time before hiking interest rates after a volatile month in financial markets. Data on Monday showed U.S. services sector activity slowed in October to a six-month low, while manufacturing output in Texas decreased. Based on the recent data of weak US inflation, troubled state of European economy and strengthening dollar, it is more likely that the Fed will not indicate plans for early interest rate hikes as the current global growth slowdown and disinflationary pressures negatively affect the US recovery. It should be noted that the Federal Reserve expected the US recovery would continue to strengthen which would allow them to raise interest rates around middle of the next year. Today at 13:30 CET Durable Goods Orders for September will be released in US, the forecast is positive. At 15:00 CET the Conference Board Consumer Confidence Index will be published. The tentative outlook is positive.

Dow Jones Industrial Average

European stocks fell on Monday as investors decided to take profit after recent gains and the European Central Bank review of the region’s banks. Though the results of the tests were considered positive by traders and fund managers, most euro zone banking stocks declined, pairing big gains made in the run-up to the results of the ECB review. STOXX euro zone bank index fell 2.3 percent, after surging 14 percent since mid-October. Hurting sentiment, the Munich-based Ifo’s business climate index, based on a monthly survey of some 7,000 firms, fell to 103.2 from 104.7 the previous month, suggesting deteriorating outlook for Europe’s largest economy in the fourth quarter. UK’s FTSE 100 index fell 0.4 percent, Germany’s DAX index shed 1 percent and France’s CAC 40 lost 0.8 percent. Asian shares were modestly higher while the dollar held steady on Tuesday, as investors awaited the outcome of the U.S. Federal Reserve’s two-day meeting that begins later in the session for clues to the direction of U.S. interest rates. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose about 0.3 percent. But Japan’s Nikkei stock average declined further, shedding 0.8 percent on concerns over corporate earnings after disappointing results from Canon Inc, despite upbeat economic data released before the market open.

In commodities markets, West Texas Intermediate crude oil fell for a third day amid speculation crude inventories increased to near a four-month high in the US, the world’s biggest oil consumer. Brent crude oil fell in London. Brent for December settlement decreased as much as 68 cents, or 0.8 percent, to $85.15 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude oil traded at a $4.81 premium to WTI.

Brent crude oil

Wheat rose for a second day on concern that harvests in Australia and Russia may drop because of extreme weather. Soybeans fell from a seven-week high. Wheat for December gained as much as 0.6 percent to $5.2575 a bushel on the Chicago Board of Trade and was at $5.25 at 10:43 a.m. in Singapore.

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