THE LOOK…April 17th, 2014
U.S. stock-index futures fell, after the biggest three-day rally in two months for equities, as Google Inc. posted worse-than-estimated sales and investors awaited data that may show jobless claims rose.
Google slid 3.2 percent in early New York trading as increasing costs and a shift of advertising to mobile phones curbed first-quarter results. Facebook Inc., which also derives most of its revenue from advertising, lost 2.5 percent. International Business Machines Corp. dropped 3.7 percent after
reporting quarterly sales that trailed projections. General Electric, on the other hand, is currently trading up 2 percent after releasing earnings this morning.
Futures on the S&P 500 expiring in June declined 0.2percent to 1,848.4 at 11:28 a.m. in London. The equity gaugeadvanced yesterday, capping a three-day gain of 2.6 percent, asYahoo! Inc. earnings topped estimates and industrial productionclimbed more than forecast. Dow Jones Industrial Average
contracts retreated 46 points, or 0.3 percent, to 16,285 today.
“It has been a bit direction-less in the markets,” OttoWaser, chief investment officer at R&A Research & AssetManagement AG in Zurich, said by telephone. “There’s been a bit of a rotation out of technology — these sectors that had gotten a bit stretched in their valuations — but there hasn’t been any
major correction in the U.S.”
Twenty-five companies in the S&P 500 report earnings today. Profit per share for the index’s constituents probably dropped 0.9 percent in the first quarter, according to analyst estimates compiled by Bloomberg. Revenue climbed 2.6 percent from a year earlier, the projections show.
A report at 8:30 a.m. in Washington may show 315,000 people filed first-time applications for unemployment benefits in the week ended April 12, up from the previous week’s reading of 300,000 that was the lowest since May 2007, according to the median economist projection compiled by Bloomberg.
European stocks declined, paring their advance this week, as SAP AG slid after posting worse-
than-forecast earnings and sales, outweighing gains by carmakers. U.S. index futures slipped, while Asian shares rose.
SAP lost 3.3 percent as Germany’s biggest technology company also said that revenue from new software licenses dropped in the quarter. Akzo Nobel NV slid the most in nine months as its sales missed projections. Remy Cointreau SA and Diageo Plc led beverage stocks lower after reporting lower
sales. Renault SA and PSA Peugeot Citroen each gained more than 1 percent as a report showed European car sales rose in March.
The Stoxx Europe 600 Index retreated 0.3 percent to 329.86 at 10:53 a.m. in London as diplomats from Ukraine, Russia, the U.S. and the European Union meet for talks in Geneva today. The benchmark has still added 0.3 percent this week. It has fallen 2.8 percent from this year’s high on April 4 amid a confrontation between Ukraine’s government and pro-Russian separatists in the country’s eastern region.
“Investors are very cautious because of Ukraine and
· Support:1851, 1840, 1824
· Resistance:1867, 1873, 1889
The Federal Reserve is increasing its dominance in the daily market for the borrowing and lending of Treasuries while putting a floor under money-market rates.
The top panel of the CHART OF THE DAY shows the allotment at the central bank’s daily fixed-rate reverse repurchase agreements, which are tri-party transactions conducted daily by the Federal Reserve Bank of New York. The daily use levels, which appear as a negative on the chart as they represent a temporary drain of reserve from the banking system, have risen as increases in allowable per counterparty bids have been matched with demand. The bottom panel shows the activity has helped Treasury repo rates move up from almost zero.
“The Fed with its reverse-repo program is playing a greater role in Treasury repo, accounting for 17 percent of the tri-party market,” said Joe Abate, a money-market strategist in New York at primary dealer Barclays Plc. “In addition to establishing a harder floor under short-term interest rates by increasing allotment sizes, the program seems to be changing the behavior of money market investors, who have been increasing their holdings of Treasury repo.”
Money market mutual funds’ holdings of Treasury repo averaged $220 billion from September 2013 to March 2014, which compares to an average of $180 billion between January 2013 and the start of the Fed’s program in September of that year, according to Abate.
The Fed is using the fixed-rate reverse repo facility to improve control of short-term borrowing costs and help facilitate the eventual unwinding of monetary policy. The facility will eventually allow the Fed’s ligible tri-party reverse repo counterparties, which range from banks to broker-dealer to money market funds, to lend the Fed unlimited amounts of cash overnight in exchange for Treasuries. The per-counterparty daily allotment cap is $10 billion at a fixed rate of 0.05 percent.
The counterparty limit was $500 million when the program began. Under the Fed’s current guides for the operations, the fixed rate can range from 0.01 to 0.05 percent.
Disclaimer:
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Sources: Commentary adapted from Bloomberg, Wall St. Journal, Briefing.com, Streetaccount, theflyonthewall, FT.com, Reuters, and/or Dow Jones NewsPlus.
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