U.S. Stocks in Holding Pattern; Political Worries Overshadow Earnings

Bikram Pandey
26 Jul, 2011
New York City

U.S. stocks struggled as mixed earnings and growing uncertainty in Washington weighed on the sentiment. 3M, Ford and Netflix led the decliners. U.S. new home sales weakness highlighted ongoing weakness in the economy and home prices in the metropolitan areas declined. Oil, copper and gold gained.

[R]4:10 PM New York � U.S. stocks struggled as mixed earnings and growing uncertainty in Washington weighed on the sentiment. 3M, Ford and Netflix led the decliners. U.S. new home sales weakness highlighted ongoing weakness in the economy and home prices in the metropolitan areas declined. Oil, copper and gold gained.[/R]

The U.S. indexes struggled after a mixed batch of earnings and the lack of progress in the debt talks as the White House and Republicans remain far from a compromise.

The latest round of talks suggested that the plan proposed by the House Republicans may not gain favour among party members and President Barack Obama said he will veto the plan. The U.S. is facing a government shutdown and a rating downgrade if the lawmakers fail to agree on a spending cut plan and lift debt ceiling before August 2.

The sign of the weak housing market was evident in the latest data. Seasonally adjusted new home sales in June decreased 1% to 312,000 and increased 1.6% from a year ago.

The annual rate is now significantly below the 600,000 rate seen in a healthy economic environment and still is only 20% of the housing market. But the health of the new housing construction affects many more industries.

The median sale price of new homes sold in the month was $235,200 and average price was $269,000 with nine months of inventory.

Separately, a controversial metropolitan U.S. home price index suggested prices declined in May at top 20 largest cities from a year ago by 4.5%.

3M second quarter net income rose to $1.16 billion but Biogen second quarter net income decreased to $288 million. Cummins second quarter net income soared to $505 million. Ford second quarter net income decreased to $2.4 billion. Valero net income increased to $744 million.

The European markets struggled as investors digested a string of mixed earnings. BP Plc reported sharply lower profit on a weak production outlook and the largest Swiss bank UBS said quarterly net was cut in half on revenue fall of 14%. The dollar falls to a record low against the Swiss franc.

Stocks in Japan rebounded on the hopes of better than expected earnings. Canon and Kao revised earnings estimates higher. Metals and resources linked companies gained as gold and oil trade near recent highs.

Australian stocks rebounded as commodities prices hovered near the recent highs. The RBA Governor Glenn Stevens noted that rises in commodities prices shipped from Australia may stabilize but sounded optimistic about the improvement in consumer spending.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield decreased to 2.95% and 30-year U.S. bond traded down to 4.28%.

The U.S. dollar decreased at $1.457 to one euro and fell against the Japanese yen to 77.87 yen.

Immediate delivery futures of Texas crude oil increased $0.34 to $99.54 a barrel and futures of natural gas decreased 0.07 cents to $4.38 per mbtu and gasoline price increased 3.06 cents to 315.70 cents a gallon.

In metals trading, copper increased 6.95 cents to $4.48 per pound, gold added $6.60 to $1,621.00 per ounce and silver increased $0.58 to $40.95.