Wall Street Struggles, Bernanke Uncertain; Yields Drop

Devan Biswas
02 Feb, 2012
New York City

U.S. indexes struggled after Fed Chairman Bernanke expression frustration with the recovery and investors digested mixed earnings, January same store retail sales and lower weekly jobless claims. In Europe hopes were high for Greek debt restructuring and Spain raised more than targeted in debt sale.

[R]4:00 PM New York – U.S. indexes traded sideways after Fed Chairman Bernanke expression frustration with the economic recovery and investors digested mixed earnings and January same store retail sales and lower weekly jobless claims. In Europe hopes were high for Greek debt restructuring and Spain raised more than targeted in debt sale.[/R]

The U.S. indexes lost early gains and struggled to stay in the positive zone as Fed Chairman Bernanke expressed his frustration with the slow and protracted recovery in the U.S. economy.

Chairman Bernanke also testified before the U.S. lawmakers today and said Fed anticipates faster recovery in the years ahead. Bernanke highlighted improvement in consumer spending, production and employment but also said the economy is vulnerable to shocks and urged lawmakers to reduce long term budget deficit.

Investor in New York were positive in the early trading after weekly jobless claims fell 12,000 to 367,000 and labor productivity increased 0.7% in the fourth quarter of 2011. But the weakness in banks and in pharmaceuticals after earnings disappointments dragged broader indexes lower.

Facebook, the social networking site filed to raise $5 billion in an initial public offering. The company generated $1 billion in net profit in 2011 and attracts at least half of its 845 million members once a month. The widely anticipated public offering is expected to be priced in the next six weeks and is likely to be priced at least above $35 to $40 a share price range.

In corporate news, American Airlines planned to cut 13,000 jobs and Cummins fourth quarter net increased to $548 million. Goodrich fourth quarter net soared to $237.9 million. Kellogg fourth quarter net increased 23% to $232 million on higher sales driven by price increase. Green Mountain Coffee Roasters Inc soared more than 20% after its sales and earnings were ahead of expectations.

Retailers report mixed same store sales in January. Gap Inc soared more than 9% after it estimated fourth quarter earnings to be at least 41 cents a share. Kohl’s reported better than expected same store sales in January and lifted fourth quarter earnings outlook.

Macy’s revised its December quarterly earnings estimate and reported weaker than expected same store sales in January. Abercrombie & Fitch declined 11% after the apparel retailer said December quarter earnings will be below expectations. Ann Inc dropped 8% after it also lowered quarterly earnings expectations.

Qualcomm first quarter net increased 20% to $1.40 billion. MasterCard fourth quarter net declined to $19 million but core earnings were higher than expected on higher spending in the network.

Global investors focused on the debt auctions in Europe and Spain raised more than expected in debt sales as the yields fell. Also, investors were on the defensive after Royal Dutch Shell reported earnings decline of 4% on weak refining margins and Deutsche Bank net plunged 76%.

European markets traded mixed after France raised €7.962 billion and Spain sold €4.56 billion of debt at auctions today at lower yields. Xstrata confirmed reports regarding a merger approach from Glencore. Deutsche net plunged 76% and Royal Dutch Shell net declined 4%.

Euro area producer price inflation eased in December. Spanish jobless rate rose in January and Swiss trade surplus soared to record high in 2011. The National Bank of Romania cut interest rate to 5.5%.

The UK indexes traded flat after the UK construction sector eased in January. The Irish central bank trimmed growth outlook for 2012. AstraZeneca planned to cut 7,300 jobs.

The benchmark Nikkei index extended gains for the third day as companies release earnings. Sharp Corp plunged its daily limit after it estimated larger than expected loss. Nomura and Itochu gained after reporting higher than expected net income.

Australian stocks gained after a streak of 3-day losses and on the rising exports of commodities to Asia. December exports rose 2% to $27.92 billion and trade surplus widened to $1.71 billion. The supermarket chain Coles said food and liquor sales increased 4.1% in the quarter to December.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond decreased to 1.82% and 30-year bond fell to 3%.

The U.S. dollar traded up 1.2% to $1.314 to one euro and traded lower against the Japanese yen to a 3-month low to 76.15.

Immediate delivery futures of Texas crude oil fell $1.83 to $97.78 a barrel and futures of natural gas rose 9 cents to $2.47 per mbtu and gasoline price decreased 3.4 cents to 285.8 cents a gallon.

In metals trading, copper decreased 6.3 cents to $3.77 per pound, gold increased $6.70 to $1,756.20 per ounce and silver increased 4 cents to $33.85.