Fed on Hold, Home Sales Lift Market Sentiment

Bikram Pandey
24 Oct, 2012
New York City

U.S. indexes struggled after early gains and the latest parade of earnings dominated market sentiment and better than expected new home sales in September. U.S. sues Bank of America for mortgage fraud. Fed left its bond buying program and interest rate policy intact.

[R]4:00 PM New York – U.S. indexes struggled after early gains and the latest parade of earnings dominated market sentiment and better than expected new home sales in September. U.S. sues Bank of America for mortgage fraud. Fed left its bond buying program and interest rate policy intact.[/R]

Stocks in New York drifted lower and lost early momentum. At the opening, stocks advanced after China’s factory orders decline was less than expected and new home sales in the U.S. were ahead of expectations.

After the two day meeting the rate setting committee of the Fed left its interest rate policy intact and left unchanged its bond buying program. Fed also said in the accompanying statement that the economy is growing “moderately.”

New home sales increased 5.7% in September from a month ago. The annual rate of home sales increased to 389,000 in September was the highest in two years and 27% more than a year ago.

Single family new homes sold in September at an annualized rate of 389,000, up 27.1% from a year ago and the best rate since 422,000 in April of 2010 when first-time home buyers tax credit expired.

Median home price last month declined 3.2% to $242,400 from the revised August data and average home price was $292,400. The median price in September was 11.7% higher from a year ago.

Sales in the South rose 16.8% and in the Northeast gained 16.7% but plunged 37.3% in the Midwest and gained 3.9% in the West.

Dow Chemical ((DOW)) planned to cut about 2,400 jobs as part of its restructuring plans. Bard agreed to acquire Neomend for $140 million.

In the earnings news, American Electric Power net jumped 6% and suspended its earnings guidance. AT&T ((T)) quarterly net edged up and smartphone sales reached 6.1 million. Bristol-Myers ((BMY)) net swung to $711 million loss as U.S. sales dropped 43%. Boeing net declined 6%. Lockheed Martin ((LMT)) gained 3% after the largest defense contractor said quarterly profit increased 9.2%.

Facebook ((FB)) soared 21% after it reported mobile platform ad tripled to $150 million. Yelp Inc ((YELP)) gained 8% after the online review site reported sales ahead of expectations and expanded in Europe.

Netflix Inc ((NFLX)) plunged 13% after the company cut its outlook for domestic growth and estimated larger losses from its international business. IAC/InteractiveCorp ((IACI)) dropped 4% after it estimated operating loss in 2013.

The European indexes advanced. German confidence deteriorated, euro area private sector activity fell to a 40-month low, and UK factory orders fell unexpectedly in October. Rolls-Royce won a $2.6 billion order from Singapore Airlines.

Puma estimates annual net earnings to be significantly less than last year. Home Retail half-year sales slid 1% to £2.53 billion. Peugeot revenues fell 3.9% to €12.93 billion and SAP software revenue increased 17% to €1.03 billion in the third quarter.

The benchmark Nikkei index declined for the first time in eight days and halted the longest rally in 26 months. Sharp Corp gained 6% after the company began selling smartphone in China. Jtek and Kawasaki Heavy declined after companies missed their estimates.

Australian markets eased after inflation jumped more than expected in the three months to September but still within the target range set by the central bank. The latest increase was driven by the introduction of carbon tax.

Commodities, Bonds and Currencies

U.S. treasury yield on 10-year bond decreased to 1.77% and on 30-year bond fell to 2.92%.

The U.S. dollar inched higher to $1.295 to a euro and increased against the Japanese yen to 79.82 yen.

Immediate delivery futures of Texas crude oil decreased $1.36 to $85.36 a barrel and Brent crude fell $1.15 to $107.13, futures of natural gas decreased 0.07 cents to $3.46 per mbtu and gasoline traded down 2.83 cents to 257.67 cents a gallon.

In metals trading, copper increased 0.10 cents to $3.57 per pound, gold decreased $7.20 to $1,702.20 per ounce and silver decreased 8 cents to $31.78.