U.S. Stocks Lack Direction, More Debate at Fed Before First Rate Hike

Nichole Harper
08 Apr, 2015
New York City

U.S. stocks lacked direction and crude oil plunged more than 6% to $50 a barrel. The Fed minutes showed that several rate committee members were inclined to wait for the momentum in inflation and wage growths before lifting rates as early as June.

[R]3:00 PM New York – U.S. stocks lacked direction and crude oil plunged more than 6% to $50 a barrel. The Fed minutes showed that several rate committee members were inclined to wait for the momentum in inflation and wage growths before lifting rates as early as June.[/R]

Stocks traded sideways in choppy trading and popular indexes struggled to stay above the flat line.

Crude oil declined after the latest report showed that the U.S. is running out of storage for the commodity as the production remains elevated.

Investors also digested the latest Fed minutes of the meeting last month and several members of the rate setting committee felt that the increase in rate may be necessary as early as June and “others” said the increase could wait till late in the year.

Fed is still widely believed to stick to its plan to not increase rate till the meeting in September, probably the first increase since June 2006.

Fed Chair Janet Yellen stressed that the committee feels that the wage growth and inflation acceleration are necessary to begin increase in rates but the members have to be confident of the near-term momentum in inflation.

On Wall Street trading, Tollbooth Strategy Index jumped 0.6% or 58.53 to 10,527.68.

S&P 500 index rose 5.94 or 0.3% to 2,082.31 and the Nasdaq Composite Index gained 37.88 or 0.8% to 4,947.88.

Crude oil in New York declined $2.55 to $51.43 a barrel and gold plunged $6.60 to $1,204 an ounce.

U.S. Movers

Global Payments Inc ((GPN)) climbed 5.5% or $5.04 to $97.27 after the payment solutions provider said revenues in the third-quarter ending in February jumped 7.9% to $665 million from a year ago period.

Net income in the quarter soared 13.5% to $62.6 million or 93 cents per diluted share compared to $55.1 million or 76 cents from the same quarter last year.

Rite Aid Corporation ((RAD)) gained 3% or 26 cents to $8.96 after the retail drugstore chain reported revenues in the fourth-quarter ending in February climbed 3.8% to $6.8 billion from a year ago period.

Same store sales for the quarter increased 4.5% and front-end sales increased 2%. The number of prescriptions filled in same stores jumped 3.5%.

Net income in the quarter surged to $1.84 billion or $1.79 per diluted share compared to $56.7 million or 6 cents from the same quarter last year.

Rite Aid forecasted sales for the fiscal 2016 to be between $26.9 billion and $27.4 billion with same store sales estimated in the range of 2.5% to an increase of 4.5% over fiscal 2015.

The company added net income for the fiscal 2016 is estimated between $190 million and $275 million and diluted earnings per share in the range of 19 cents to 27 cents.

European Markets

In London trading, FTSE 100 index gained 0.2% or 14.59 to 6,976.36 and in Frankfurt the DAX index fell 0.3% or 31.68 to 12,091.84.

In Paris, CAC 40 index edged up 3.71 to 5,154.90.

easyJet plc rose 0.5% to 1,855 pence after the U.K.-based discount airline said number of passengers in March climbed 7.5% to 5.49 million from 5.11 million and load factor in the month increased 1.1 percentage point to 92.6% compared to 91.5% in a year ago month.

Royal Dutch Shell Plc declined 3.3% to 2,025 pence after the U.K.-based energy giant agreed to acquire oil and gas explorer BG Group Plc in a cash and stock deal valued at about £47 billion or $69.78 billion.

Shell confirmed that it will pay dividends of $1.88 per share in fiscal years 2015 and 2016 and expects to commence a share buyback program in fiscal 2017 ending in fiscal 2020 and acquire as much as $25 billion.

The deal is expected to close in early 2016.

Shares of BG Group Plc surged 32.7% to 1,208.50 pence.

Under the terms, shareholders of BG Group will receive 383 pence cash per share and 0.4454 B shares of Shell.

BG confirmed the takeover talk with Shell.

Asian Markets

Nikkei in Tokyo soared to a new 15-year high as Bank of Japan kept its monetary expansion plan unchanged and retail investors supported new buying in the market.

Current account surplus widened in February after the trade deficit in the month narrowed. Takashimaya Company met earnings expectations.

Stocks in Tokyo climbed after retail investors drove the new purchases in the market with the launch of two equity investment trusts.

Two new equities linked trusts were launched today and raised $1.3 billion or 100 billion yen.

In addition, market indexes were powered by the sector rotation from domestic fund managers with the beginning of new financial year and new flow of funds from international investors looking to diversify away from the U.S. markets.

Current account surplus in February widened to 1.44 trillion yen following the 61.4 billion yen surplus in January and 5.99 trillion yen in the same month a year ago, the Ministry of Finance said.

The trade deficit in February narrowed to 143.1 billion yen compared to 864.2 billion yen in the previous month and 572.9 billion yen in the same month a year ago.

The government added export in the month rose 0.4% to 5.96 trillion yen from 5.94 trillion yen a year ago month and imports declined 6.2% to 6.10 trillion yen from 6.51 trillion yen in February 2014.

The Nikkei 225 Stock Average jumped 149.27 or 0.8% to 19,789.81 and the broader Topix index increased 9.92 to 1,588.47.

The Nikkei soared to a 15-year high not seen since April 2000.

The yen closed at 119.76 against a dollar.

Stocks in Mumbai surged for the fourth day in a row and cyclical stocks led the gainers.

Coal India soared after the central government removed the upper limit of e-auction for the sale of coal.

Separately, the Union Cabinet also amended bill for the real estate to monitor and prevent the flow of illegal funds and the use of cash for the purchase of properties.

Rupee slid 1 paisa 62.24 against one dollar.

The Sensex Index jumped 119.16 or 0.7% to close at 28,707.75. The CNX Nifty added 54.10 or 0.6% to 8,714.40.

Drug sector stocks also gained after the National Pharmaceutical Pricing Authority permitted the price increase of as much as 3.8% on 509 drugs.

The prices were approved for the sale from April 1.

Videocon Industries Limited climbed 3.3% to ₹160.80 after the home appliances maker’s subsidiary Videocon d2h began trading on the U.S. based Nasdaq trading system and raised $325 million.

The American Depository Receipt of Videocon d2h closed at $11.74, down 3% from the opening price in New York.

According to the prospectus, Videocon d2h agreed to sell nearly 33% stake in the company for $325 million or ₹1,950 crore to Silver Eagle promoted by former executive of MGM.

The satellite pay TV channels operator controls nearly 16% of the India’s direct-to-home market with 11.8 million or 1.18 crore subscribers. The company was launched in 2009 and offers several packages from its 500 digital television channels.

The company had previously planned to raised ₹700 crore or $115 million through a listing on the Bombay Stock Exchange.

At the end of fiscal year in March 2014, the company had revenues of ₹1,760.80 crore and a net loss of ₹469.30 crore.