Investors Cautious as Greece Rattles Markets
Mon, Feb 8, 11:22 AM ET, by Scott V. Nystrom
Investors remain cautious as U.S. stocks opened lower then turned higher this morning on fears that a bailout of debt-laden Greece might create a domino effect in Europe. Fears of sovereign debt defaults in Europe kept the U.S. dollar near a seven-month high on Monday as investors stepped away from risk assets. Economic news is light while earnings season continues strongly for the fourth quarter of 2009 with almost 470 companies scheduled to report this week. Market Review In overseas equity markets on Monday, major Asian markets closed lower. Japan's Nikkei 225 index fell 1.1 percent today while China's Shanghai Shenzen index dropped 0.1 percent. Hong Kong's Hang Seng was lower by 0.6 percent. European equity markets were higher on Monday. The German DAX index rose 0.9percent. Britain's Footsie 100 index edged up 0.2 percent. U.S. stocks are mixed in Monday morning action. Dow Industrials index components Industrials DuPont (DD) and Alcoa (AA) opened lower, but popped back into positive territory quickly. JPMorgan (JPM) and Merck (MRK) also dropped sharply and bounced up a bit, but are still in negative territory. The Dow is trading up about 12 points around the 10,025 level, or +0.16% while the S&P 500 index is trading up 4.04 points around the 1,070 level, higher by 0.34% at mid-morning. Oil futures are marginally higher (+0.6%), with the March contract at about $71.60 a barrel this morning. The price of spot gold also edged up (+0.4%) mid-morning, trading at $1,070 an ounce. In foreign exchange markets, fears of a sovereign default in Greece are keeping the U.S. dollar near its seven-month high against the euro, despite weakening on Monday. The euro fell to $1.362 on Monday morning before recovering to 1.37. The DXY index is at 80.19, off 0.6 percent from Friday's high of 80.683. The dollar remains a safe haven play with the debt crisis in Europe. Greece Rattles World Markets European ministers gathering for a G-7 meeting in Iqaluit, a town just south of the Arctic circle in north-eastern Canada over the weekend, indicated they will ensure Greece sticks to a fiscal austerity plan. Observers said Europe needs to go further than words if it is to restore investors concerned about debt problems in Greece and other fiscally weak euro currency zone countries. World stock markets dropped to three-month lows on Friday on concerns that Greece may require a bailout by other European nations and destabilizing the euro zone. The euro hit to its lowest level since May 2009 against the U.S. dollar. Euro monetary nations Greece, Spain and Portugal face growing pressure to demonstrate they can bring their exorbitant public debt under control. Greece only accounts for 3 per cent of Europe's "euro" monetary-zone economy, the largest in the world. But investors are fearful the situation in Greece might spread to other, larger countries creating a currency crisis and throwing the economy into a tailspin. Economic Preview On the economic front, market moving news in the U.S. will be slower than in previous weeks. International trade data for the month of December will be released on Wednesday. Economists expect the U.S. trade deficit fell from $36.4 billion in November to $35 billion in December. Another potential market moving release on Wednesday will be the Treasury Department's budget deficit for January. Expectations are for $60 billion in red ink. On Friday, the University of Michigan Survey of Consumer sentiment is expected to rise to 74.8 in February. It would be a slight increase from January's reading of 74.4. A higher index value means consumers are more confident and more likely to spend income, boosting economic growth. In other economic news, U.S. Fed Chairman Ben Bernanke will testify before the House of Representatives Financial Services Committee on Wednesday, February 10 to talk about how the Federal Reserve Bank intends to wind down its balance sheet. Earnings Preview This week will see nearly 470 companies reporting earnings. Drug chain company CVS Caremark (CVS) barely beat analyst estimates in their fourth quarter 2009 earnings report on Monday morning. The company announced 79 cents per share in earnings, excluding special items, compared to street estimates of 78 cents per share. Toymaker Hasbro (HAS) beat the street badly for the fourth quarter, driven by an increase in sales of Transformers, Tonka, and Playskool toys. Hasbro earned $1.09 per share. Wall Street estimates were for 81 cents per share in profit. On Tuesday, media and entertainment giant Walt Disney (DIS) will release earnings. The company is scheduled to report fourth-quarter results after the market closes on Thursday. Current consensus estimates are 39 cents per share. Also on Tuesday, Coca-Cola (KO) is expected to announce 66 cents per share in profits and Baidu (BIDU) is expected to announce $1.68 per share in profits. On Wednesday, Prudential (PRU) is scheduled to report results. Analysts are calling for earnings of $1.11 per share. Also on Wednesday, French drug maker Sanofi-Aventis (SNY), maker of blockbuster blood thinner Plavix, will announce fourth quarter results for 2009. Analysts are expecting the company to report earnings per share of $2.12. Reporting on Thursday is soft drink giant Pepsico (PEP). Consensus estimates call for profits of 90 cents per share. Fast food retailer Chipotle (CMG) will also report earnings on Thursday. Analysts expect 79 cents a share for Chipotle in the fourth quarter. Other companies reporting earnings this week include Lincoln National (LNC), Biogen Idec (BIIB), Sprint Nextel (S), Allstate (ALL), New York Times (NYT), ArcelorMittal (MT), Torchmark (TMK), Sun Life Financial (SLF), World Wrestling Entertainment (WWE), and Lorillard (LO).
SDI Glossary: "Analyst" Definition
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