LONDON (SHARECAST) - -S&P 500 could rise 11% to 1,160 by year-end –Ed Yardeni
-Philly Fed chief (Plosser) says “watching European crisis” –Bbg
-Plosser: There is plenty to keep you up at night
-Plosser: We risk the credibility of the institution
Dow Jones Industrial: 0.73%
Nasdaq Comp.: 1.37%
S&P 500: 1.09%
Stock markets in Hong Kong, Shanghai and Tokyo registered gains today on speculation that the People’s Bank of China injected a net 365bn yuan this week into the Chinese banking system to boost markets ahead of next week's Golden Week holidays. That seems to have buttressed sentiment on Wall Street.
The initial reaction to the announcement of new measures to reign in the fiscal deficit in Spain may also be contributing to the better tone to trading now evident, with a small rise in the euro towards the 1.2922 dollar level.
All of the above despite the risk of further nasty surprises as regards Spain’s current constitutional crisis.
Also helping to buttress sentiment a bit this afternoon are the latest weekly initial unemployment claims numbers, although the day’s other main reports: durable goods orders and pending home sales numbers, have come in weaker than expected.
Worth pointing out, speaking to Bloomberg this afternoon, US Philadelphia Federal Reserve President Charles Plosser indicated the following: “The risks and the costs might be very much higher than whatever small benefits we get (...) If it doesn’t work, we risk the credibility of the institution.”
Shares of credit card company Discover Financial are advancing following the release of its latest quarterly results. Loans at least 30 days overdue, a signal of future defaults, dropped to 1.79% from 2.49%.
Analysts at Goldman Sachs have today initiated their coverage of Yahoo at “buy.” Over at Jefferies on the other hand analysts have downgraded Hewlett Packard to underweight from neutral.
Dollar General is moving lower after a secondary placement.
From a sector stand-point the best performance is now to be seen in the following industrial groups: Platinum (4.17%), Furnishings (3.64%) and Gold Mining (2.29%).
Weak tone to durable goods orders report
US durables goods orders for August were a bit of a horror show, declining 13,2% to show the biggest monthly decline in over three years. Economists were expecting a decline, but nothing of this scale; more something in the region of 5.3%.
The transportation sector had a malign impact on the figures, and with this sector stripped out the fall was a mere 1.6%, while orders for “core capital goods”, which exclude defence and aircraft orders, rose 1.1% after declining 5.2% in July. Even so, “a downward revision to July (to -5.2% from -4.0%) and a decline in core capital goods shipments (of 0.9%) gave the report a weak tone overall,” comment economists at Barclays Research.
Defence orders dropped by 40%.
Gross domestic product expanded at a revised 1.3% year-on-year clip in quarter two, below the 1.7% forecast, according to the third estimate released today by the US Bureau of Economic Analysis. That as growth in so-called final demand (GDP minus inventories) was revised down by 3 tenths of a percentage point, to 1.7%.
First time jobless claims fell more than expected to a two-month low, by 26,000 to 359,000 (Consensus: 378,000).
The preliminary estimate of the 2012 benchmark revision indicates an upward adjustment of 386,000 to nonfarm employment, or a bit over 32,000 jobs per month from April 2011 to March 2012 on average.
Pending home sales dropped at a 2.6% month-on-month pace during August, well below the 0% expected.
Crude futures bounce back
10 year US Treasuries are falling by 10/32 dollars, with yields at 1.65%.
Front month West Texas crude futures are rising by 2.1%, to the 91.88 dollar level on the NYMEX.