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The Dow Futures Report

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Us equities retreat after worse

Wed, Apr 15 2009, 06:35 GMT
by Paul Brittain

Alaron

US EQUITIES RETREAT AFTER WORSE THAN EXPECTED RETAIL SALES FIGURES PROMPTS RETURN OF RECESSION SENTIMENT. TREASURIES RALLY, INTEL POSTS LOWER THAN EXPECTED PROFITS ON FALLING CHIP DEMAND IN AFTERMARKET.

US Equities fell in Tuesday’s session after an unexpected decline in retail sales and prices at the producers’ level offered a reminder to traders that the global economy is still dealing with extraordinary recession challenges in the present. A decline of 1.3 % in March retail sales was fueled primarily by a worse than expected reading on auto sales, as the historically slow period was exacerbated by the ongoing debate regarding the fate of the 3 major US auto producers. In related news, General Motors was actually up this session after an announcement that the US government was considering a debt for equity swap for the carmaker once its reforms its company structure.

Financials posted a mixed picture in the markets today after Goldman Sachs posted better than expected earnings for the 1st quarter of 2009. While there was little surprise regarding Goldman’s exceptional performance, concerns arose from the announcement of the firm’s intention to issue $5 billion worth of stock for the purpose of financing repayment of funds borrowed from the TARP program. Fears regarding the dilution of current shares pressured a number of financial institutions that may be in a position to attempt the same strategy. Goldman Sachs and Morgan Stanley both fell over 10% while Citigroup and Bank of America-the “poster children” for toxic asset relief- gained in the session on expectations that they will be unable to adopt the dilution strategy. Both banks are scheduled to report 1st quarter results this week.

Overall every market sector came under pressure today in the wake of the surprisingly disappointing data. Energies, retailers, and technology stocks led the indices lower. Intel posted a worse than expected drop in profit due to falling chip demand. The bellwether tech firm released its results in the aftermarket. A bright spot of news came from the earnings release from Johnson & Johnson. The consumer products company thoroughly beat earnings expectations through a manageable strategy of cost control that overcame decreased revenues.

Technically, June Dow Futures remain within their trading range. Market has pulled back from the overbought conditions and should still have room to correct back to support at 7680. A break of this level leaves target open to test 7450. Resistance appears to have reset to 8060.

Published on  Wed, Apr 15 2009, 06:38 GMT