While you were sleeping: Stocks, bonds fall before Fed
July 30 (BusinessDesk) – Wall Street weakened as investors awaited more details from US Federal Reserve policy makers on
paring back their bond buying at a two-day meeting starting tomorrow.
In late afternoon trading in New York, the Dow Jones Industrial Average fell 0.15 percent, as declines in shares of Bank
of America, last 1.3 percent weaker, and Chevron, last 1 percent lower, weighed on the index. The Standard & Poor's 500 Index shed 0.24 percent, while the Nasdaq Composite Index dropped 0.18 percent.
US Treasuries also declined, pushing yields on the 10-year bond 4 basis points higher to 2.60 percent.
"There's a concern that whatever the FOMC says or does will lead to a dramatic reaction in the market, much like we saw
in June," Stephen Massocca, managing director at Wedbush Equity Management in San Francisco, told Reuters.
Investors are also eyeing further guidance from the European Central Bank and the Bank of England as their officials are
set to meet as well in the coming days.
In Europe, the Stoxx 600 Index edged higher, ending just ahead of the previous close. France’s CAC 40 and the UK’s FTSE
100 were also steady. Germany’s DAX advanced 0.2 percent.
In terms of US economic data, the National Association of Realtors' index of pending home sales fell 0.4 percent to
110.9 in June. The decline was smaller than anticipated.
"This latest move down in pending home sales may reflect some weakening in activity related to the recent increase in
mortgage rates as well as limited available inventory for sale," Daniel Silver, an economist at JPMorgan in New York,
wrote in a research note, according to Reuters.
The key reports this week are yet to come. There is second-quarter US gross domestic product on Wednesday and monthly
government jobs data on Friday. GDP probably grew at a 1 percent annualised rate last quarter, according to a Bloomberg
survey.
A slew of earnings will also help set the tone. So far quarterly earnings have been decent.
Of the 265 companies in the S 500 that have posted results so far this reporting season, 73 percent have exceeded analysts’ estimates for profit and
56 percent have beaten sales projections, data compiled by Bloomberg show.
There was plenty of merger and acquisition activity to start the week. Perrigo said it agreed to buy Irish drug maker
Elan for US$8.6 billion, Omnicom Group agreed to merge with Publicis Groupe of France, while Canada's Hudson's Bay said
it agreed to buy Saks for US$2.4 billion.
(BusinessDesk)