We are seeing equity weakness once again this week, with stocks retreating from yesterday’s rally as investors contend with less-than-hoped for earnings results and continued Euro-zone growth concerns, as European shares fell for the fourth straight session. The pace of global growth is certainly continuing to rattle investors, with commodity market pressure still very much in focus.
As of 10:25AM, the S&P 500 is off just over -1%, dropping back to 1,556. The wild price swings over the past few days makes today’s session an important one in shaping investor sentiment with last Thursday’s high (1597.35) and this week’s low (1552.28) serving as critical thresholds such that a break of either would confirm the next directional trend for stocks.
Main Factors Driving Early Trade:
– Corporate Earnings In Focus – Bank of America disappointed as earnings missed analyst estimates. Bank of America shares dropped -3.5% after first-quarter results fell short of expectations and showed the financial giant is struggling to boost growth in its core lending business. Tech stocks took a hard hit following lackluster results from Intel and Yahoo. Apple is hitting fresh lows, off -5%, and is one of the leading decliners in the sector. Bernstein Research predicted the company will report a “tepid quarter” when it posts results for the March period next Tuesday. Leading industrials lower, Textron reported a quarterly profit below analysts’ estimates on weak demand for business jets and a decline in sales to the military, and it cut its full-year profit forecast.
– Crude And Commodities Continue Slide – Brent crude slid below $99 per barrel and copper dropped 1.8 percent as softer-than-expected data in the U.S. and China has heightened worry over demand. The drop in oil prices has put Brent crude on pace for its sixth straight decline, with the price down 4.1 percent for the week. Copper is down 4 percent for the week. We are sitting on key support for copper. If it fails, we could see prices fall below $3, triggering further declines. Copper continues to be closely watched as it’s a key measure of industrial demand.
– Fed’s Beige Book Out at 2PM – This afternoon, investors will eye the Federal Reserve’s Beige Book of economic conditions. The survey analyzes economic conditions in 12 U.S. districts. Fed Chairman Ben S. Bernanke said on April 8 that “the economy is significantly stronger than it was four years ago, although conditions are clearly still far from where we would all like them to be.”
– Flight To Safety – Treasuries strengthened modestly on a fresh round of euro-zone fears, led by unconfirmed rumors of a possible German downgrade. Yields on the 10-year benchmark note fell to 1.714%, a drop of just over 1 basis point.
– Gold Update – Still very volatile, gold is actually a bright spot today, with the yellow metal making a push back towards $1,400/ounce, despite Cyprus’ finance minister Haris Georgiades saying that the government plans to sell part of its gold reserves in the next few months.