Stock futures slip as ECB excitement dims

The central bank says a report that it plans to cap government bond yields is "misleading." Bundesbank warns of risks from a bond buying program. Lowe's quarterly results disappoint.

By TheStreet Staff Aug 20, 2012 9:12AM
Updated at 9:11 a.m. ET


By Andrea Tse


Stock futures were largely pulling back Monday as the steadily building enthusiasm over the potential for European Central Bank intervention in the sovereign debt markets took a bit of a hit.


The ECB has called a Der Spiegel report about a plan by the central bank to cap government bond yields in troubled eurozone countries such as Spain and Italy as "misleading."


Also, the Bundesbank threw cold water on anticipation about an ECB bond buying program, saying that it “holds to the opinion that government bond purchases by the Eurosystem are to be seen critically and entail significant stability risks.”


Futures for the Dow Jones Industrial Average ($INDU) were down by 20 points at 13,227. S&P 500 ($INX) futures were down by 1.2 points at 1,414. Futures for the Nasdaq ($COMPX) 100 were up by 2.5 points to 2,778 and paring gains.


Meanwhile, the euro was sliding against the dollar by 0.26% on the quashed excitement.


"The suggestion here is that no major program will be announced any time soon, despite what European Central Bank President Mario Draghi suggested at the European Central Bank policy meeting on August 2," said Christopher Vecchio, currency analyst at DailyFX, about the Bundesbank  commentary.


The major U.S. equity averages approached highs for the year Friday and extended gains on signs the U.S. economy is performing better than expected. Last week's rally was also supported by German Chancellor Angela Merkel's backing of European Central Bank President Mario Draghi's plan to do "whatever it takes" to support the euro.


There were no major U.S. economic releases scheduled for Monday.


Events this week include Wednesday's release of the minutes from the July 31 to August 1 Federal Open Market Committee meeting and Thursday's jobless claims data connected to the August employment survey period.


On Wednesday and Thursday existing and new home sales reports will be released and on Friday there will be durable goods orders data.


China's economic calendar will include the HSBC flash manufacturing purchasing managers data, expected on Wednesday. In Europe, German economic growth figures and a meeting in Berlin of Merkel and French President François Hollande to discuss the euro crisis on Thursday is expected, as is Greek Prime Minister Antonis Samaras' meeting with these European leaders later this week.

 

On the corporate front Monday, home improvement retailer Lowe's (LOW) posted second-quarter earnings of 64 cents a share on revenue of $14.25 billion. Analysts surveyed by Reuters expected a profit of 70 cents a share on revenue of $14.46 billion.


Consumer electronics retailer Best Buy (BBY) has named Hubert Joly, former chief executive of hospitality and restaurant giant Carlson, the new CEO of the struggling company, according the Wall Street Journal.


Aetna (AET) has reached a deal to purchase Coventry Health Care (CVH) in a transaction valued at $7.3 billion, including the assumption of Coventry debt.


October crude oil futures were falling 5 cents at $96.27 a barrel and December gold futures were down $2.70 at $1,616.70 an ounce.


The benchmark 10-year Treasury was falling 10/32, pushing the yield up to 1.855%. The greenback was flat, according to the dollar index.


The FTSE in London was down 0.05% and the DAX in Germany was up 0.12%.

The Hong Kong Hang Seng index settled up 0.71% and the Nikkei in Japan closed up 0.86%.

 


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33Comments
Aug 20, 2012 10:08AM
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The current entire Federal Budget today is $3.8 trillion and  we're only taxing about $2.6 trillion -- so that, in fact, is all we should have to spend.


To continue to spend above and beyond that is reckless, and not worth another term.

Aug 20, 2012 9:57AM
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Yeah, and "we can solve a debt problem with more spending...."

Such crazy thinking!!!

Aug 20, 2012 5:36PM
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We take a day like today anytime, flat, a bit down; after the last 6 weeks and a horrible economy, we cant complain....You should have seen these scumbags after the close though, not a bunch of happy campers, a big bunch too. We are sure they will come out with swords drawn in the morning....Oh well, we will deal with them tomorrow. One thing is for sure, cheating crooks will never go away.

Aug 20, 2012 10:42AM
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At 1000 hrs the call came to start the selling, not a surprise at all after 5 or 6 positive weeks; you may imagine the mood these manipulators are in...Haven't had man good days so they brought reinforcements today and the selloff has begun....Oh well, still very early, we will keep you up to date
Aug 20, 2012 10:16AM
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Yup nothing like talking about everything.....Except Markets...
Aug 20, 2012 9:28AM
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"the world is flat too".......Isabella's henchmen..
Aug 21, 2012 10:28AM
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We opened up once again and once again be cautious....Its very early, the volume is low and manipulators are on and off the floor ready to make their move so, just be careful...Hopefully we will be able to hold...More later.
Aug 20, 2012 4:28PM
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Also...VF, you can always sell small amounts out of a brokerage account, at a time...That would accomplish your goal.

One big dump of a high flyer, would put you under the gun for the tax burden; Just like income for the year.

 

Aug 20, 2012 2:46PM
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Tog:  Let's say you bought LOW 10 years ago.  in that time your value increased by 10K.  For the purposes of determining your tax rate on that, you would take that total gain and average it across the total years held.  Meaning you had a 2K average yearly increase.  So you would add 2K to your income total to get the total effective tax rate.  Then apply that tax rate to your entire AGI (10K) to get the total tax due..

So if LOW gains were your entire income, you would find the effective tax rate for 2K and apply that to the whole 10K.  If you started with 50K of AGI, you would find the effective tax rate for 52K (50+average gain of 2) and apply it to 60 (50+total gain of 10)

  It's clunky, and really needs some polishing before anything else.. but it's a starting point that treats all income basically the same

Aug 20, 2012 12:32PM
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Tog:  I'm surprised it's as flat as it is!  I've been calling since 1000 hours and something keeps holding back my orders to drop the index!  Man I'm in a piss poor mood...

Seriously, I'm actually surprises.. i though it would open -50 or so and close -80 after last week.

Aug 20, 2012 12:14PM
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Exceo:  I think 13,500 is where we'll end up.  14K is too pie in the sky for the conditions before us. 

I think capital gains are too low to be honest.  Dividends should be taxes at earned income levels, and I personally thing there should be a kick in for SS and Medicare as well for all "unearned" income.  Capital gains, I used to think should be normal income as well but I've softened a little on that as a result of some of the discussions here.  Being taxed in one shot on 10 years of asset growth seems like it would push many people into marginal tax rates that are too high.  I kind of like the idea of averaging out the gain and using the average yearly gain as a basis for determining the tax rate. (10K of growth over 5 years, 2K added to your earned income for the purposes of determining the tax rate to be applied to your entire AGI, followed by credits)  I don't have the details worked out to make it into a full proposal, just an idea at this point.

If you're asking for my read of how Europe will impact us, I think it'll be somewhat muted.  i don't think we're going to see the kind of contagion that many are fearing because banks with exposure are much better capitalized and can sustain losses without impacting their ability to lend.  I see more slow growth unless there's a serious leap in technology.

Aug 20, 2012 5:25PM
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Tog:  It's really an idea to revamp the current capital gains setup.  I'm really not a fan of the preferred treatment.  I just can't wrap my brain around passive money being preferred over actual productive work.
Aug 20, 2012 4:18PM
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Amazing maybe the Markets are for real ///////???????

 

Possible some of that old rich money is finally going back into equities?? I've heard that...

Something going on here...?

Aug 20, 2012 3:33PM
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Okay I'm following your example now...

I happened to invest in 401s, IRAs then rolled out 401s to rollover IRAs and have a large Roth, I have been contributing to...Or doing IRA-ROTH conversions.

Thus I can pull out of the IRA or rollover; Using Tax amounts that are manageable; Very similar to your example...Of course the ROTH is a totally different animal as far as taxes...

Any out right sales from our brokerage accounts that made decent money should be taxed differently, it also "has the ability" to be written off as a lost..

These different tax advantages or disadvantages are available to all, we probably just consider that the rich have a bigger advantage then others....They DO....And better accountants.

So to reap some of those benefits....Try and follow closely to what the rich do... 

Aug 20, 2012 1:16PM
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Until early this AM or late last night...I expected a pull back.....I'm trying to fill a limit oder on an Oil company, STO....If it looks like I could gain 25-50 cents on the buy, I will change the pricing..

 

As always I own HD and Lowes, instead of Coventry Health...One of these days I may get lucky too.

I get a kick out of the combining of Healthcare companies,and others with price increases that are not warranted...They are expecting to make a bigger killing, then what they do now...

Non-profit my azz.....I hoping they are all rolled back..?

LOW...down 6.5%

CVH....up 20%

Aug 20, 2012 11:14AM
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VolkerFan:

 

In a recent post you projected a year end DJ close of 14,000 which I agree with and hope it bears fruition. What troubles me a bit is the 6 months scenario following 2013. I rarely care or make portfolio decisions based on short term emotional or capricious market trends.

It looks pretty certain that regardless of who wins the election, we are due for some hefty tax increases and if they are not applied judiciously we are headed for some deep doodoo. Small investors should not be penalized by increased capital gains tax. Most use it for retirement or seed money for new ventures. And, remember, most of all, that this money has already been taxed once before it was invested.

I see a potentially uncomfortable trend developing for 2013 aside from the European impact. The seedlings of improvement from 2011 & 2012 could be trampled instead of nourished.. Would you care to render an opinion.??

Aug 20, 2012 5:42PM
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One thing I really admire about CGT1...He is so good at predicting the past.
Aug 20, 2012 7:41PM
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An odd way yes, but exactly what it is and can work in a positive manner for future generations..

Kind of a balance when the younger generation is stymied for spending large sums or are trying to save, for their futures...

We have the last or second back, spending to keep the machines rolling.

And pass on possible leftovers? It helped us...

A somewhat non-vicious circle..? 

 

And there are many,or too many; That cannot take advantage of it...Sometimes by poor planning.

Aug 20, 2012 7:00PM
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Retog:  I'm all for the tax advantages savings plans that get amounts put away from retirements or some specific purpose.  It can actually be a very odd way to engineer a progressive consumption.  By allowing people to saving from a 401K or IRA and have it deduct from their taxable income, they are avoiding taxation on their savings and are only taxed on the amount they are planning to use to for consumption.  Overlay that with a 17K max and progressive income tax and you have a situation where people can suppress their earned income tax rate in a progressive manner.
Aug 20, 2012 6:35PM
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Most all of these tax incentive plans were put in to place to encourage Americans to become a saving Nation....We are or were very poor at putting away for a rainy day..It has gotten better the last few to ten years maybe? Americans have been saving a lot the last 4-5 years.percentage wise.

Of course the original 401s and IRAs were the cats meow, for people that took advantage of them..?

Surprisingly, There were way less then 50% takers,way back; Even with "matching contributions", many shied away.

But as usual....And this is not an issue that I am trying make; It is a major money maker for the Rich, that are in a better position to take advantage of the situation.

First we have to realize who encouraged the Laws or Regulations to be written or passed.??

Maybe there needs to be a limit on Capital Gains of claiming lower tax rates..Then again we go back to limitations or punishing of the rich, as some would surely say..And then I really can't take sides one or the other... 

 

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