Market DispatchesMarket Dispatches

Stocks struggle ahead of Fed

Markets await the central bank's policy statement. Spanish and Italian 10-year bond yields ease. The Bank of England leans toward stimulus measures. Procter & Gamble cuts its outlook.

By TheStreet Staff Jun 20, 2012 9:06AM

TheStreetImage: Wall Street sign (© Corbis/SuperStock) Updated at 10:44 a.m. ET


By Andrea Tse


Stocks wavered Wednesday as investors awaited the outcome of the latest Federal Reserve meeting.

 

The Dow Jones Industrial Average ($INDU) was down by 9 points at 12,828. The S&P 500 ($INX) was down by 2 points at 1,356. The Nasdaq Composite ($COMPX) was up 3 points at 2,927.

 

Stocks jumped Tuesday, with the S&P 500 soaring to a one-month high, as risk-tolerant investors bet that additional fiscal stimulus is forthcoming from the Fed.

 

"The Fed offers a moment of economic sanity with its rate decision," said Paul Donovan, a global economist at UBS, ahead of the conclusion of the Fed's two-day meeting."

 

"If the Fed does nothing but hints . . . that further action may come as soon as the Aug. 1, 2012, FOMC meeting, the markets would still likely be disappointed," said John Canally, an economist for LPL Financial. "The markets' focus then would shift to Bernanke's press conference and back to the Fed's new economic forecast as participants try to gauge the timing of the next round of stimulus."

 

After the Federal Open Market Committee meeting, the Federal Reserve will post its statement at 12:30 p.m. ET, followed by the outlook of policymakers on the Fed funds rate and economy at 2 p.m. Fed Chairman Ben Bernanke is expected to address the press at 2:15 p.m.

 

Asian markets settled higher in anticipation of the outcome of the Fed meeting. Hong Kong's Hang Seng index settled up 0.53%, and Japan's Nikkei average closed higher by 1.11%.

 

The FTSE in London was up by 0.56%, and the DAX in Germany was up 0.31%, with the euro gaining a bit of traction.

 

The FTSE was edging higher as data showed that employment in the United Kingdom increased to the highest level in more than three years in April and as  minutes from the Bank of England's last policy meeting indicated that the central bank is very close to supporting more monetary stimulus for the economy.

 

Both Spanish and Italian 10-year yields were easing Wednesday.

 

Eurozone leaders said at the Group of 20 summit of industrialized nations in Mexico this week that they will strive to reach an agreement on integrating their regional banks by December.

 

In Greece, there looked to be significant progress in forming a coalition among pro-bailout parties.

 

August crude oil futures were down 9 cents at $84.26 a barrel. August gold futures were slipping $7.40 to $1,615.80 an ounce.

 

The benchmark 10-year Treasury was down 2/32, raising the yield to 1.627%, while the dollar was trading sideways, according to the dollar index.

 

In corporate news, Adobe Systems (ADBE), the publishing software maker, provided a disappointing outlook for its fiscal third quarter on Tuesday because of a weaker demand forecast for Europe. Adobe forecast non-GAAP earnings of 56 cents to 61 cents a share for the three months ending in August on revenue of $1.075 billion to $1.125 billion. Analysts forecast profit of 61 cents a share on revenue of $1.133 billion.

 

Procter & Gamble (PG), the consumer-products giant, reduced its fourth-quarter profit and revenue forecasts because of slower-than-anticipa​ted sales growth in developed markets.

 

P&G said Wednesday it expects to post core earnings for the quarter ending in June of 75 cents to 79 cents a share. Its previous estimate was 79 cents to 85 cents a share.

 

Analysts forecast core earnings of 82 cents a share in P&G's fiscal fourth quarter.

 

P&G said organic sales are expected to rise 2% to 3%. Its previous estimate was 4% to 5%.

 

The company said foreign exchange is expected to reduce net sales by 4%. Net sales are expected to be in the range of down 2% to 1%. It previously expected an increase of 1% to 2%.

 

Quest Software (QSFT) agreed to a higher buyout bid of $2.17 billion after Insight Venture Partners added Vector Capital as a new partner. The new bid is for $25.75 a share, up from a competing bid of $25.50 a share that was reportedly made by Dell (DELL).

 

Jabil Circuit (JBL) reported adjusted fiscal-third-quarter​ profit of 64 cents a share on revenue of $4.3 billion, in line with analysts' estimates.


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145Comments
MirageGuy
Jun 20, 2012 10:32AM
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VF, explain to me how you can have deflation with a massive 12% increase in the money supply this year?   With the FED set to pump even more dollars into the economy how is deflation possible?

What we have is not deflation.  It is the a defacto government take over of the banks.  Banks no longer need depositors at all, actually they are more of a pain in the a**.  Banks now get their funds directly from the FED, bypassing the entire capital formation phase.  Why pay interest on someones savings, when your capital is supplied by the government?

Now you can have price declines and deflation like symptoms, when the newly created money is  held overseas, because  people overseas FEAR their governments might devalue or print in even more excess than ours will.   

If you want to create money out of thin air and have provide some sort of stimulus effect you must get it into the hands of the PEOPLE.  To do that you need to either reduce taxes or give it directly to the people. 

What Obama has done was to spend that money for you.  His 5.5 trillion in deficit spending was about  56,000 /family.   If he would have sent every family a check for that amount I assure you the effect would have been far greater.  No mind you he also sent out a PAYMENT book for 60K...  

Government spending is not the answer.  REDUCING the size of government, and thus ALLOWING consumers to keep and SPEND their own money is the answer.  This is WHY OBAMA must be fired.  Any other method that grows the size of government will make things worse, not better.    We need to undo Obama's massive growth in government.  It is over 26% of GDP now and needs to return to under 18% of GDP.   There really cannot be any prosperity until this is done...
Gary Myers (gmyers)
Jun 20, 2012 10:27AM
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"FREE" speech,

 

I didn't mean to leave the impression that I limited big money donors to the

repubs.  Although I think they may lead a litle in that category, the dems are just

as guilty.  They are all after the best government money can buy, and its working for

both sides.

 

Not so sure about the last Supreme Court ruling as to what CONSTITUTES "FREE"

speech, not because of its constitutionality but because of its reality.

 

When I give may small contribution of, lets say $ 25.00, I don't see or hear about

anbody 's ears purking up and listening to what I have to say.

 

But, when the Koch brothers or some of these other "FREE" speech avocates kick in millions,

probably even billions of dollars to the SUPER PACS, the ears in Washington begin to stand on end and the hearing aids go in so they can hears every word their saying.  And soon those words are turned into actions through the lobbyists and reach those that can really make this "FREE" speech work for them.  In other words giove them a big payday, often at the expense of somebody like me whose $ 25.00 got lost in the blare of the large donors.

 

"FREE" speech my A**.  Its only free for those that can afford it.

 

 

Divine Right
Jun 20, 2012 10:27AM
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Inflation leads to deflation... Didn't we just experience that with the housing bubble??? Stimulating the economy by pumping more wasteful government spending into it only kicks the can further down the road, and leads to an even bigger bust (eventually).

 

 

 

ZEEBART
Jun 20, 2012 10:26AM
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  just saying what everybody  else is  the  q1  q2 went to the stock market  everbody  has pretty  much  quit  buying  anything  prices keep going  up . they  make less and sell it  for  more  gas included  we just  have to  keep the pressure  on them only  buy  what you  need  there are  more of  us  than   them  the stock  market  is using are  401 k to  keep  it  alive .  to  bad   you can not  take your  money out of  401 k  without  quitting  your  job  but  you can quit  putting  money  into  it  go  to a roth or  even  bonds  get your  money  out of  ther  hands return  might  not  be  great all the  time  but at least its your  money  not  there's . 401k  was the biggest scam that was ever put on the  american  people
Too Sick 2 Swag
Jun 20, 2012 10:26AM
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"What are so-called investors?.....Pleas​e enlighten."

The proper, Webster's Dictionary definition of an investor, and what most of those who have money in the Market beyond their 401k's that i have run into here do.

You are not "investing."
wordsofreason
Jun 20, 2012 10:24AM
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The Market is like cattle at a trough.  Waiting for their next feeding. 
Re-TOG Re-TOG (Re-TOG)
Jun 20, 2012 10:16AM
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Jamie Dimon has gotten too many free rides now, a friggin liar, like all of his ilk.

 

Even at the shareholders meeting...Explanatio​ns and excuses for the $2 billion losses, shareholders allowing him to keep his job......Then within a day or two of annoucing an increase of 50% more losses, on top of, bringing totals to $3 Billion down the drain.. 

 

Congressional Hearings.....How fruitful was that?

Infantile and juvenile questions.....Allowi​ng Dimon to Monkey dance them, bobbing and swaying...

And we elect and pay these azzholes to do WHAT ??

VolckerFan
Jun 20, 2012 10:14AM
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I was thinking the same Re-Tog.  Admittedly I probably don't have as much skin in the game as you do, certainly not as active.  I count myself more as an investor than a speculator.  Wide pool, well diversified.  Don't play the timing thing anymore.  Too much work, too much risk, too little return.  Much easier to look for good, well run companies and hold them for the long haul.

next time up
Jun 20, 2012 10:12AM
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Historically  mild inflation provides a much safer and more controllable philosophy for economic growth. Deflation is scary and my belief dangerous.   Attempting  to control it once it gets started doesn't seem like anything I would feel good about.  JMHO
VolckerFan
Jun 20, 2012 10:08AM
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IDK:  What impact do you think deflation would have on wages and hiring?  If suddenly companies are getting less for their product, do you think they'll increase production or decrease it?  And if wages come down to meet prices immediately, I'll just share the fantasy land for a moment, what happen to mortgages and car payments that are fixed?

Re-TOG Re-TOG (Re-TOG)
Jun 20, 2012 10:04AM
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What are so-called investors ?.....Please enlighten.
next time up
Jun 20, 2012 10:02AM
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The bad, Our financial system has become corrupted by the mentality of arrogance and overindulgence..  The thought of all these folks waiting to take part in the destruction of the financial security of future generations. Like a pride of lions waiting to shred a freshly caught antelope. Folks with much much more  wealth yet no philosophy or personal direction, where the norm is to use and abuse the assets of those least capable of defending themselves.    The future generations. Sad very Sad!  The good.  Every post I have read today has the exact same basis for generational and social responsibility. Are we starting to get together as a group and as a nation and understand what needs to be done?  Looks like it from here! 
IDK and ME
Jun 20, 2012 9:54AM
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We need deflation not inflation. With fixed low wages and 14% real unemployment we need prices to come down. Inflation takes away buying power the same as high gas prices do. We don't need more stimulus, we need the Fed to stop printing money and reduces the money supply so our fixed wages can buy more. If we can buy more jobs well be created. The Fed is not setup for the American people, it is setup for their banker buddies.
steveG1956
Jun 20, 2012 9:51AM
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our government subsidizes every big business......  sad use of our tax money.  we pay ~ they write the checks.  then they ask for more......

 

>>>>My favorite is the article decrying Jamie Dimon and JPM Chase as a welfare recipient.<<<<

V_L
Jun 20, 2012 9:45AM
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My favorite is the article decrying Jamie Dimon and JPM Chase as a welfare recipient. they truly are... requiring regular stimuli to keep the doors open. I'd prefer there were 50 separate doors, one in each state, limited to business only within that state and 50 sets of personnel operating them.

Let's get our head together, dump "big" and get going forward again.

Michael Coats (trust2112)
Jun 20, 2012 9:41AM
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So does that mean yesterdays "Rally" was formed on speculations? Or was it from Insider knowledge?
Too Sick 2 Swag
Jun 20, 2012 9:37AM
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Another day of watching you so called investors froth at the mouth of the thought of more currency debasement and wealth stealing from the Fed.

Just amazing what is considered GOOD NEWS these days.....

Brutus625
Jun 20, 2012 9:35AM
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300k less job openings - check
UE rate still above 8% - check
GDP hovering around 2% - check
FedEx and P&G forecasting a global slowdown - check
Greece asking for more time to implement austerity - check
Spanish bond rates soaring - check
Looming fight over raising the debt ceiling/tax cuts/spending cuts - check
Housing still in a slump - check
Downgrade of US banks who are holding tons of Euro paper - check

All of this adds up to one thing - more stimulus from the Fed, which should mean at least another 5-10% to the upside for stocks.

If you're not convinced that the newly-elected Greeks can form a coalition and build a new gov by the next deadline, it could be a prime spot to short the Euro....
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