US stocks ended lower on Monday as investors consolidated last week’s gains and adopted cautious stance ahead of Federal Open Market Committee’s two day meeting. The S&P 500 closed 0.4% lower, with seven of 10 main sectors posting losses. Healthcare stocks sold off on disappointing news from biotech companies and concerns over high drug pricing by pharmaceutical companies. S&P 500 healthcare subindex fell 1.8%. The Nasdaq Composite ended the session 0.6% lower at 5,060.25, with biotechnology stocks leading the losses. As companies report earnings that have beaten lowered expectations, estimates indicate first quarter earnings and revenues for S&P 500 companies will be lower compared with the 2014 results for the same period. Forecasts estimate lower trajectory for earnings in the second and third quarter. Earnings are expected to rise only in the fourth quarter and record an annual growth of 1.6% for all of 2015, while revenues are expected to decline by 2%. Ford, United Parcel Service, Twitter, and Pfizer will report earnings today. The dollar traded lower on Monday, with the ICE US dollar index declining 0.2%. Today the Federal Reserve 2-day policy meeting begins. While the recent reports indicate the economic growth slowed in the first quarter, with analysts revising first quarter GDP growth projections down to 0 to 1 percent, the Fed is expected to draw attention away from this soft patch in growth, explaining it by temporary factors. Today At 14:00 CET the December Case-Shiller Home Price Index will be released in US. At 15:00 CET the April Consumer Confidence Index and Richmond Fed’s Manufacturing index will be published. The tentative outlook is positive for the dollar.
European stocks reversed early losses and rose on Monday after reports the Greek negotiating team will be headed by Greece’s alternate foreign minister Euclid Tsakalotos, reducing the influence of finance minister Yanis Varoufakis. The Athex Composite climbed 4.4%. The Stoxx Europe 600 rose 1%. DAX 30 surged 1.9%, helped by a 4.6% jump in Volkswagen AG shares after the car maker’s chairman, Ferdinand Piech resigned on Saturday following a failed attempt to oust Chief Executive Martin Winterkorn. Deutsche Bank shares fell 4.6% after the bank reported first-quarter net profit dropped about 50% to 559 million euros ($607.8 million), hit by penalties the company paid to settle allegations over manipulating the London interbank offered rate, or Libor. Today at 09:30 CET first quarter GDP advance estimate will be released in UK. The tentative outlook is negative. No economic data are expected in euro-zone today.
The Nikkei finished 0.4% higher today after industrial robot maker Fanuc jumped 6.6% as it announced plans to double its dividend payout ratio to 60 percent of consolidated net income. March retail sales were much weaker than expected, declining 9.7% against forecast of 7.5% drop. Fitch Ratings downgraded Japan’s credit rating to “A” from “A+” on Monday, citing growing public debt.
Oil futures settled lower on Monday after hitting 2015 highs last week. Investors are cautious as global oversupply still persists. despite the falling count of US oil rigs and concerns over potential supply disruption due to continued fighting in Yemen.
Gold prices jumped 2.4% on Monday on lingering concerns over Greek debt issue ahead of Fed’s policy statement on Wednesday and on the back of weakening dollar, which makes the dollar denominated precious metal less expensive.
Source: IFC Markets