Sentiment Cautious Even Amid Positive Data

(RTTNews) - The major U.S. index futures are pointing to a lower opening on Monday, with sentiment still negative despite the release of better than expected industrial output and regional manufacturing activity data. Geopolitical concerns surrounding Iraq could generate some weakness and pressure the overbought stocks. Additionally, the upcoming FOMC meeting could render the mood cautious, pushing some traders to the sidelines.

U.S. stocks moved lower in the week ended June 13th, with overbought levels and lackluster economic data exerting downward pressure on the markets.

Last Monday, the major averages resiliently maintained their upward momentum with the support of some positive overseas economic data and ended modestly higher. The averages moved about Tuesday's session on a lackluster note amid a lack of meaningful catalysts before closing narrowly mixed.

With a weak global growth forecast issued by the World Bank pressuring stocks on Wednesday, the averages closed modestly lower. The Dow snapped a 5-session winning streak and eased off its record highs. Amid the release of some lukewarm domestic data, stocks closed Thursday's session moderately lower. However, Intel's (INTC) positive outlook helped the markets overlook geopolitical concerns and the economic uncertainty, helping the averages rebound on Friday.

For the week ended June 13th, the Dow Industrials and the S&P 500 Index fell 0.88 percent and 0.68 percent, respectively, for the week, while the Nasdaq Composite Index ended down 0.25 percent.

Among the sectors, the NYSE Arca Airline Index declined 4.86 percent for the week, and the Philadelphia Housing Sector Index and the Dow Jones Transportation Average both ended down over 2 percent each, On the other hand, the NYSE Arca Gold Bugs Index rallied 6.35 percent and the NYSE Arca Oil Index advanced 2.21 percent.

Commodity, Currency Markets

Crude oil futures are edging down $0.12 to $106.79 a barrel after rallying $4.25 or 4.14 percent to $106.91 a barrel in the week ended June 13th.

Last week's rally was triggered by supply concerns amid an escalating conflict between the Iraqi government and Sunni militants. Last Monday, oil jumped $1.75-a-barrel after the previous week's modest retreat. The commodity fell marginally on Tuesday amid uneventful trading.

After rising marginally on Wednesday despite the muted forecast issued by the World Bank, oil rallied close to $2.15-a-barrel on Thursday due to the situation in Iraq. The commodity rose modestly on Friday to end the week near a 9-month high.

Gold futures, which spiked $21.60 or 1.72 percent to $1,274.10 an ounce last week, are currently climbing $4.40 to $1,278.50 an ounce. The previous metal shone last week due to its appeal as a safe haven amid the rise in risk aversion.

Among the currencies, the dollar was mixed in the week ended June 13th, as it fell 0.43 percent against the yen to end the week at 102.04 yen. The yen was the beneficiary of safe haven buying. At the same time, the dollar gained 0.38 percent against the euro to $1.3540, with the risk aversion and the reduction of interest rates by the European Central Bank earlier this month clearly working against the currency.

The U.S. dollar is currently trading at 101.85 yen and is valued at $1.3559 versus the euro.

Asia

The major Asian markets closed mixed, with the Australian, Chinese, New Zealand, South Korean and Taiwanese markets advancing, although on an unconvincing note, while most other major markets in the region retreated. Risk aversion weighed on the markets, diverting investment away from risky bets such as stocks, as geopolitical concerns continued to haunt traders.

With the Sunni militants in Iraq posting graphic photos of them carrying out mass executions of Iraqi soldiers on Twitter, sentiment has worsened, especially amid the lack of any other major catalyst from the region.

The safe haven yen rallied, generating negative sentiment towards export stocks in Japan. The Nikkei 225 average opened slightly lower and declined broadly throughout the rest of the session. The index ended down 164.55 points or 1.09 percent at 14,933. A majority of stocks declined in the session.

After opening little changed, Australia's All Ordinaries declined sharply in early trading but recouped its losses by the mid-session. Subsequently, the averages moved back and forth across the unchanged line in a very narrow range before closing up 6.90 points or 0.13 percent at 5,391. Material stocks saw modest gains and financial and energy stocks also saw slight strength, while real estate, healthcare and industrial stocks retreated.

Hong Kong's Hang Seng Index ended 18.50 points or 0.08 percent lower at 23,301, while China's Shanghai Composite Index ended at 2,086, up 15.27 points or 0.74 percent.

Europe

European stocks opened lower but managed to cut some of their losses in early trading only to see a steeper decline.

In corporate news, Mitchells & Butlers announced the purchase of Orchid Group for 266 million pounds in cash. Vodafone Group PLC (VOD) said it plans to acquire Cobra Automotive through a voluntary tender offer of 1.49 euros per share cash, valuing the entire fully diluted ordinary share capital of Cobra at 145 million euros.

Reports suggest that Germany's Siemens (SI) and Japan's Mitsubishi Heavy Industries are putting together a bid for Alstom.

On the economic front, house prices in the U.K. remained almost unchanged in June, as demand matched supply, according to a report released by Rightmove. On a month-over-month basis, prices rose 0.1 percent in June following the 3.6 percent hike in May. House prices rose 7.7 percent year-over-year in June, a slower rate of growth than the 8.9 percent increase in May.

U.S. Economic Reports

The unfolding week's calendar is loaded more with market moving economic data than merely numbers. The 2-day FOMC meeting that kicks off on Tuesday is likely to headline the economic events of the week, with the central bank also scheduled to release its updated forecasts along with its post-meeting policy statement and the customary press briefing by the Fed Chair.

The results of the June manufacturing surveys by the New York Federal Reserve and the Philadelphia Federal Reserve, the Federal Reserve's industrial production report for May, the National Association of Realtors' housing market index for June, the Commerce Department's housing starts report for May and the jobless claims report are also likely to be on the spotlight.

The Labor Department's consumer prices report for May, the Commerce Department's quarterly current account report, the Conference Board's leading economic indicators index for May and announcements concerning Treasury auctions of 2-year, 5-year and 7-year notes round up the economic events of the week.

Business conditions for New York manufacturers improved significantly for the second consecutive month in June, the Federal Reserve Bank of New York said in a report released.

The New York Fed said its general business conditions index inched up to 19.3 in June from 19.0 in May, with a positive reading indicating growth in regional manufacturing activity. The modest uptick by the index came as a surprise to economists, who had been expecting the index to drop to a reading of 15.0.

The Federal Reserve reported that industrial production rose a better than expected 0.6 percent month-over-month in May. Economists expected a more modest 0.5 percent increase for the month. The previous month's output was upwardly revised to a show a 0.3 percent drop.

Manufacturing output rose 0.6 percent, reversing the 0.1 percent drop in the previous month. Mining output fell 1.3 percent, while utility output eased 0.8 percent.

The National Association of Home Builders will release the results of its homebuilder confidence survey at 10 am ET. Economists expect the housing market index to climb to 47 in June from 45 in May.

The housing market index fell to 45 in May from 46 in April. The present sales conditions index fell 2 points to 48, while the sales expectations index rose a point and the index measuring prospective buyer traffic climbed 2 points, although it remained depressed at 33.

Stocks in Focus

Medtronic (MDT) announced a deal to buy Covidien (COV) for $42.9 billion in cash and stock. The deal is expected to close in the fourth quarter of 2014 or early 2015.

Williams (WMB) announced that it has agreed to acquire 50 percent general partner interest and 55.1 million limited partner units in Access Midstream Partners from Global Infrastructure Partners for $5.995 billion in cash. Upon completion of the deal, Williams said it would own 100 percent of the general partner and 50 percent of the limited partnership interests in Access Midstream Partners.

Following the completion of the deal, now scheduled for the third quarter, the company said it plans to increase its dividend by 32 percent to 56 cents per share. The company also announced a proposal to merge Williams Partners (WPZ) with Access Midstream Partners.

Tyson Foods (TSN) said it believes its offer to buy Hillshire Brands (HSH) for $63 per share in cash in a superior proposal following Hillshire's decision to withdraw its recommendation in favor of its May 12th merger agreement with Pinnacle Foods (PF).

SanDisk (SNDK) announced a deal to buy smaller peer Fusion-io for $1.1 billion.

Sealed Air (SEE) announced the closing of the previously announced underwritten offering of 5 million shares of its common stock by WRG Asbestos Pl Trust at a price of $33.06 per share.