US SUMMARY: Fed Signals Tightening End Close
DJIA 11268.77 gain 194.99 up 1.8%
NASDAQ 2356.14 gain 44.98 up 2.0%
S&P 500 1307.65 gain 22.32 up 1.7%
Dow Future 11317.00 gain 9.00 up 0.1%
NASDAQ Future 1744.50 gain 4.75 up 0.3%
S&P Future 1314.25 gain 0.75 up 0.1%
10-Yr US Treasury: 4.98% down 0.03
(Futures values as of 0450 GMT)
Stocks soared Tuesday on news that Federal Reserve policymakers believed their run of interest rate hikes is likely nearing an end, propelling the Dow Jones industrials up nearly 200 points. The report helped offset the effects of oil prices that passed $71 a barrel. Prices of Treasurys rallied.
STOCKS: Wall Street was already climbing in mid-afternoon when the Fed released minutes of the Federal Open Market Committee's March 27-28 meeting that showed most of the panel's members "thought that the end of the tightening process was likely to be near, and some expressed concerns about the dangers of tightening too much, given the lags in the effects of policy."
The release of the minutes was just what an interest rate-weary market wanted to hear. The Fed has raised rates 15 times in a row since June 2004, putting the nation's benchmark rate at 4.75 percent.
"When it appears as though the governors of the Federal Reserve believe that the end of the rate increases is near, that's very good news for investors," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "A lack of ambiguity from the Federal Reserve is always a little bit of a shocker."
Traders had already gotten some comfort Tuesday from the Labor Department's report that core wholesale inflation, which excludes volatile energy and food prices, rose just 0.1 percent last month.
With some reassurance from the Fed, investors are likely to focus more on earnings, which are cascading in this week and next. If company results show they've managed to weather higher prices for energy and other commodities, Wall Street could have the incentive to continue a rally started in March but put on hold in recent weeks.
The threat of energy prices came from tension over Iran's nuclear energy program and worries about disruption to supplies from Nigeria, pushing crude to a record close of $71.35 on the New York Mercantile Exchange.
But stock investors, calmed by past experience, appeared to be looking past the price of crude, analysts said.
"We have seen it before and that's the key. It's not a new level and we didn't really see demand taper off, we didn't really see economic activity slow down because of it," said Steven Goldman, chief market strategist, Weeden & Co. in Greenwich, Conn. "A year ago we thought $70 would be the death knell for consumers. It wasn't."
IBM quarterly results topped expectations but in after hours trading, it's shares declined. Yahoo Inc. reported earnings that matched expectations. In after-hours trading, its shares rose. Motorola reported a slight drop in first-quarter income despite a 23 percent jump in sales that helped it gain market share and close the gap on rival Nokia Corp. Motorola shares tumbled 5 percent after hours.
Intel Corp. is estimated to report sales of $8.93 billion and earnings of 23 cents a share when it delivers its earnings reporting late Wednesday, according to analysts surveyed by Thomson First Call.
BONDS: Treasury prices rose Tuesday, though most of the gains were booked before the Federal Reserve released minutes from its March policy meeting hinting that interest rate hikes may end soon.
"The Fed is definitely talking about the risk of overtightening, and we got a marginal rally in the two-year note, but it hit resistance and the curve hasn't steepened too much," said Richard Gilhooly, senior interest rate strategist at BNP Paribas in New York.
But he said it's still early days in terms of revising the Fed's outlook on growth and economic conditions. Markets will have to see a very tame March core consumer price index Wednesday before "you could make the case that their forecast has been too aggressive."
Economists see headline CPI up 0.4% and the core reading up a more modest 0.2%.
The Fed minutes dovetailed with earlier remarks from San Francisco Fed President Janet Yellen, who said future rate moves remain dependent on incoming data. She said inflation should remain well contained but added that risks are "tilted slightly" to the upside. On housing, Yellen said she sees "early signs of cooling.
ASIAN SUMMARY: Markets Rally As Commodities Soar Again
USD-Yen 116.95 loss 0.30 dn 0.2%
AUD-USD 0.7419 gain 0.0004 up 0.03%
Nikkei 225 17397.54 gain 164.60 up 1.0%
Hang Seng 16793.53 gain 156.00 up 0.9%
Taiwan Index 7052.33 gain 62.87 up 0.9%
S.Korea Kospi 1440.25 gain 13.25 up 0.9%
JGB Yield 1.9200% down 0.0400
(All values as of 0450 GMT)
STOCKS: Asian markets are rallying sharply Wednesday, pacing gains on Wall Street, with Japan and Taiwan gaining on strength in technology and export-related issues.
The Australian share market also is higher as prices of commodities continued to fuel mining shares, such as BHP Billiton and Rio Tinto, both up strongly. ABN Amro's head of Sydney sales trading, Justin Gallagher, said, "With commodity prices doing what they are doing, it probably ignites takeover potential for some of these stocks."
BONDS: Prices of Japanese government bonds rebounded on the Fed's reassuring stance and after the latest 30-year JGB auction saw strong demand.
OIL: Crude futures retreated 33 cents to $71.02 from a record closing price overnight, as market participants awaited a U.S. fuel supply report later in the day expected to show crude stocks rose. But concerns about Nigeria and Iran will lend support.
METALS: Spot gold, now $623.40/oz, is expected to trade between $621 support, $625 resistance in the coming hours, says a Hong Kong trader. Oil, Iran troubles may help the market test $625 late Wednesday. Silver and copper also rallied.
EUROPEAN OUTLOOK: Strong Stock Rally Seen On Fed Stance
Euro-USD 1.2351 gain 0.0025 up 0.2%
Stlg-USD 1.7819 gain 0.0004 up 0.02%
USD-Franc 1.2697 loss 0.0016 dn 0.1%
(All values as of 0450 GMT
European shares and prices of government debt are likely to start higher, while the euro pauses before a new push higher.
STOCKS: European markets are likely to open sharply higher after the Fed's dovish statement.
U.K. spreadbettor Cantor Index is calling the FTSE up 32 points at 6079, the DAX up 57 at 5960 and the CAC up 22 at 5117.
But rising commodities prices are sparking investor worries ahead of the earnings season, said Jan Leroy, a fund manager with Petercam Asset Management.
"People are a bit concerned about higher inflation and pressure on profit margins," Leroy said. "After a strong run in the first quarter, it is healthy and normal to have a pause for breath." The focus in earnings season will be on forecasts and how companies expect rising oil prices to hit future earnings, he noted.
"Everyone knows the first quarter was pretty strong in the U.S. and globally," he noted. "The biggest risk is if analysts start to extrapolate first-quarter results - they could become overoptimistic."
European markets traded mixed Tuesday, as oil and mining companies got a lift from rising commodity prices while Philips Electronics' profit report fell short of most forecasts.
BONDS: European government debt is likely to add to gains Wednesday, after the Fed's more relaxed view.
With little euro-zone data of note on the economic agenda Wednesday, bunds are likely to continue to follow the trend in Treasurys, dealers said. Gilts will be keeping an eye on Bank of England policy minutes from the April meeting, at which rates were left on hold at 4.50%.
Economists at Lehman Brothers expect a 7-1 vote, with external Monetary Policy Committee member Stephen Nickell likely to have remained the sole dissenter in favor of lower rates for the fifth meeting in a row.
European government bonds held onto modest gains late Tuesday ahead of comments from various Federal Reserve members and minutes from the U.S. central bank's March 28 policy meeting.
FOREX: The dovish FOMC minutes continue to support the euro against the dollar, with European interest rates likely to go higher and aid the euro.
"I think that along with some of the data we've seen in recent days, it (the minutes) contributes to the view that the interest rate market and the foreign exchange market might have been a bit hasty in thinking that the Fed was sending a signal of further tightening beyond the May meeting," said Robert Sinche, head of global foreign exchange strategy at Bank of America in New York.
One focus of the dollar's decline has been that as the Fed prepares to pause in its rate-hike cycle, the European Central Bank will keep raising rates. Euro-zone indicators have been surprisingly on the upside recently, and investors are all but certain the ECB is likely to increase rates at its June meeting.
But geopolitical concerns have added pressure on the dollar, with issues regarding Chinese trade and currency policies playing a role in the uncertainty, particularly ahead of Chinese President Hu Jintao's meeting with President George W. Bush on Thursday. Hu began his U.S. visit Tuesday.
CALENDAR: Wednesday, April 19: Germany, US Inflation
GMT Expected Previous
0600 GER Mar PPI
0645 FRA Feb Balance of Payments
0830 UK Apr Econ Trends
0830 UK Apr BOE Agents Summary of Business Conditions
1100 US Apr 14 MBA Refinancing Index -6.6%
1230 US Mar CPI +0.4% +0.1%
1230 US Mar CPI, ex-food and energy +0.2% +0.1%
1430 US Apr 14 US Energy Dept Gasoline Stocks (in -2.0M -3.9M
1430 US Apr 14 US Energy Dept Crude Oil Stocks (in +2.3M +3.2M
1430 US Apr 14 US Energy Dept Distillate Stocks (in -1.0M -4.2M
1640 US Pres Bush speaks on US competitiveness
in Tuskegee, Ala.
1830 US Tsy Secy Snow addresses World Health
Care Congress in Washington
2350 JPN Mar Trade Balance Y704.8B Y955.7B
ASML (ASML): 1Q Earnings
Average net profit (DJ, 4 analysts): EUR88.7M (EUR100M)
Average sales: EUR675.8M (EUR685M)
Note: Earnings and sales lower due to less machine sales and margin pressure. Analyst will focus on ASML's backlog and company's cash position. Eyes also on margins, average selling prices and overall 06 market comments.
Associated British Foods (ABF.LN): 1H Earnings
Average operating profit (DJ, 4 analysts): GBP257M (GBP243M)
Note: A weak performance at British Sugar is expected to have been offset by the continued strength of the Primark retail chain as well as higher grocery, and ingredients profit. The market will also be looking for news on an expected formal bid for South African sugar producer Illovo (ILV.JO).
Bang & Olufsen (BO-B.KO): 3Q Earnings
Average pretax profit (DJ, 3 analysts): DKK157M (DKK135M)
Average revenues: DKK1.14B (DKK1.05B)
Average net profit: DKK102M (N/A)
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Syngenta (SYT): 1Q Sales
Average sales (DJ, 5 analysts): $2.76B ($2.85B)
Note: Sales seen -3% as the cold weather in Europe is seen moving sales into 2Q and USD appreciation will have a negative impact. Sales at the larger crop protection unit are seen at $1.88B vs. $1.92B a year ago and seed unit sales are seen falling to $899M from $921M. Analysts expect the company to reiterate its outlook of double-digit EPS growth until 08 and to provide more information on the situation in Brazil.
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Capitalia (CAP.MI): Shareholder Pact Meeting
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Hapag Lloyd (TUI1.XE): AGM
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Hubwoo.com (405256.FR): 1Q Sales
Huis Clos (7235.FR): FY Earnings
Itesoft (402615.FR): 1Q Sales
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(END) Dow Jones Newswires