European stocks fell from a five- month high amid a stalemate between regional policy makers and Greek bondholders over how to resolve the nation’s debt crisis. Indian shares surged after the central bank unexpectedly cut the cash reserve ratio for banks.
The Stoxx Europe 600 Index retreated 0.8 percent at 8:28 a.m. in New York. Standard & Poor’s 500 Index futures lost 0.5 percent, while the BSE India Sensitive Index jumped 1.5 percent. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, rose 0.3 percent. Germany’s 10-year bund yield decreased one basis point to 1.96 percent. Natural gas jumped 3 percent.
European finance ministers balked at putting up more public money for Greece, calling on bondholders to provide greater debt relief. Apple Inc. is among U.S. companies scheduled to report quarterly results today as the Federal Reserve begins a two-day policy meeting.
Many of Europe’s major bourses have retreated into the red amid disappointment and frustration related to ongoing wrangling over Greece’s debt terms; many had come to expect some sort of solution yesterday. Greece’s Athex 20 is currently down 4.0%. Meanwhile, Germany’s DAX is down 0.9%. Commerzbank, which rallied hard in each of its last two outings, is under heavy selling pressure. Deutsche Bank (DB 41.89, -1.56) is down in sympathy. Germany reported that its Manufacturing PMI for January hit 50.9, which is up from the 48.4 that was posted in the prior month. The country’s Services PMI improved to 54.5 in January from 52.4 in the prior month. Banking outfits are also dragging on Britain’s FTSE, which is currently off by 0.8%. Lloyds Group (LYG 1.91, -0.11) and Royal Bank of Scotland (RBS 8.38, -0.29) are currently the two poorest performers in the FTSE. Barclays (BCS 13.48, -0.44) is also in rough shape this session. France’s CAC has fallen to a 0.9% loss. Societe Generale and Credit Agricole are hurting action there after the pair had provided upside leadership in the prior session. France reported that its preliminary reading on Manufacturing PMI eased down to 48.5 in January from 48.9 in December. The Manufacturing PMI for the overall eurozone improved to 48.7 in January from 46.9 in the prior month. The Services PMI reading for the eurozone inched up to 50.5 in January from 50.3 in the prior month.
Action in Asia was limited due to holiday observations in China and Hong Kong. However, Japan’s Nikkei was open. It inched up to a 0.2% gain. Kawasaki
Treasury prices edged up Tuesday, bringing yields off their highest level since early December, as hopes about a debt deal for Greece faded and traders turned their attention to the U.S. outlook as the Federal Reserve begins its two-day meeting.
Standard & Poor’s will likely downgrade Greece’s ratings to “selective default” when the country concludes its debt restructuring, but that will not necessarily destroy the credibility of the European Union, an official with the ratings agency said on Tuesday.
“It’s not a given that Greece’s default would have a domino effect in the euro zone,” John Chambers, the chairman of S&P’s sovereign rating committee, said in an event organized by Blooomberg Link.
Johnson & Johnson’s fourth-quarter results show continued weakness in the orthopedics market. The company said Tuesday that U.S. sales at its DePuy unit fell 4%. The market for hip and knee implants has been hurt by factors such as consumers putting off surgeries in a weak economy and concerns over the safety of metal-on-metal hips. Shares slid 0.7% premarket at $65.25.
Verizon swung to a fourth-quarter loss on a large pension-related charge, though more contract wireless subscribers helped the telecommunications giant post better-than-expected revenue. Shares were down 2.1% to $37.65 in recent premarket trading.
As McDonald’s fourth-quarter earnings per share grew more than analysts expected amid a 7.5% surge in global same-store sales, despite tough comparisons to strong prior-year results, the restaurant chain yet again shows its apparent immunity to macro-economic pressures. The performance also came amid few new-product launches in the U.S. Meanwhile, analysts say McDonald’s will need to raise prices, if they haven’t already, to continue to offset high inflation, and are waiting to hear the company’s plan for additional price increases. Shares were up 0.5% to $101.40 in recent premarket trading.
EMC Corp. on Tuesday eased fears of slowing business spending on technology by reporting its best-ever fourth quarter and issuing an optimistic view for 2012, saying demand for its storage products remain high. Shares climbed 3.7% to $24.30 in recent premarket trading.
Kimberly-Clark Corp.’s fourth-quarter earnings fell 19% as higher costs again put a damper on the company’s improved sales, particularly in its crucial personal care business. The company, whose products include Huggies diapers, Scott paper towels and Kleenex tissues, also offered a conservative outlook for its new fiscal year. Shares declined 2.6% to $71.60 in recent premarket trading.
CSX Corp.’s fourth-quarter earnings rose 6.3% as the railroad company posted higher revenue, though volume slid. The U.S. transportation sector is broadly expected to post improved results for the fourth quarter, coming off a better-than-expected, though subdued, peak shipping season. Shares fell 3.7% to $21.85 in premarket trading.
Nokia Corp. shares fell sharply 8.2% to $5.26 premarket after comments by Texas Instruments Inc. and STMicroelectronics N.V., says FIM analyst Michael Schroder. The chipmakers have said their weakened business with Nokia indicates that Symbian-based feature phones are “probably losing a lot of momentum right now,” says Schroder. “With Nokia’s Windows Phones only coming up gradually, not compensating all the losses in Symbian handsets, it looks quite bad.”
Baker Hughes Inc.’s fourth-quarter earnings fell 6.3% as higher costs and weakness in pressure pumping masked the oilfield-services company’s revenue growth. Shares declined 3.8% to $45.93 premarket as the results missed expectations.
Quest Diagnostics Inc.’s fourth-quarter earnings rose 14% as the company saw higher testing revenue and improved margins, while unveiling a $1 billion increase to its stock buyback program. Results easily beat expectations, but the company predicted downbeat adjusted per-share earnings on revenue growth for the new year. Shares were up 4.3% to $58.92 in recent premarket trading.
Higher average selling prices helped boost Western Digital Corp.’s second-quarter results, Morgan Stanley says. The firm notes pricing for hard-disk drives was up about 72% since the Thailand flooding, which lifted the company’s gross margin despite higher manufacturing and component costs, and it also offset weaker units. But Morgan Stanley adds average selling prices will normalize earlier than expected. Shares gained 4.5% to $36.28 in recent premarket trading.
International Game Technology’s fiscal first-quarter earnings fell 33% as a lack of new casinos in North America hurt the slot-machine maker’s revenue and margins, leading to a surprise drop in both top- and bottom-line results. Shares slumped 8% to $14.75 in recent premarket trading.
Polycom Inc.’s fourth-quarter earnings rose a greater-than-expected 50% as the videoconferencing company’s emerging-market sales continued to outperform its American business. Shares jumped 16% to $21.28 in recent premarket trading as revenue also topped expectations.
Brinker International Inc.’s fiscal second-quarter earnings fell 4.8% as charges masked the casual-dining company’s improved revenue and margins. While the parent company of Chili’s Grill & Bar and Maggiano’s Little Italy reported a rise in fiscal first-quarter revenue–its strongest rate in years–some questioned whether the momentum would continue through the remainder of the fiscal year, as it comes up against stronger prior-year performance and increased competitive pressure. Shares dropped 8.2% to $25.36 in recent premarket trading.
Overnight Headlines (Links)
WORLD/US
Turkey Slams France Over ‘Genocide’ Bill
EU Scrambles To Salvage Greek Talks
Euro Zone Business Bounces Back
End of an Era for Japan’s Exports
Romney Paid 14% Tax Rate in 2010
CORPORATE
Petroplus to File for Insolvency
Nokia Continues to Weigh on STMicro
MARKET
Spanish Bond Success Continues
Portuguese Bondholders Fret Over Haircut
Economics/FedSpeak
Day 1 of the FOMC meeting kicks off. Richmond Fed’s business activity survey is due at 10 a.m. ET.Treasury sells 2-year notes at 1:00 pm ET. President Obama’s State of the Union address is scheduled for 9:00 p.m.
Key Earnings
Before the open, we get results from a slew of companies. Here are some of the highlights:
- McDonald’s
- KeyCorp
- Harley-Davidson
- Quest Diagnostics
- DuPont
- EMC
- Verizon
- Coach
- Johnson & Johnson
- Travelers
After the bell, we get results from:
- Apple — another record-breaking quarter expected
- Yahoo
- CA
- Advanced Micro Devices