German Data Lift Stock Futures Ahead of Fed


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Stock-index futures bounced back from the selloff in the prior session after a better-than-expected report on German economic sentiment lifted traders' spirits ahead of the Federal Reserve's monetary policy statement later in the day.

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Today's Markets

As of 8:35 a.m. ET, Dow Jones Industrial Average futures gained 54 points to 11,998, S&P 500 futures rose 7 points to 1,236 and Nasdaq 100 futures climbed 14 points to 2,305.

Markets received a batch of positive news from Europe on Tuesday. A report from the ZEW Centre for Economic Research showed economic sentiment in Germany, Europe's biggest economy, improved for the first time in 10 months in December from the lowest level since 2008.

Spain also had a successful auction of one-year and 18-month bonds, selling 4.94 billion euro compared to its target of 4.25 billion. Still, the success in Spain did little to ease yields on Italian debt. The country's 10-year note is presently yielding 7.13%, a level that many economists say may lead to unsustainable borrowing costs.

The euro climbed 0.08% to $1.3198 after falling to the lowest level in two months in the prior session. European blue chips were up 0.63%.

The Federal Reserve is expected to make its last planned monetary policy statement of the year at roughly 2:15 p.m. ET. The central bank has already said it plans on holding interest rates at record lows until the middle of 2013, and isn't expected to unveil any new asset buying to buoy the economy. Some economists expect the Fed plans on revamping its communications strategy to offer more clarity on how it will make monetary policy decisions.

The Fed has held interest rates at a record low range of between 0 and 0.25% since December 2008, when the central bank led by chairman Ben Bernanke was faced with what is seen as one of the worst financial crises since the Great Depression. It also enacted multiple asset buying programs, the last of which, dubbed Quantitative Easing 2, ended in July. Since then, the Fed has been moving to lengthen the average maturity of its balance sheet by selling short-term bonds and buying equal quantities of longer term ones.

It also announced a coordinated move with several other global central banks, including the European Central Bank, to decrease the cost of dollar funding in world money markets. The move, analysts say, was designed to help European banks that were having difficulty obtaining adequate levels of the currency and to provide liquidity in that marketplace.

The markets also got a round of retail sales data on Monday morning. Sales climbed 0.2% in November from the month prior, which is a slimmer gain than the 0.6% increase economists forecast. Excluding the automobile component, sales were up 0.2%, less than estimates of 0.4%. November is the kickoff of the crucial holiday shopping season, and earlier reports have largely been positive.

Energy markets were modestly to the upside. The benchmark crude oil contract traded in New York rose 58 cents, or 0.58%, to $98.34 a barrel. Wholesale RBOB gasoline gained 0.87% to $2.585 a gallon.

In metals, gold, which plunged in the last session, was essentially unchanged at $1,669 a troy ounce. Investors sold U.S. government debt, pushing yields higher. The benchmark 10-year note yields 2.038% from 2.019%.

Corporate News

Best Buy (NYSE:BBY) posted fiscal third-quarter profits of 47 cents a share, shy of estimates of 51 cents. The retailer's revenue came in at $12.1 million, also missing forecasts of $12.1 billion.

DuPont (NYSE:DD) said it expects its 2012 earnings per share to climb 12% to 17% from the prior year, excluding one-time charges.

Foreign Markets

European blue chips rose 0.63%, the English FTSE 100 gained 0.74% to 5,468 and the German DAX climbed 0.85% to 5,834.

In Asia, the Japanese Nikkei 225 slid 1.2% to 8,553 and the Chinese Hang Seng slid 0.69% to 18,447.

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