Stocks Resume Descent After Confidence Drop
Stocks opened lower Tuesday amid concerns about interest rates. After a brief jump, stocks resumed their descent after a reading showed consumer confidence fell to a five-year low.
The Conference Board's consumer-confidence gauge dropped to 62.3in March from 65.9 in April. However, that was slightly better than the 61-62 range economists had expected.
The Federal Reserve kicks off a two-day meeting today. The market is pricing in about an 80-percent chance of a quarter-point rate cut to 2 percent when the Fed issues its decision on Wednesday, according to fed-funds futures contracts. Some Fed watchers say it will be the last rate cut the Fed makes in this cycle.
"There is going to be a cut," Felix Riley, head of binaries at Choiceodds, told CNBC. "I think the real big thing is the smoke signals coming up from the Fed, once they've announced the expected cut."
"If [the market] gets mixed signals in any way, shape or form, then it will be exciting tomorrow," Riley said.
Meanwhile, U.S. home prices extended their slumpin February, with 17 of the 20 measured regions posting record annual declines, according to a report from Standard & Poor's/Case Shiller. A separate report showed home foreclosure filings jumped 23 percent in the first quarter from the prior quarter and more than doubled from a year earlier, according to real-estate tracker RealtyTrac.
On the earnings front, U.S. credit-card companies posted strong results as consumers increasingly pay with plastic instead of cash and checks.
MasterCard shares shot up after the Purchase, NY, company said its first-quarter earnings more than doubled, surpassing expectations, helped by the weak dollar and an increase in the number of cards outstanding.
Rival Visa also blew past forecasts with its earnings, reported after the bell Monday, but shares skidded amid profit-taking and some disappointment with the San Francisco company's outlook. This was Visa's first earnings report as a public company.
Visa follows a pattern we've seen in the market recently: Bidding up the stock in the weeks leading up to its earnings, then dumping it on the day of the solid earnings report. Visa shares had gained 15 percent in the two weeks leading up to its earnings report.
The same thing happened to fertilizer stocks last week: Potash and Bunge beat estimates by a long shot and raised guidance. Their stocks had risen in the runup to earnings and were promptly sold off.
IBM announced it was raising its dividend by 25 percentto 50 cents a share, marking the 13th straight year that IBM, the world's largest computer-services company, has increased its payout to shareholders. Just two weeks earlier, IBM reported better-than-expected earnings and raised its 2008 outlook.
Major oil companies dominated earnings news from Europe, with Royal Dutch Shell blowing away expectations thanks to record-high oil prices.
BP also beat expectations.
And in the financial sector, Deutsche Bank reported its first quarterly loss in five years.
In the U.S., agricultural company Archer Daniels Midland beat analyst expectations with a profit of 80 cents per share against analyst predictions of 70 cents per share, up from 51 cents a year earlier.
TUESDAY: Fed meeting begins; earnings from GM and US Steel
WEDNESDAY: Fed rate decision (2:15 p.m. ET); first read on Q1 GDP; mortgage applications; Chicago PMI; weekly crude inventories; earnings from GM, Kraft, Kellogg, P&G, Time Warner, Prudential and Starbucks
THURSDAY: Monthly auto sales; jobless claims; personal income and spending; ISM manufacturing index; construction spending; earnings from Kodak, ExxonMobil
FRIDAY: April jobs report; factory orders; earnings from Chevron, Viacom
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