"If you are not willing to risk the unusual, you will have to settle for the ordinary." – Jim Rohn.
Unusually uncertain - that is how Federal Reserve chairman Ben S Bernanke sees the prospects for the US economy. Wall Street was doing just fine until Bernanke’s latest assessment – a guarded view of the world’s largest economy - sent US stocks into a tizzy. A mixed bag of earnings from some of the top American companies added to the woes.
Thankfully, Asian markets don’t appear to be too perturbed about Bernanke’s comments and the ensuing fall on Wall Street. Chinese shares are up fourth day in a row, while others are flat to slightly negative. Also, European markets managed to eke out small gains. So, we expect a sluggish opening for India. As usual, the end will hinge on few earnings and global cues.
It has been a long consolidation phase for our markets and the same may persist for some time to come. Try churning your portfolio to beat this listless trend. A new, secular bull run may take a while to materialize. Till that happens, there is no escape from the current sideways pattern.
In the long run though, India is expected to hold its own being one of the fast-growing markets. FII flows have been really good and will continue to be positive. The only hitch could come in the form of rich valuations. However, at any given point in time one will find overvalued as well as under-valued stocks. The challenge is to grab opportunities and make a timely exit. Near-term events that could have a bearing on the sentiment include corporate earnings, outcome of the stress test results for European banks, the RBI policy meet and F&O expiry.
Results Today: ACC, Akzo India, Ambuja Cements, Bajaj Auto, Bajaj Holdings, Bharat Bijlee, CRISIL, Deepak Fertilizers, Dish TV, Dr. Reddy's, Gujarat Gas, Hikal, HOV, IDBI Bank, Idea, ING Vysya Bank, ITC, Kingfisher Airlines, Mahindra Forgings, PNB, PFC, Shriram Transport, Vijaya Bank, Zee News and Wipro.
FIIs were net buyers of Rs3.62bn in the cash segment on Wednesday (provisionally), according to the NSE web site. Local funds were net sellers of Rs3.02bn. In the F&O segment, they were net buyers at Rs43.06bn. On Tuesday, the FIIs were net buyers of Rs3.72bn in the cash segment. Mutual Funds were net sellers at Rs1.47bn on the same day.
US stocks erased early gains to end sharply lower on Wednesday after the Fed chairman Bernanke said that the outlook for the American economy is "unusually uncertain" and that central bank is willing to do more to shore up growth.
But he did not elaborate further on what actions the Fed might take. The markets seemed disappointed that Bernanke did not offer any specifics about a contingency plan for additional stimulus should there be another dip in the US economic growth.
In a report to the Congress, Bernanke said that it would take significant time to restore the 8.5 million jobs lost in 2008 and 2009. In a related news, the US passed a bill extending federal jobless benefits to more than two million long-term unemployed workers.
Mixed earnings from Yahoo, Coca-Cola Co. and others also played on the minds of traders and investors.
The Dow Jones Industrial Average closed with a loss of 109.43 points, or 1.1%, to 10,120.53, with all but four of its 30 components losing ground.
The S&P 500 Index declined 13.89 points, or 1.3%, to 1,069.59, with consumer discretionary and financials pacing the declines that extended to all 10 of its industry groups.
The Nasdaq Composite Index was down 35.16 points, or 1.6%, to 2,187.33.
Market breadth was negative. For every share on the rise, more than two were falling on the New York Stock Exchange, where trading volume topped 1.2 billion.
The euro fell versus the dollar. The dollar fell versus the Japanese yen.
US light crude oil for September delivery fell $1.16 to $76.56 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery fell $5.90 to $1,191.80 an ounce.
Treasury prices rose, lowering the yield on the 10-year note to 2.89% from 2.93% late on Wednesday.
All three indexes managed to hang onto slight weekly gains by the close. Stocks were slightly lower through the early afternoon as better-than-expected quarterly profit reports from Apple, Morgan Stanley and Wells Fargo were countered by disappointment about results from Yahoo and others. But the selling picked up steam in the afternoon following the release of Bernanke's prepared testimony for a Senate committee.
The central bank chief said that he expects a gradual recovery over the next few years, although the labor market healing will be slower than previously thought. US stocks had rallied on Tuesday amid speculation that the Fed may take more steps to encourage bank lending.
After the close on Tuesday, Apple posted its best quarter ever, thanks to sales of its Mac computers, iPads and iPhones. Shares gained 1% on Wednesday.
Yahoo reported results that disappointed investors. The Internet company reported higher earnings that beat estimates on revenue that was barely higher from a year earlier and was shy of analysts' expectations.
Citigroup downgraded the stock, while a variety of other firms downgraded it or cut earnings estimates on the company. Yahoo shares fell 8.5%.
Dow component Coca-Cola reported higher quarterly sales and earnings that topped estimates, helped by increased sales in most of its markets, with particularly strong demand overseas. Shares gained 1.6%.
Morgan Stanley, Wells Fargo and US Bancorp all reported strong profits, but bank shares were mixed. The KBW Bank index lost 2.4%.
Morgan Stanley reported a profit of $1.4 billion, better than expected and reversing a loss from the same quarter a year ago. The company also reported higher earnings that topped estimates.
Wells Fargo reported a higher second-quarter profit that topped expectations, thanks to smaller loan losses. Shares gained 4.7%.
US Bancorp reported higher quarterly sales and earnings that topped expectations, thanks partly to lower credit costs.
After the close, eBay reported higher quarterly sales and earnings that topped estimates, thanks to strength at its PayPal only payments unit. The online auctioneer also lowered the high end of its full-year 2010 profit forecast, citing the impact of the weaker euro. Shares gained 3% in after-hours trading.
Some high-profile US companies like General Electric (GE), IBM and Bank of America beat earnings estimates but missed on revenue.
Still, the majority of S&P 500 companies are reporting both earnings and revenue above estimates, according to Thomson Reuters.
Meanwhile, President Barack Obama signed the Wall Street reform bill into law on Wednesday.
European shares rose on Wednesday, as investors chose to ignore bad US market cues and instead focused on regional earnings.
The Stoxx Europe 600 index climbed 1.2% to close at 249.24. The index ended marginally higher on Tuesday, snapping a four-session losing streak, with miners performing strongly.
Resource-sector stocks climbed again, while financials and technology shares also advanced.
The UK's FTSE 100 index rose 1.5% to close at 5,214.64, the French CAC-40 index advanced 0.7% to end at 3,493.92 and the German DAX index was up 0.4% at 5,990.38.
Fiat shares jumped 6.7% after the car maker reported a return to second-quarter profit on better results across all its divisions.
Shares of Swedish paper company SCA surged 7.5% after reporting a 23% rise in second-quarter net profit.
GlaxoSmithKline rose 1.1%. The firm reported a second-quarter loss, owing to restructuring and legal charges incurred as the company sought to settle lawsuits over two of its key drugs and a factory in Puerto Rico. Adjusted earnings per share totaled 29.1 pence, higher than the 28.1 pence analysts were expecting.
Roche Holding shares declined 4.2% after an unfavorable recommendation from a US Food and Drug Administration panel regarding the company's Avastin cancer drug.
Shares of consumer-products firm SSL International surged 33% after household-products firm Reckitt Benckiser made an agreed 2.54 billion pound ($3.89 billion) bid for the firm. Reckitt Benckiser shares climbed 3.4% after it said that excluding restructuring charges, the deal should immediately add to earnings.
BP shares rose 3.2% after the firm said late Tuesday that it will sell $7 billion of its assets to Apache Corp.