U.S. stock index futures edged higher on Wednesday, suggesting the market would continue a recent advance that lifted benchmark indexes to multi-year highs.
While the long-term trend in markets should remain positive, some investors may take profit at current levels, analysts said, with the S&P near its highest since November 2007. Recent daily moves have been small and trading volume light as investors search for fresh impetus to drive stocks higher.
Equities have been strong performers of late, buoyed largely by healthy growth in corporate earnings, with the S&P 500 gaining 6.5 per cent so far this year. The Dow is about 1 per cent from an all-time intraday high, reached in October 2007.
“This is a market that refuses to go down, and the trend suggests that we’ll not only hit a new high on the Dow, but move well beyond it,” said Adam Sarhan, chief executive of Sarhan Capital in New York.
Sarhan noted that the S&P 500 was well over its 50-day moving average of 1,460.92, which he said was a sign the market was overbought.
“A light-volume pullback should be expected and embraced at these levels,” he said.
Industrial and construction shares will be in focus a day after President Barack Obama’s State of the Union address, during which he called for a $50-billion (U.S.) spending plan to create jobs by rebuilding degraded roads and bridges. He also backed higher taxes for the wealthy.
Investors have cheered strength in recent company results, even as economic data, including recent reads on gross domestic product, have indicated some weakness.
Deere & Co. jumped 2.1 per cent to $95.99 in premarket trading after the farm equipment maker reported results and raised its full-year profit outlook.
S&P 500 futures rose 2.9 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 19 points and Nasdaq 100 futures rose 7.25 points.
Comcast Corp. agreed late Tuesday to buy General Electric Co’s remaining 49 per cent stake in NBC Universal for $16.7-billion. Comcast jumped 8 per cent to $42.10 in premarket trading while Dow component GE was up 3.2 per cent to $23.31.
Yahoo Inc. Chief Executive Marissa Mayer said Tuesday the company’s search partnership with Microsoft Corp. was not delivering the market share gains or the revenue boost that it should.
Companies scheduled to report quarterly results on Wednesday include MetLife Inc, Applied Materials and Whole Foods Market.
According to the latest Thomson Reuters data, of 353 companies in the S&P 500 that have reported results, 70.3 per cent have exceeded analysts’ expectations, above a 62 per cent average since 1994 and 65 per cent over the past four quarters.
Fourth-quarter earnings for S&P 500 companies are estimated to have risen 5.3 per cent, according to the data, above a 1.9 per cent forecast at the start of the earnings season.
Also in economic news, business inventories are seen rising 0.3 per cent in December, a repeat of the November increase. The data is due at 10:00 a.m. (ET).
The U.S. dollar and the euro rose against the yen in volatile trade after a G7 statement on exchange rates designed to calm talk of a currency war instead triggered fresh concerns. The G7 reaffirmed its commitment to market-determined exchange rates and said fiscal and monetary policies must not be directed at devaluing currencies – comments which at first were seen as supporting the recent weakness in the yen.
However, an official from the group, which links the United States, Japan, Germany, Britain, France, Italy and Canada, later said Tuesday’s statement was meant to signal concern about the yen’s excessive moves. Japanese Prime Minister Shinzo Abe’s government is pushing for aggressive policies by the Bank of Japan to beat deflation through monetary expansion.
Anticipation of the bolder measures has sent the yen down nearly 20 per cent against the dollar since November, sparking comments from policymakers in the euro area about the impact on the common currency as the region struggles with a recession.
Europe’s share markets were little changed, hovering below the top of a six-day trading range, with investors more focused on mixed corporate results than moves in the currency markets.
The FTSE Eurofirst 300 index of top European companies was down 0.1 per cent at 1,160.36 points. Around Europe, UK’s FTSE 100 index and France’s CAC 40 were unchanged, though Germany’s DAX index was up 0.6 per cent.
MSCI’s world equity index was also flat at 356.65 points.
Debt markets were also mostly steady as investors focused on an auction of 30-year bonds by Italy, its last debt sale before an imminent general election.
Italy’s debt has been under pressure in recent weeks as a comeback in the opinion polls by former Prime Minister Silvio Berlusconi’s party has raised the prospect of a fragmented parliament that could hamper the next government’s reforms.
At the sale investors bought €888-million ($1.0-billion) of the new bonds and bid for 1.97 times the amount on offer, The bonds due in 2040 yielded 5.07 per cent.
However, at a separate sale of three-year debt the government had to pay more than it did a month ago, in a sign that some investors fear that the Feb. 24-25 poll will result in a fragmented parliament.
Ten-year Italian yields were little changed on the day at 4.45 per cent.
U.S. Treasuries were lower as traders prepared for an auction of $24-billion of 10-year bonds later in the day.
Inside the Market editor Darcy Keith is away and will return next week.