Dow Jones Futures and Options Trading

Dow Jones Futures: Stocks, Oil Retreat on Economy; Dollar Slips Versus Yen

Jul 28^th, 2010

U.S. stocks fell, Europe’s benchmark equity index halted a six-day rally and the dollar slipped versus the yen as an unexpected drop in American durable-goods orders added to evidence the economic recovery is slowing.

The Standard & Poor’s 500 Index lost 0.7 percent to 1,106.12 at the 4 p.m. close in New York. The Stoxx Europe 600 Index fell 0.4 percent. Oil slid to a one-week low as government data showed an unexpected gain in U.S. inventories, and the dollar slid from the highest in almost two weeks versus the yen. Copper rose to an 11-week high on signs growth is sufficient in China and the U.S. to spur demand. Treasuries rallied, sending 10-year yields below 3 percent.

Nine of 10 industries in the S&P 500 fell after orders for U.S. goods meant to last at least three years dropped 1 percent in June, depressed by less demand for aircraft, government data showed. Equities extended losses in the afternoon as the Federal Reserve said U.S. economic growth slowed in some areas over the past two months, dragged down by commercial real estate and the expiration of a tax credit for homebuyers.

“The scars remain,” said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto, in a radio interview with Tom Keene on Bloomberg Surveillance. “The transition to the next sustainable economic expansion is usually between five and seven years. The good news is that we finished two years of this. The glass is half empty. There could be between three to five years to go.”

Dow Jones Rally Halted

The drop in durable goods orders, which followed a bigger- than-forecast decrease in consumer confidence yesterday, added to concern that the economic recovery is slowing even after improving corporate earnings triggered an 8.2 percent rebound in the S&P 500 from a 10-month low on July 2.

“Economic activity has continued to increase, on balance, since the previous survey,” the central bank said today in its Beige Book business survey, while noting that two of the Fed’s 12 districts reported the economy “held steady” and two said the expansion slowed. The Dow Jones Industrial Average snapped a four-day streak of gains, falling 39.81 points, or 0.4 percent, to 10,497.88. Boeing Co. slid 1.9 percent to lead declines after second- quarter sales fell 9.2 percent to $15.6 billion, trailing analysts’ estimates.

Earnings have topped analysts’ projections at about 81 percent of companies in the S&P 500 that have reported results since July 12 and per-share profit has grown 54 percent, according to data compiled by Bloomberg. Sales have increased 9.2 percent and topped estimates at 66 percent of 219 companies.

Crude oil for September delivery tumbled 0.7 percent to $76.93 a barrel on the New York Mercantile Exchange after the Energy Department’s inventory report showed supplies surged by 7.31 million barrels to 360.8 million in the week ended July 23.

Copper Rallies

Copper for September delivery climbed 1.2 percent to $3.2455 a pound in New York, the highest settlement price since mid-May, and lead and zinc jumped at least 2 percent in London.

The gains in industrial metals came after the Shanghai Composite Index of equities jumped 2.3 percent to a two-month high as the central bank said China’s economic fundamentals are “good” and the U.S. Commerce Department’s durable-goods report showed that orders and shipments for nonmilitary capital goods excluding aircraft climbed 0.6 percent in June.

Wheat futures surged to a 13-month high and corn and soybeans rose as drought damages crops in Russia, Ukraine and other parts of Europe, increasing demand for supplies from the U.S., the world’s biggest exporter. Wheat futures for September delivery jumped 3.4 percent to $6.155 a bushel in Chicago. Earlier, the price reached $6.2325, the highest level since June 12, 2009.

Bond Auction

Treasury shorter-term securities led gains as the government sold $37 billion of five-year notes in the smallest auction of the debt in a year, the second of three note sales this week totaling $104 billion.

The 10-year Treasury yield slipped 5 basis points, or 0.05 percentage point, to 2.99 percent. The yield on five-year notes slipped 9 basis points to 1.7 percent. The dollar slipped 0.5 percent versus the yen, while gaining against 11 of its 16 other most-traded counterparts.

Today’s auction drew a yield of 1.796 percent, compared with an average forecast of 1.820 percent in a Bloomberg News survey of seven of the Fed’s 18 primary dealers. The bid-to- cover ratio, which gauges demand by comparing total bids with total securities offered, was 3.06, compared with an average of 2.66 for the previous 10 sales.

Dow Jones Default Swaps

A benchmark indicator of corporate credit risk in the U.S. rose, while holding near the lowest level in two months. Credit- default swaps on the Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 2.6 basis points to a mid-price of 105.1 basis points, according to index administrator Markit Group Ltd.

More than two stocks fell for each that advanced in Europe’s Stoxx 600. Yell Group Plc slumped 19 percent after the publisher posted a drop in profit. Nexans SA lost 8.5 percent after the world’s biggest maker of cables and wires reported narrowing first-half margins. Safran SA and Infineon Technologies AG climbed more than 2 percent after the companies raised their earnings outlooks.

Japan’s Nikkei-225 Stock Average posted the biggest jump among major global equity indexes, rising 2.7 percent, after Tokyo-based Canon Inc., the world’s largest camera maker, reported earnings that beat analysts’ estimates.

- Stephen Kirkland in London and Rita Nazareth in New York at Bloomberg.