Stocks in the US are set for a mixed open with not much in the way of economic data or earnings news to spur activity on Tuesday before the official kick-off of earnings season with Alcoa Inc (NYSE:AA) reporting tomorrow.
Estimates for the timing of the first US rate-hike have been pared back after the disappointing non-farm payrolls report over Easter. Loose monetary policy is not enough by itself to drive stock market returns; there needs to demonstrable evidence of its effectiveness through earnings growth in top-flight US companies.
While the Fed has stayed loose, the rest of the world is getting looser, essentially meaning the Fed is tightening on a relative basis. The resulting strong US dollar and falling commodity prices look like they may have some more causalities this reporting season.
M&A amongst parcel delivery giants FedEx Corporation (NYSE:FDX) and TNT Express (AMS:TNTE) has bolstered European share trading on Tuesday but the effect maybe more muted in the US. With the dollar having appreciated 25% against a basket of currencies in the last nine months, management in corporate America is going to give serious consideration to putting their strong dollars to work in Europe. It could be the beginning of a year-long trend for US companies buying assets abroad. Outbound M&A boom could be at the expense of future US shareholder dividend payouts.
Futures suggest the:
S&P 500 will open 1 point lower at 2,079 with the
Dow Jones expected to open 8 points higher at 17,888 and the
Nasdaq 100 1 point higher at 4,351.
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