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While you were sleeping: Caution before earnings

Tuesday 13th July 2010

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Equities in the US seesawed as commodity producers declined and technology companies gained before the start of the second-quarter earnings season.

Investors were cautious ahead of the flow of earnings. Alcoa fell 1.4% before the largest US aluminum company reports results after exchanges close today.

In late trading, the Dow Jones industrial average rose 0.06% and the Nasdaq Composite Index rose 0.17%. The Standard & Poor's 500 Index was unchanged in percentage terms.

“I get the feeling a lot of people are on edge. They're tentative. No one really knows what to expect” with this quarter's earnings, Paul Brigandi, a trader with Direxion Funds in New York, told Reuters.

For the second quarter, analysts see earnings growth of 27% for companies in the S&P 500, according to Thomson Reuters data, up from previous readings in the past three quarters, which hovered around 22%. This would also exceed the 22.4% analysts were predicting at the start of the year.

Among the most active stocks on Wall Street were Aon Corp, SanDisk Corp and Qualcomm Inc.

Aon, the world’s largest insurance broker, was the biggest decliner in the Standard & Poor’s 500 after agreeing to buy Hewitt Associates Inc for US$4.9 billion. Aon dropped 8% to US$35.26 at 12.09pm in New York Stock Exchange composite trading, the company’s biggest drop in more than a year.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, fell 2.24% to 24.42.

The Stoxx Europe 600 Index advanced 0.4% to 251.18.

Across Europe, the UK’s FTSE 100 rose 0.7%, Germany’s DAX gained 0.2% and France’s CAC 40 climbed 0.4%.

Among the most active stocks in Europe were BP Plc, Zodiac Aerospace SA and Getinge AB.

The Dollar Index, which measures the greenback against a basket of six major currencies, gained 0.33% to 84.22.

The euro fell as investors grew cautious on the health of European banks ahead of results of stress tests on the sector.

Second-quarter earnings season was looming large for investors who are seeking clues about the economic outlook amid signs of a fading recovery, persistently high unemployment in the United States, Europe's debt troubles and commercial real estate losses.

The euro fell 0.52% to US$1.2568, pulling away from last week's two-month high as concerns about the effectiveness of stress tests on European banks prompted investors to trim long positions in the single currency.

The stress tests are being performed on 91 European banks, with results due on July 23, a major step as the European Union seeks to restore confidence in the sector.

Against the yen, the US dollar fell 0.1% to 88.43 yen.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.78% to 258.60.

US crude oil futures fell, as investors fretted about Europe's fiscal issues.

Crude for August delivery fell 86 cents to US$75.23 a barrel by 12.45pm EDT (1645 GMT), after closing last week with a gain of more than 5%.

Brent crude was down 77 cents at US$74.65 a barrel.

China's release of data showing a drop in demand for copper for a third straight month sent the price of copper more than 2% lower. China is the world's top metals consumer.

Copper was traded at US$6,641.75 a metric tone from US$6,769 on Friday.

Gold slipped, declining for the fourth time in the last seven sessions.

Spot gold was bid at US$1,203.85 an ounce at 1440 GMT, against US$1,211.85 late in New York on Friday. US gold futures for August delivery eased US$5.60 an ounce to US$1,204.20.

Among other precious metals, silver was at US$17.97 an ounce against US$18.06, platinum at US$1,518.40 an ounce against US$1,529 and palladium at US$452.60 against US$456.50.

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