US Markets cautious

Market becomes extremely cautious a day ahead of Federal Reserve’s monetary policy decision

US Market ended the day with modest losses today, Tuesday, 24 June, 2008. A rebound in financial sector helped market partially offset some disappointment over weak consumer sentiment spurred by an earnings warning from UPS. It was very clear that market turned cautious a day ahead of Federal Reserve’s crucial meeting on monetary policy decision. The Fed kicked off its two-day Federal Open Market Committee meeting today. The market expects the fed funds rate will remain unchanged.

The Dow Jones industrial Average traded in red for the entire first half today. It then slipped in the green in the post lunch hours but once again slipped in the red before the closing bell. Going into close, the index ended the day with a loss of 34.9 points at 11,807.43. The Nasdaq Composite Index, finished lower by 17.4 points at 2,368.28. S&P 500 finished lower by 3.7 points at 1,314.29.

Fifteen out of thirty Dow stocks ended in the red today. Caterpillar was one of the Dow laggards while Merck was one of the top Dow winners.

Among one of the major news hitting market sentiment today, UPS lowered its second quarter earnings guidance, citing the increase in fuel costs and the sluggish U.S. economy.

In terms of economic data, consumer confidence in June slipped 13% to its lowest level since 1992, after consumers were bombarded with reports of spiking food and energy costs and rising unemployment.

Also, the housing industry continued to remmain sluggish, although the rate of home price declines is slowing. The S&P/Case Shiller index showed that house prices in 20 major metro areas fell 1.6% compared to last month - the smallest drop since September. Home prices are now down 15.2% on a y-o-y basis, the largest drop in the composite's eight year history.

Crude futures remained almost unchanged today. Prices rose marginally after Royal Dutch Shell Plc said that it resumed production at its Nigerian Bonga field that was attacked last week. But prices had peaked $139 as traders digested production news from Nigeria and Saudi Arabia. Crude-oil futures for light sweet crude for August delivery today closed at $137/barrel (higher by $0.26/barrel or 0.2%) on the New York Mercantile Exchange. It traded as high as $138.85 during intra day trading.

Shell shut Bonga output on 19 June after militants attacked a production vessel at the field 75 miles off the coast of Nigeria. Nigeria was overtaken by Angola in April as Africa's biggest oil producer because attacks cut the country's output.

At the currency markets on Tuesday, the dollar fell against the euro before the Fed's meeting on interest rates today and tomorrow. The dollar index which measures the greenback against a basket of trading partners was at 73.257, compared with 73.470 late Monday.

Trading volume was relatively light, with 1.3 billion shares exchanged on the New York Stock Exchange, where declining stocks outran those advancing by more than 2 to 1. On the Nasdaq, 914 million shares traded, and decliners outpaced advancing

Durable goods orders data for May are due before tomorrow’s open. The report offers market participants a look at the orders placed with domestic manufacturers during a given month. New home sales figures for the month of May and the weekly crude oil inventory report are due shortly after that. But the day's primary focus will be the Federal Open Market Committee's monetary policy decision and its accompanying directive.