US markets look set to open relatively unchanged today ahead of US consumer confidence and new home sales data releases. Business confidence appears to be dipping worldwide at the moment with German IFO dipping today and Chinese, German and then US PMI’s coming in below expectations yesterday. Markets will be looking for consumers to pick up the slack. Futures suggest the S&P500 will open 3 points higher at 1,860 with the Dow Jones expected to open 33 points higher 16,309. The S&P 500 has been stuck for over a month in a $40 range, not closing below 1,840 or above 1,880 since February 21st. US markets are clearly looking for the next big impetus to push higher or lower and one suspects this will either be a geopolitical event pushing markets down or a surprise boost to US (or Chinese) economic growth pushing markets higher. US CB Consumer confidence for February is expected to be higher than January at 78.7. January had seen a big dip below expectations. As a consumption-driven economy, this may have led to the poor business confidence we are seeing now. Investors will be hoping this was just a brief weather-related dip rather than something more permanent. US New homes sales are expected to drop slightly on the month to 447k. The biotechnology sector was looking poorly yesterday with the iShares Nasdaq Biotechnology ETF down heavily by 4.7%. Biotechs are generally high-beta growth stocks, meaning they see proportionately larger moves than the market as a whole. As stocks have been trending higher throughout 2013, biotechs have been strongly outperforming with larger pharmaceuticals largely leaving medical R&D to smaller start-ups. As the broader US indices look a little toppy, biotechs have started to come under pressure given their well above-average PE ratios. This was exacerbated on Friday when a letter was sent by the US congress to Gilead Sciences (GILD) asking them to explain the $84k price tag for its new hepatitis C drug ‘Sovaldi.’ With the US moving towards a more socialist health-care system under ‘Obamacare’ there may well be increasing scrutiny over the high costs of drugs and this could be a dampener on future profit growth for the biotech sector. CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
US markets to open relatively unchanged with consumer confidence in focus
13:00, 25 March 2014