MORNING MARKET VIEW

[Wiljor]

Stocks Start the Session Sluggishly

The domestic equity markets are trading lower in early action of the second-to-last trading session of the year with the persistent drop in crude oil prices and political uncertainty in Greece weighing on sentiment. The hampered mood led to a decline for stocks in Asia and is applying pressure on European equities. Treasuries are trading higher amid the downward move for stocks, ahead of a read on U.S. Consumer Confidence. Meanwhile, a report showed domestic home prices rose more than expected in October. In equity news, American Realty Capital Properties is trading higher after hedge fund Corvex Management LP disclosed a 7.1% stake in the real estate investment trust, while Civeo Corp issued a full-year 2015 revenue warning and suspended its dividend due to reduced activity in the oil & gas markets. Finally, gold is trading higher, while the U.S. dollar is losing ground.

As of 8:45 a.m. ET, the March S&P 500 Index future is 3 points below fair value, the DJIA future is 4 points below fair value, and the Nasdaq 100 Index is 2 points south of fair value. WTI crude oil is declining $0.39 to $53.22 per barrel and Brent crude oil is decreasing $0.36 to $57.52 per barrel, while the Bloomberg gold spot price is trading $14.83 higher at $1,198.12 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is down 0.2% to 89.99.

American Realty Capital Properties Inc. (ARCP $8) is trading higher after hedge fund Corvex Management LP disclosed a 7.1% stake in the real estate investment trust (REIT). Corvex noted in the regulatory filing that it was in discussions with ARCP's board and will seek to have representation on the company's board. ARCP confirmed that it has had "constructive conversations" with Corvex and noted that it is "pleased that Corvex shares its belief that ARCP is an attractive investment."

Civeo Corp. (CVEO $8) issued a full-year 2015 revenue warning and suspended its dividend as the provider of accommodations for workers in the oil & gas sector noted the impact of decisions by major oil companies in North America to significantly reduce capital spending and the continuing weakness in global commodity markets.

Home prices top expectations, ahead of Consumer Confidence report

The 20-city composite S&P/Case-Shiller Home Price Index showed a rise in home prices of 4.5% year-over-year (y/y) in October, compared to the 4.4% increase that economists surveyed by Bloomberg had expected. Moreover, month-over-month (m/m), home prices were higher by 0.8% on a seasonally adjusted basis for October, exceeding forecasts calling for a 0.4% increase.

Treasuries are higher in early action, with the yield on the 2-year note decreasing 3 basis points (bps) to 0.68%, while the yields on the 10-year note and the 30-year bond are declining 2 bps to 2.18% and 2.75%, respectively.

Later this morning, the U.S. economic calendar will bring the release of Consumer Confidence, expected to improve to 93.9 in December from 88.7 in November.

Europe moving lower on oil and Greek political uneasiness

The European equity markets are trading broadly lower in afternoon action, with oil & gas stocks leading the way as oil prices continue to drop to more than 5-year lows. Sentiment also remains hampered by the weekend's failure for Greece to elect a president for the third and final attempt, sending the country toward general elections next month. The failed election is fostering concerns about the potential for an anti-austerity party to gain control, which could impact the composition of the eurozone. Moreover, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, notes in his latest article, The Santa Claus Rally and the Risks to Watch, that the anti-austerity movement in Greece could raise doubts about the European Central Banks’s (ECB) decision to buy government bonds in early 2015. Some at the ECB object to buying government bonds from countries that aren’t committed to financial reform and may not meet their debt obligations. However, the recent easing of fiscal terms for France and Italy are a sign that the ECB will likely step up bond buying regardless of the outcome of the Greek election. Read more at www.schwab.com/marketinsight, while you can also find other timely international market commentary at www.schwab.com/oninternational.

In equity news, shares of Next PLC. (NXGPF $103) are trading nicely higher after the U.K. clothing retailer reported stronger-than-expected Christmas-season sales and declared a special dividend. In economic news in the region, Italian business confidence rose more than expected for this month, while Spanish retail sales grew more than anticipated y/y in November.

The U.K. FTSE 100 Index is down 1.1%, Germany's DAX Index, France's CAC-40 Index and Spain's IBEX 35 Index are all dropping 1.2%, Switzerland's Swiss Market Index is declining 0.5%, Italy's FTSE MIB Index is decreasing 0.6%, and Greece's ASE Athens Index is trading 0.9% lower.

Asia sees pressure on oil concerns and Greek political uncertainty

Stocks in Asia finished lower as the continued slide in oil weighed on energy-related issues, while political uncertainty in Greece also hamstrung sentiment. Japan's Nikkei 225 Index fell 1.6%, paring its yearly gain in light volume on the final trading session of the year as the markets will be closed for the rest of the week. Japanese stocks shrugged off news late yesterday that the government will cut its corporate tax rate by 3.29 percentage points over the next two years. Meanwhile, China's Shanghai Composite Index dipped 0.1% amid weakness in technology and utilities stocks, while the Hong Kong Hang Seng Index fell 1.1% on the heels of yesterday's report that showed the nation's trade deficit widened more than expected in November as exports rose by a much smaller rate than projected. Elsewhere, Australia's S&P/ASX 200 Index dropped 1.0% as oil & gas stocks came under pressure, while South Korea's Kospi Index declined 0.6% despite a stronger-than-estimated read on the country's industrial production for November. Rounding out the day, India's S&P BSE Sensex 30 Index finished flat.

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