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Traders to Focus on More Data Amid Encouraging Signs
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The major U.S. index futures are pointing to a higher opening on Thursday, with futures turning uniformly higher following the release of jobless claims data and the consumer price inflation report for February. Held down by a decline in energy prices, consumer price inflation remained benign in February, while jobless claims continued to show a modest drop in the recent week.
The sustenance of the rally witnessed in recent weeks that lifted the major averages to multi-month highs largely depends on the Conference Board’s leading economic indicators index and the results of the Philadelphia Fed’s manufacturing survey.
U.S. stocks opened Wednesday’s session higher, as the producer price inflation report released earlier in the day supported the Federal Reserve’s stance of leaving interest rates at extremely low levels for an extended period. After advancing steadily till late trading, the major averages gave up some of their gains but still closed moderately higher. With the advance, the Dow settled at its highest level since October 1st, 2008.
The Dow Industrials gained 47.69 points or 0.45% to close at 10,734 and the Nasdaq Composite Index rose 11.08 points or 0.47% to 2,389, while the S&P 500 Index ended up 6.75 points or 0.58% at 1,166.
Twenty-two of the thirty Dow components ended the session higher, with Alcoa (AA), Chevron (CVX), Bank of America (BAC), DuPont (DD), Intel (INTC), JP Morgan (JPM), Exxon Mobil (XOM) and Caterpillar (CAT) recording strong gains.
Among the sector indexes, the NYSE Arca Oil Index rose 1.27%, the Philadelphia Housing Sector Index gained 1.64% and the KBW Bank Index moved up 1.67%. The Philadelphia Semiconductor Index advanced 1.16%, while the NYSE Arca Networking and the NYSE Arca Software Index rose over 1% each. On the other hand, the NYSE Arca Airline Index slipped 1.16%.
Currency, Commodity Markets
Crude oil futures are trading down $0.39 at $82.54 a barrel after closing up $1.23 at $82.93 a barrel in Wednesday’s session. The upside witnessed on Wednesday came amid OPEC’s decision to leave its output quota unchanged at 24.84 million barrels. Yesterday, the Energy Information Administration released its weekly oil inventory report, showing a 1million barrel increase in crude oil inventories in the week ended March 12th. Stockpiles of crude oil remained above the upper limit of the average range.
Gasoline inventories fell by 1.7 million barrels but were still above the upper limit of the average range. Distillate inventories also declined, dropping by 1.5 million barrels. Refinery capacity utilization averaged 81.1% over the four weeks ended March 12th compared to 80.9% in the previous week.
Gold futures are currently fetching $1,125.60 an ounce, up $1.40. The precious metal rose $1.70 to $1,124.20 an ounce in the previous session.
The U.S. dollar is trading at 90.28 yen compared to the 90.308 yen it was worth at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.3661.
Asia
Most Asian markets receded on Thursday, as profit taking took some sheen off the recent run up in the markets. Most averages in the region traded in a lackluster fashion amid weakness in commodity prices.
Japan’s Nikkei 225 average opened lower and traded sideways with a modest loss before pulling back sharply in late trading. At the close of trading, the index was down 102.95 points or 0.95%. Yesterday, the key average had settled at a nearly 2-month high.
A majority of stocks, with the exception of pharma and some utility stocks, showed weakness. Isuzu Motors, Mitsubishi Estate, Nikon, Oki Electric, Shimizu, Taiheiyo Cement, Tokyu Land and Taiyo Yuden were among the worst decliners in the session. The weakness witnessed among real estate stocks emanated from an analyst downgrade of the sector.
On the economic front, Japan’s Cabinet Office downwardly revised its leading index to 96.7 in January from its preliminary estimate of 97.1. The coincident index was revised up 0.2 points to 100.1, while the lagging index was left unchanged at 85.1.
Meanwhile, the Bank of Japan released its monthly report on recent economic and financial developments for March, with the central bank retaining its view on economic conditions. The central bank said conditions could continue to improve, although the pace of improvement is likely to remain moderate for the time being.
Australia’s All Ordinaries showed some degree of volatility, although it maintained a positive bias throughout the session to close modestly higher. The index closed up 10.80 points or 0.22% at 4,878.
Most sector stocks showed modest gains, although healthcare, IT and industrial stocks showed weakness. In the mining space, Rio Tinto, Incitec and Lihir Gold advanced, while BHP Billiton and Fortescue fell. Among the four major banks, ANZ and Commonwealth Bank rose, but Westpac and National Australia Bank moved to the downside.
Hong Kong’s Hang Seng Index showed volatility throughout the session before closing lower. The index closed down 53.82 points or 0.25% at 21,331. Twenty-six of the index components closed the session lower, with property stocks leading the slide. However, index heavyweights China Mobile and HSBC Holdings advanced in the session. China Mobile ended up over 1% after it reported a 2.3% increase in net profits for the full year 2009.
Europe
After trading notably lower early in Thursday’s session, the major European averages have cut their losses and are trading slightly higher. The French CAC 40 Index and the German DAX Index are moving up 0.01% and 0.11%, respectively, while the U.K.’s FTSE 100 Index is gaining 0.24%.
U.S. Economic Reports
Kansas City Federal Reserve Bank President Thomas Hoenig, Richmond Federal Reserve Bank President Jeffrey Lacker and Cleveland Federal Reserve Bank President Sandra Pianalto are all scheduled to speak on a panel about the role of banking in local economic growth at the American Bankers Association conference at 8:30 AM ET.
The Labor Department’s consumer price inflation report showed that consumer prices remained unchanged compared to the previous month in February. The core consumer price index was up 0.1%. The consensus estimates had called for a 0.1% increase in the headline consumer price index as well as the core consumer price index that excludes food and energy.
Food prices rose 0.1%, with the cost of eating at home and eating away from home increasing in the month. Energy prices were down 0.5%, reflecting a 1.3% decline in prices of energy commodities. Shelter costs, which have a significant weighing in the headline number, were unchanged. Annually, on an unadjusted basis, consumer prices rose 2.1% in February.
First-time claims for unemployment benefits showed another modest decrease in the week ended March 13th, according to a report released by the Labor Department on Thursday, although the report also showed another increase in continuing claims.
The report showed that initial jobless claims edged down to 457,000 from the previous week's unrevised figure of 462,000. Economists had been expecting a slightly steeper drop in jobless claims to 455,000.
At the same time, the Labor Department said that continuing claims, a reading on the number of people receiving ongoing unemployment help, rose to 4.579 million in the week ended March 6th from the preceding week's revised level of 4.567 million.
The Conference Board is scheduled to release a report on its leading economic indicators index for February at 10 AM ET. The consensus estimate calls for a 0.1% increase in the leading indicators index for the month.
The leading economic indicators index continued to show improvement for the 10th straight month in January. The leading indicators index rose 0.3% month-over-month in January, although this represented the slowest increase in the 10-month winning streak.
Out of the 10 components, 5 contributed positively to growth, with treasury yield and vendor performance being the biggest contributors. On the other hand, money supply, building permits and initial jobless claims were among the biggest negative contributors.
The results of the Philadelphia Federal Reserve's manufacturing survey are due out at 10 AM ET. Economists expect the diffusion index of current activity to show a reading of 18 for March.
In February, the headline-manufacturing index rose to 17.6 from 15.2 in January. The new orders surged up 19 points to 22.7 and the shipment index rose 8 points to 18.7.
The employment indices in the Philly Fed report were mixed. The number of employees index rose 1.3 points to 7.4, but the average work index slipped to 1.9 from the month-ago's 4.2. The outlook index showed some pessimism about the future, slipping to 35.8 in February from 43.3 in January.
Stocks in Focus
Nike (NKE) shares rose in Wednesday’s after hours session after the company reported that its third quarter revenues rose 7% year-over-year to $4.7 billion. The company’s earnings were $1.01 per share compared to 50 cents per share last year. The year-ago results included a charge amounting to $241 million. Analysts estimated earnings of 89 cents per share on revenues of $4.60 billion. The company reported that worldwide future orders for NIKE Brand footwear and apparel scheduled for delivery from March through July 2010 were up 9% year-over-year.
FedEx (FDX) is moving lower in pre-market trading despite its third quarter revenues rising 7% to $8.70 billion. The company’s earnings rose to 76 cents per share from the year-ago’s 31 cents per share. Analysts estimated earnings of 72 cents per share on revenues of $8.37 billion. The company expects earnings of $1.17-$1.37 per share for the fourth quarter and $3.60-$3.80 per share for the year. The consensus estimates call for earnings of $1.26 per share for the quarter and $3.64 per share for the year.
Clarcor (CLC) could also be in focus after it reported first quarter net sales that edged up 0.7% to $215.13 million. The company’s earnings rose 71% to 29 cents per share. Analysts estimated earnings of 31 cents per share on revenues of $222.83 million. The company reaffirmed its full year 2010 sales growth guidance of 6%-8% and its earnings estimate of $1.55-$1.70. For the full year, analysts estimate earnings of $1.70 per share on revenues of $956.60 million, up 5.4% year-over-year.
XL Capital (XL) is likely to see some activity after it said it estimates a preliminary loss of $140 million to $205 million related to the Chilean earthquake and a loss of $20 million to $25 million related to windstorm Xynthia, which hit Europe.
CA, Inc. (CA) may also be in focus after it said it has completed its previously announced acquisition of Nimsoft for $350 million in an all cash deal.
Commerica Inc. (CMA) is also likely to move in reaction to its announcement that it has repaid $2.25 billion in TARP funding it received from the U.S. Treasury. The company noted that it has redeemed the preferred stock issued to the Treasury, five days after completing the issuance of $880 million worth of its common stock. The repayment helps the company to eliminate the annual $134 million negative impact to net income to common shareholders related to the preferred stock.
Guess? Inc. (GES) may gain ground after it reported that its fourth quarter earnings rose to 93 cents per share from 51 cents per share last year. On an adjusted basis, the company reported earnings of 96 cents per share, higher than the 66 cents per share last year. Net revenues climbed 14.4% to $642 million. Analysts estimated earnings of 81 cents per share on revenues of $601.67 million. For the full year 2010, the company estimates earnings per share of $2.87-$2.95 and net revenues of $2.30 billion to $2.35 billion. The consensus estimates call for earnings of $2.92 per share on revenues of $2.29 billion. The company also raised its quarterly dividend by 28% to 16 cents per share.
Herman Miller (MLHR) could also see activity after it reported that its third quarter net sales fell 7% to $329.6 million. On an adjusted basis, the company reported earnings of 15 cents per share, lower than 18 cents per share in the year-ago period. The results were below the consensus estimates. While orders rose 3.8%, backlogs fell 6.4%.
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