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Jobless Claims Data May Mitigate Some Weakness

4/5/2012 9:24 AM ET

The major U.S. index futures are pointing to a lower opening on Thursday, with futures paring back their losses after the release of the U.S. jobless claims report, which showed that claims fell to their lowest level in about four years. Commodities are rebounding after the sell-off seen in the previous two sessions. Given the apprehensions concerning the course of the economy, especially ahead of tomorrow's non-farm payrolls data, some consolidation around current levels is the most likely outcome.

U.S. stocks ended Wednesday's session sharply lower, as economic fears spooked the overbought markets. The major averages opened lower as the previous session's negative sentiment generated by fading stimulus hopes lingered and a Spanish debt auction received a lukewarm response. Thereafter, the averages declined steadily till late morning trading before moving sideways. Although the indexes pared some of their losses in the afternoon, they ended notably lower.

The Dow Industrials ended down 124.80 points or 0.95 percent at 13,075 and the S&P 500 Index closed 14.42 points or 1.02 percent lower at 1,399, while the Nasdaq Composite retreated 45.48 points or 1.46 percent before closing at 3,068.

Twenty-six of the thirty Dow components closed lower, with Alcoa (AA), Bank of America (BAC), Cisco Systems (CSCO), JP Morgan Chase (JPM), Microsoft (MSFT) and McDonald's (MCD) declining sharply.

Resource, semiconductor, financial, housing, biotechnology and transportation stocks were among the worst hit in the session.

On the economic front, ADP's private payrolls survey showed that about 209,000 jobs were added by the private sector in March.

The Institute for Supply Management's service sector survey showed that its non-manufacturing index unexpectedly fell to 56 in March from 57.3 in February. The business activity index fell 3.7 points to 58.9 and the new orders index slid 2.4 points to 58.8. The order backlogs index slipped into contraction territory, declining to 49.5 from 53. Meanwhile, the employment index rose 1 point to 56.7.

Currency, Commodity Markets

Crude oil futures are rising $0.14 to $101.61 a barrel after declining $2.54 to $101.47 a barrel on Wednesday. The previous session's retreat came amid the risk aversion that boosted the dollar and the release of the inventory report, which showed that crude oil stockpiles jumped by 9 million barrels to 362.4 million barrels in the week ended March 30th, climbing above the upper limit of the average range.

Distillate inventories were unchanged yet remained in the upper limit of the average range. Meanwhile, gasoline stockpiles fell by 1.5 million barrels, although remaining in the upper limit of the average range.

Gold futures are currently gaining $11.20 to $1,625.30 an ounce. In the previous session, the precious metal slumped $57.90 to $1,614.10 an ounce.

Among the currencies, the U.S. dollar is trading 82.14 yen compared to the 82.46 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.3056 compared to yesterday's $1.3142.

Asia

The major Asian markets ended mostly lower, as wary traders remained perturbed about recent soft data and adopted a cautious stance ahead of Friday's U.S. employment report.

Japan's Nikkei 225 average languished in negative territory throughout the session, although the index closed off the lows of the session. The Nikkei 225 Index closed down 52.38 points or 0.53 percent at 9,768.

Honda Motor, Credit Saison, Da-ichi Life, J Front Retailing, Kawasaki Kisen, Mitsui Mining, Mitsui OSK Lines, Sony Financial and Sumitomo Electric were among the other notable decliners.

Australia's All Ordinaries closed at 4,402, down 16.60 points or 0.38 percent. Material stocks declined the most, dragging the resource-heavy index lower. The Hong Kong market, which opened after yesterday's public holiday, also ended lower. The Hang Seng Index receded 197.98 points or 0.95 percent before closing at 20,593.

China's Shanghai Composite, which was open for trading for the first time this week, bucked the downtrend and ended 1.74 percent higher. Non-banking financial stocks led the advance, reacting to comments by Premier Wen Jiabao, who called for the break-up of a banking monopoly on lending.

Europe

The European markets are also trading lower, as traders continue to cash in on recent gains amid reduced visibility into the economic outlook. The French CAC 40 Index is receding 0.46 percent compared to a more modest 0.81 percent retreat by the German DAX Index and the 0.31 percent pullback by the U.K.'s FTSE 100 Index.

In economic news, a report released by the U.K. Office for National Statistics showed that the U.K.'s industrial output rose 0.4 percent month-over-month in February. Meanwhile, manufacturing output declined 1 percent compared to expectations for a 0.1 percent increase.

The Bank of England's Monetary Policy Committee opted to keep interest rates as well as the size of its bond buying program unchanged amid the emergence of inflation threat from rising oil prices and belief that a recession may be averted. The reception of a debt auction by France was fairly encouraging after the Spanish scare yesterday.

U.S. Economic Reports

New U.S. claims for unemployment fell to the lowest levels in almost four years, according to figures released by the Labor Department. For the week ending March 31, the level of new claims for unemployment came in at a seasonally adjusted level of 357,000, a decline of 6,000 from the previous week's revised average of 363,000.

And while the previous figure was revised up somewhat from the 359,000 initially reported, this week's numbers come in lower than the 360,000 predicted by most economists. The last time the weekly jobless claims numbers came in this low or lower was in mid-April 2008, according to DOL statistics.

St. Louis Federal Reserve Bank President James Bullard is scheduled to speak to the 13th Annual InvestMidwest Venture Capital Forum, on "The U.S. Economy and Monetary Policy," in St. Louis at 9:10 am ET. He will also take questions from the audience and the press.

Stocks in Focus

Covidien (COV) announced a deal to buy Israel-based Oridion Systems for $23 per share in cash or a total of $300 million, net of cash required. The companies expect the deal to be completed in the second quarter of 2012.

Sanofi-Aventis (SNY) and Regeneron (REGN) said the FDA has granted priority review of the BLA for their investigational metasatic colorectal cancer candidate. The FDA decision date is set for August 4, 2012.

Hovnanian (HOV) announced that it has priced its previously announced offering of 25 million shares of its Class A stock at $2 per share compared to the $2.15 at which it closed on Wednesday. The company said the offering will result in net proceeds of about $47 million for the company.

Bed Bath & Beyond (BBBY) reported fourth quarter earnings of $1.48 per share, up from $1.12 per share last year. Net sales climbed 9.1 percent to $2.732 billion. The company also said it expects first quarter net earnings of 79-83 cents per share and full year earnings per share growth in the high single digit to a low double digit percentage. The fourth quarter results were better than expected, while the first quarter and full year guidance was fairly soft.

American Airlines, a unit of AMR (AMR), reported a March load factor of 82.5 percent, up 2.2 points year-over-year, as traffic rose 1.3 percent despite a 1.4 percent drop in capacity.

American Apparel (APP) announced preliminary first quarter sales of $132.7 million, up 14 percent year-over-over. Sales for March were up 15 percent to $49 million.

A. Schulman (SHLM) reported second quarter adjusted net income of 38 cents per share on sales of $495.9 million. The earnings trailed expectations. For the full year, the company expects non-GAAP net income to exceed the previous year's net income.

AngioDynamics (ANGO) reported a third quarter loss of 7 cents per share compared to earnings of 15 cents per share last year. On an adjusted basis, the net income was 9 cents per share. Net sales fell to $51.6 million from $54.6 million last year. The results were better than expected. For 2012, the company expects non-GAAP earnings of 42-44 cents per share on sales of $216.2 million to $218.2 million. The guidance was also upbeat.

Pier 1 Imports (PIR) reported fourth quarter adjusted earnings of 48 cents per share on sales of $476.76 million. For 2013, the company expects earnings of $1.06-$1.12 per share. The fourth quarter earnings were in line, while revenues exceeded estimates. The company's 2013 guidance suggests that the company will meet or miss estimates.

Dick's Sporting Goods (DKS) announced that it has completed the purchase of the intellectual property rights to the Top-Flite brand from Callaway Gold Co. (ELY).

Ruby Tuesday (RT) reported third quarter adjusted earnings of 18 cents per share, lower than 24 cents per share last year. Total revenues rose to $324.83 million from $319.06 million in the year-ago period. The earnings exceeded estimates, while revenues were below expectations. For 2012, the company expects adjusted earnings of 43-48 cents per share, lower than its earlier estimate of 55-65 cents per share.

Among retailers, Zumiez (ZUMZ) reported March comparable store sales growth of 14.1 percent year-over-year compared to an 8.9 percent increase last year. Costco Wholesale (COST) reported that its comparable store sales rose 6 percent in March. Total sales rose 10 percent to $9.13 billion.

by RTT Staff Writer

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