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Rebound Likely As Oversold Markets Look Ahead To Facebook Listing

5/18/2012 9:06 AM ET

The major U.S. index futures are pointing to a higher opening on Friday, with sentiment receiving a lift from the frenzy over Facebook's listing. The positive sentiment generated by the biggest ever tech IPO should encourage traders to pick up bargains in oversold markets. Meanwhile, fundamental concerns about the eurozone linger and therefore, a sustainable uptick is unlikely.

U.S. stocks extended their declines on Thursday, as disappointing economic data and underlying concerns about Greece that got aggravated following a Fitch downgrade of Greece generated considerable selling pressure in the markets.

The major averages opened little changed but fell in early trading, unimpressed by the jobless claims report. Stocks dipped further following the release of a regional manufacturing report, which showed an unexpected contraction by the manufacturing sector. The averages legged down further in the afternoon, unnerved by the Fitch action, ending notably lower.

The Dow Industrials ended down 156.06 points or 1.24 percent at 12,443 and the S&P 500 Index closed at 1,305, down 19.94 points or 1.51 percent, Meanwhile, the Nasdaq Composite Index fell 60.35 points or 2.10 percent before closing at 2,814.

Since topping out around 13,260 in early April, the Dow have been in a down trend. The recent 5-session slide has brought the Dow Industrials below a key support around 12,460. The 14-day relative strength index is currently at around 9, suggesting oversold levels and allowing scope for a bargain hunting-induced rebound. That said, fundamental issues in hand are too large to ignore. On the downside, support lies around 12,320 and 12,060.

Twenty-four of the thirty Dow components closed lower, with Caterpillar (CAT) (down 4.42 percent), American Express (AXP) (down 3.03 percent), Boeing Co. (BA) (down 3.62 percent), Home Depot (HD) (down 3.59 percent) and JP Morgan Chase (JPM) (down 4.31 percent) among the worst decliners of the session. On the other hand, Wal-Mart (WMT) and Verizon (VZ) rose 4.21 percent and 1.20 percent, respectively.

Among the major sectors, basic resource, transportation, biotechnology, retail, housing, financial and semiconductor stocks were among the worst performers.

On the economic front, the Labor Department reported that jobless claims came in at 370,000 in the week ended May 12th, unchanged from the previous week's upwardly revised reading. At the same time, the 4-week average declined 5,000 to 375,000, while continuing claims for the week ended May 5th rose by 18,000.

The results of the Philadelphia Federal Reserve's manufacturing survey suggested a contraction by manufacturing sector in the region. The manufacturing index based on the survey came in at -5.8 in May from 8.5 in April. The new orders and unfilled orders indexes slipped into negative territory to -1.2 and -9.4, respectively, while the shipments index rose 1.7 points to 3.5. The employment indexes also worsened.

The Conference Board's report showed that the U.S. leading economic indicators index fell 0.1 percent month-over-month in April, marking the first drop since September. Meanwhile, the lagging and coincident indicators indexes rose 0.5 percent and 0.2 percent, respectively.

Facebook Debuting at Trying Times

Social networking site Facebook will begin trading on the Nasdaq under the ticker symbol 'FB' starting today. The company's IPO has been priced at $38 per share, at the upper end of the estimated pricing of $34-$38 per share and the sale proceeds are estimated at $16 billion, trumping Google's (GOOG) $1.67 billion offering in 2004. It remains to be seen if Facebook's listing can bring traders back to the markets.

Currency, Commodity Markets

Crude oil futures are slipping $0.01 to $92.55 a barrel after edging down $0.25 to $92.56 a barrel on Thursday. Gold futures are currently trading up $13.10 to $1,588 an ounce. In the previous session, the precious metal rose $38.30 to $1,574.90 an ounce.

On the currency front, the U.S. dollar is trading at 79.29 yen compared to the 79.28 yen it fetched at the close of New York trading on Thursday. The euro is is now trading at $1.2712 compared to yesterday's $1.2698.

Asia

The major Asian markets tumbled, as Greek worries and eurozone debt concerns intensified after Fitch downgraded its rating on Greece to 'CCC' from 'B-'and Moody's downgraded 16 Spanish banks, citing the reduced ability of the government to provide support. Additionally, weak U.S. data from overnight also dampened spirit.

Japan's Nikkei 225 average closed 265.28 points or 2.99 percent lower at 8,611, representing a 4-month low. Australia's All Ordinaries ended down 109.70 points or 2.61 percent at 4,099, the lowest level since early October 2011. Hong Kong's Hang Seng Index slid 249.08 points or 1.30 percent before closing at 18,952.

Europe

The major European markets have turned mixed after a negative start, with the French CAC 40 Index and the German DAX Index trading modestly higher, while the U.K.'s FTSE 100 Index is down over moderately.

Stocks in Focus

Marvell Technology (MRVL) reported first quarter non-GAAP net income of 23 cents per share compared with 29 cents per share last year, while revenues declining slightly to $796 million. The results exceeded estimates. Separately, the company announced the initiation of a quarterly dividend and an increase in its share repurchase authorization by $500 million.

Brocade (BRCD) reported second quarter non-GAAP earnings of 15 cents per share on revenues of $543.4 million. The results topped expectations.

Autodesk (ADSK) said its first quarter non-GAAP earnings per share rose to 47 cents per share from the year-ago quarter's 40 cents per share, while revenues rose 11 percent to $589 million. The earnings met estimates, while the revenues were above expectations. The company expects second quarter non-GAAP earnings of 46-51 cents per share on revenues of $580 million to $600 million. The guidance was downbeat. The company also said it expects its full year net revenue to increase at least by 10 percent.

Intuit (INTU) reported third quarter non-GAAP earnings of $2.51 per share, up from $2.33 per share last year. Revenues rose 5 percent to $1.95 billion. The company's earnings beat estimates, while revenues were about in line with estimates. For the full year, the company expects non-GAAP earnings of $2.92-$2.97 per share on revenues of $4.21 billion to $4.22 billion. The company guided fourth quarter non-GAAP earnings of 5-7 cents per share on revenues of $647 million to $662 million. The guidance surrounded the consensus estimates.

Salesforce.com (CRM) reported first quarter non-GAAP earnings of 37 cents per share on revenues of $695 million. For the second quarter, the company expects non-GAAP earnings of 38-39 cents per share on revenues of $724 million to $728 million. Additionally, the company expects full year non-GAAP earnings of $1.60-$1.63 per share on revenues of $2.97 billion to $3 billion. The results were better than expected and the guidance was also upbeat.

ViaSat (VSAT) reported a fourth quarter non-GAAP loss of 1 cent per share compared to earnings of 41 cents per share last year. Revenues climbed to $240.5 million from the year-ago quarter's $216.4 million. The earnings trailed expectations, while the revenues were above estimates.

Among retailers, Gap (GPS) reported better than expected first quarter results. The company raised its 2012 earnings per share guidance, but the forecast is still below the consensus estimate. Pacific Sunwear (PSUN) reported a narrower than expected adjusted loss for its first quarter on revenues that exceeded expectations. The company also forecasts a narrower than expected loss for its second quarter.

Hot Topic (HOTT) reported first quarter earnings that beat estimates, while its revenues were about in line with expectations.

JDA Software (JDAS) said it received a Nasdaq letter for non-compliance with listing standards, which mandates timely filing of financial reports. The company now has to submit an updated plan of compliance by May 30th, 2012.

Boston Scientific (BSX) announced that the U.S. FDA approved its vascular self-expanding stent system.

ResMed (RMD) said it plans to initiate a quarterly dividend of 17 cents per share in the first quarter of 2013. The company also said its present CEO Peter Farrell will remain as CEO until the end of calendar year 2013, while it expects to complete the evaluation of potential internal and external candidates for the CEO post by the end of 2013.

by RTT Staff Writer

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