The major U.S. index futures are pointing to a higher opening on Thursday, with the positive sentiment preserved due to the release of strong tech earnings. A sharp spike in crude oil prices is also supporting the cause. The gains came despite a lackluster debt auction by Spain and a report showing a bigger than expected increase in jobless claims.
The traders now look ahead to a couple of key economic reports that could clarify the economic outlook further. If the Philadelphia Federal Reserve's manufacturing survey and existing home sales data improve more than expected, the markets may sustain the optimism suggested by the index futures.
U.S. stocks advanced for the second day in a row on Wednesday, as tech stocks rallied despite disappointing results released by some companies.
The major averages started on a cautious note after housing starts data came in better than expected. As Federal Reserve Chairman Ben Bernanke's testimony began, the averages began to climb steadily and moved higher until the afternoon. Thereafter, the averages saw some consolidation before closing higher.
The Dow Industrials added 103.16 points or 0.81 percent before closing at 12,909 and the S&P 500 Index closed up 9.11 points or 0.67 percent at 1,373, while the Nasdaq Composite closed at 2,943, up 32.56 points or 1.12 percent.
Twenty-three of the thirty Dow components closed the session higher and one stock ended unchanged, while the remaining six stocks retreated. Cisco Systems (CSCO), IBM (IBM), Intel (INTC), Hewlett-Packard (HPQ), United Technologies (UTX), 3M Co. (MMM) and Microsoft (MSFT) were among the biggest advancers of the session. On the other hand, Bank of America (BAC) tumbled close to 5 percent in reaction to its quarterly results.
Oil service, computer hardware, networking and semiconductor stocks advanced solidly, while financial and gold stocks lost ground.
On the economic front, the Commerce Department reported that housing starts rose to a seasonally adjusted annual rate of 760,000 in June from 711,000 in May, reaching the highest level since October 2008. Single-family and multi-family starts rose from the month-ago levels. Meanwhile, building permits, considered an indicator of future starts, fell to 755,000 from 784,000.
The Beige Book released by the Federal Reserve showed that overall economic activity continued to expand at a modest to moderate pace in June and early July. Most Federal Reserve districts reported an increase in retail sales and largely positive housing market activity. That said, manufacturing was reported as expanding slowly in most districts. Most districts also reported easing pricing pressure. While residential construction remained positive, the commercial real estate market saw a mixed performance.
Currency, Commodity Markets
Crude oil futures are currently adding $1.24 to $91.11 a barrel after rising $0.65 to $89.87 a barrel on Wednesday. The previous session's rally came amid the increase in risk appetite and the release of the weekly inventory report, which showed that crude oil stockpiles edged down by 0.8 million barrels in the week ended July 13th to 377.4 million barrels. Inventories remained above the upper limit of the average range.
Gasoline inventories fell by 1.8 million barrels and were in the lower limit of the average range. Meanwhile, distillate stockpiles rose by 2.6 million barrels, remaining in the lower limit of the average range. Refinery capacity utilization averaged 92.3 percent over the four weeks ended July 13th, flat with the levels in the four weeks ended July 6th.
Gold futures, which fell $18.70 to $1,570.80 an ounce in the previous session, are currently adding $15.70 to $1,586.50 an ounce.
Among currencies, the U.S. dollar is trading at 78.58 yen compared to the 78.80 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2284 compared to yesterday's $1.2283.
The major Asian markets advanced, helped by the positive close on Wall Street overnight. A few promising U.S. tech earnings also aided sentiment.
Japan's Nikkei 225 average hovered above the unchanged line throughout the session before closing up 68.81 points or 0.79 percent at 8,796. Exports stocks rallied, while pharma, utility, paper, telecom and construction stocks moved to the downside.
Yaskawa Electric rallied 8.38 percent and Dainippon Screen Manufacturing, Advantest, Showa Denko and Nippon Soda rose about 6 percent or more.
Australia's All Ordinaries was up 80 points or 1.92 percent at the close of trading. Energy stocks rose notably, while material and consumer staple stocks also found strong buying interest.
The Hang Seng Index added 319.17 points or 1.66 percent before closing at 19,559.
Final estimates released by Japan's Cabinet Office showed that its leading economic indicators index fell 0.4 points to 95.2 in May, in contrast to the preliminary reading, which showed an improvement in the index to 95.9.
A survey by National Australia Bank showed that its business confidence index declined to -2 in the June quarter from -1 in the March quarter.
The major European markets are trading higher despite the lackluster Spanish debt auction. Spain auctioned 2.96 billion euros worth of debt at dearer terms, while demand for the debt also waned. Meanwhile, France, a core eurozone nation, was able to raise 8.95 billion euro worth of debt at benign costs.
A report released by the U.K. Office for National Statistics showed a 1.6 percent increase in retail sales, slower than the 2.3 percent increase expected by economists.
Dutch paint manufacturer Akzo Nobel reported second quarter adjusted earnings that were higher than a year-ago. Swiss drugmaker Novartis (NVS) reported a nearly flat second quarter profit. However, the results were better than expected, as lower costs and higher sales of new drugs helped it to neutralize the weakness stemming from patent expirations and lower generic sales. Swedish white goods manufacturer Electrolux also reported strong results.
U.S. Economic Reports
After reporting a notable drop in first time claims for U.S. unemployment benefits last week, the Labor Department released a report on showing that initial jobless claims rebounded by more than anticipated in the week ended July 14th.
The Labor Department said jobless claims jumped to 386,000 from the previous week's revised figure of 352,000. Economists had expected jobless claims to climb to 365,000 from the 350,000 originally reported for the previous week. With the increase, jobless claims bounced off the four-year low set in the previous week, which was partly due to seasonal distortions.
The National Association of Realtors is scheduled to release its report on existing home sales for June at 10 am ET. Economists estimate existing home sales of 4.65 million for the month.
In May, existing home sales fell 1.5 percent month-over-month to a seasonally adjusted annual rate of 4.55 million units. Single-family home sales declined 1 percent, while condominiums and co-ops sales fell 5.7 percent. Inventories as measured by the months of supply rose to 6.6 months from 6.5 months in April. The median price of an existing home rose 7.9 percent year-over-year and was 5.1 percent higher compared to the previous month. First time buyers accounted for 34 percent of the total.
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 -8 for July.
The manufacturing index fell to -16.6 from -5.8 in May. The new orders index declined 17.6 points to -18.8 and the order backlogs index moved down by 6.9 points to -16.3. The employment indexes were mixed, with the number of employees index rising 3.1 points to 1.8, while the average workweek index declined to -19.1 from -5.4. The inventories index slumped 13.2 points to -8.7. However, the 6-month outlook index rose 4.5 points to 19.5.
The Conference Board is scheduled to release a report on the U.S. leading economic indicators index for June at 10 am ET. The consensus estimate calls for a 0.1 percent drop by the index.
In May, the leading economic indicators index rose 0.3 percent month-over-month following a 0.1 percent drop in April. The coincident index was up 0.2 percent compared to a 0.3 percent increase in the lagging economic index.
Stocks in Focus
eBay (EBAY) reported second quarter non-GAAP earnings of 56 cents per share on revenues of $3.4 billion, up 23 percent. The results were ahead of estimates. The company expects full year non-GAAP earnings of $2.30-$2.35 per share on revenues of $13.8 billion to $14.10 billion.
Verizon (VZ) reported second quarter earnings that increased from the year-ago quarter, while its earnings per share matched Wall Street view. The company said it remains on track to meet its financial objectives and produce solid double-digit earnings growth for the year.
Morgan Stanley (MS) is falling 5 percent to $13.29. The company swung to a profit in its second quarter, but earnings per share were below Wall Street view. Consolidated net revenues declined 24 percent from the prior year period.
IBM (IBM) said its second quarter non-GAAP earnings rose 14 percent to $3.34 per share, while revenues were down 3 percent at $25.8 billion. The earnings beat estimates, while the revenues were below estimates. The company raised its 2012 non-GAAP earnings guidance to at least $15.10 per share from at least $15 per share.
Qualcomm's (QCOM) second quarter results were below estimates and its third quarter and full year outlook was weak.
American Express (AXP) reported second quarter income from continuing operations of $1.15 per share, up from $1.07 percent in the year-ago period. Revenues, net of interest expense, rose 5 percent to $7.97 billion. The earnings exceeded estimates, while the revenues were below expectations.
Xilinx (XLNX) reported first quarter earnings of 47 cents per share on a 5 percent decline in revenues to $582.8 million. The company expects a 4-8 percent sequential drop in second quarter sales. The results exceeded estimates, while the guidance was below expectations.
Yum Brands (YUM) said its second quarter adjusted earnings rose 1 percent to 67 cents per share, while revenues rose 12 percent year-over-year to $3.17 billion. The earnings trailed estimates, while the revenues were ahead of estimates.
J.M. Smucker (SJM) said its board has approved an 8 percent increase in its dividend to 52 cents per share from 48 cents per share.
Sallie Mae (SLM) reported second quarter core earnings of 49 cents per share, up from 48 cents per share last year. The earnings missed expectations by a penny. The company raised its core earnings per share guidance for the year but the forecast remains below
East West Bancorp. (EWBC) reported second quarter earnings of 47 cents per share, up from 45 cents per share last year and also ahead of the consensus estimate of 46 cents per share.
Capital One (COF) reported that its second quarter net income plunged to 16 cents per share from $1.97 per share last year. However, revenues improved year-over-year and also were about in line with estimates.
Skyworks (SWKS) reported third quarter non-GAAP earnings of 45 cents per share on revenues of $389 million. The results exceeded estimates. For the fourth quarter, the company expects non-GAAP earnings of 50-51 cents per share on revenues of $415 million to $420 million. The guidance surrounds the consensus estimate.
Noble Corp. (NE) reported second quarter earnings of 63 cents per share compared to 21 cents per share last year. Operating revenues rose 43 percent to $898.92 million. The results exceeded estimates.
AMD (AMD), Chipotle Mexican Grill (CMG), City National (CYN), Compuware (CPWR), Freescale Semiconductor (FSL), Google (GOOG), Intuitive Surgical (ISRG), Lattice Semiconductor (LSCC), Microsoft (MSFT), Rambus (RMBS), SanDisk (SNDK) and Swift Transportation (SWFT) are among the companies due to report their quarterly results after the markets close.
by RTT Staff Writer
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