The major U.S. index futures are pointing to a higher opening on Friday, with sentiment receiving a small lift after a WSJ report revealed that the Obama administration is in advanced talks on a plan to substitute the spending cuts that are to be implemented early next year. That said, uncertainty over fructification of such a plan could leave traders nervous. Highlighting the impact the economic travails are having on corporate profits, PC maker Dell (DELL) reported lackluster earnings and issued weak guidance. The markets may also turn to the industrial production report due to be released in a little while from now for trading cues.
U.S. stocks turned in another lackluster performance on Thursday, ending the session modestly lower, as lukewarm economic data both from the U.S. and Europe weighed on sentiment.
The major averages opened little changed after separate reports showed that jobless claims spiked and New York region's manufacturing activity continued to contract. Thereafter, the averages moved back and forth across the unchanged line in a directionless manner before closing modestly lower.
The Dow Industrials ended down 28.57 points or 0.23 percent at 12,542 and the S&P 500 Index closed 2.16 points or 0.16 percent lower at 1,353, while the Nasdaq Composite lost 9.87 points or 0.35 percent before closing at 2,837.
Sixteen of the thirty Dow components closed lower and one stock ended unchanged, while the remaining thirteen stocks advanced. Wal-Mart (WMT) led the retreat with a 3.63 percent drop following the release of its third quarter results. Alcoa (AA), Chevron (CVX), AT&T (T) and Verizon (VZ) also declined notably. On the other hand, Coca-Cola (KO), Cisco Systems (CSCO) and Bank of America (BAC) posted solid gains.
Biotechnology, resource, housing and semiconductor stocks were among the biggest decliners of the session.
On the economic front, driven by the one-off impact of hurricane Sandy, weekly jobless claims surged up 78,000 to a 1-1/2 year high of 439,000 in the week ended November 10th. Claims in the hurricane hit states of New Jersey and Connecticut rose sharply. Continuing claims calculated with a week's lag rose by 171,000, also due to hurricane impact.
Among the results of the two regional manufacturing surveys released yesterday, the New York Federal Reserve's survey showed a modest let up in the pace of contraction. The business conditions index improved to -5.2 in November from -6.2 in October. The employment index slumped 14 points to -14.6, the lowest level since July 2009 and the average workweek index dipped 3.5 points to -7.9. On the other hand, the new orders index rose to 3.1 in November from -9 in October. Although the order backlogs index rose by 7 points, it remained in negative territory.
The Philadelphia Fed's survey showed that its manufacturing index fell to -10.7 in November from 5.7 in October. The new orders index declined to -4.6 from -0.6 in October and the order backlogs index, although improving by about 2 points, came in at -4.6. The employment index was at -6.8 compared to October's -10.7 and the average workweek index rose 1.4 points to -6.2. The 6-month outlook index slipped 1.6 points to 20.
Meanwhile, U.S. consumer prices edged up 0.1 percent month-over-month in October, raising the annual rate to 2.2 percent. Excluding food and energy, core consumer prices rose 0.2 percent. The annual rate of core consumer price inflation was 2 percent.
Currency, Commodity Markets
Crude oil futures are advancing $0.94 to $86.81 a barrel after declining $0.87 to $85.45 a barrel on Thursday. The previous session's decline came amid the risk aversion and the release of the weekly inventory report, which showed that crude oil stockpiles rose by 1.1 million barrels to 375.9 million barrels in the week ended November 9th. Inventories remained well above the upper limit of the average range for this time of this year.
Meanwhile, gasoline inventories edged down by 0.4 million barrels and were in the middle of the average range. Distillate stockpiles also fell by 2.5 million barrels, dropping well below the lower limit of the average range. Refinery capacity utilization averaged 86.6 percent over the four weeks ended November 9th compared to 86.9 percent over the four weeks ended November 2nd.
Gold futures are currently slipping $1.70 to $1,712.10 an ounce. In the previous session, the precious metal declined $16.30 to $1713.80 an ounce.
Among currencies, the U.S. dollar is trading at 81.14 yen compared to the 81.18 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2741 compared to yesterday's $1.2782.
The major Asian markets closed on a mixed note, with the Japanese, Hong Kong, Indian, Indonesian and Singaporean markets closing higher, while the Australian, Chinese, Malaysian, New Zealand, South Korean and Taiwanese markets ended in negative territory. Even as the lackluster lead from Wall Street overnight weighed on the averages, the markets received some cheer from the risk appetite following some political developments in Japan.
Japanese Prime Minister Yoshihiko Noda dissolved the lower house of the Parliament in a bid to conduct snap polls as early as next month. The move is expected to pave the way for the election of the opposition LDP party to power. The party's nominee and former Prime Minister Shinzo Abe has been vociferously calling for more easing moves to tackle the deflationary environment faced by the nation.
Propelled higher by the yen's weakness, Japan's Nikkei 225 average opened higher and saw further upside over the course of the session. The index ended up 194.44 points or 2.20 percent at 9,024. The market saw broad based strength, with the exception of some defensive stocks.
After seeing some volatility in early trading, Australia's All Ordinaries move decisively into negative territory in late morning trading. Thereafter, the index languished below the unchanged line before closing down 10.50 points or 0.24 percent at 4,360. Material, financial and energy stocks served as a drag on the index.
Hong Kong's Hang Seng closed at 21,159, up 50.08 points or 0.24 percent.
European stocks are retreating for the third straight session, succumbing to the domestic economy's travails and overseas risks.
In corporate news, the London Stock Exchange reported first half profits that were flat with the year-ago period, as capital market revenues remained weak. German chemicals firm Henkel reported third quarter EBIT of 639 million euros on sales of 4.29 billion euros. In its strategy update, the company said it is looking to boost investment in emerging markets to achieve sales of 20 billion euros by 2016.
U.S. Economic Reports
The Treasury is set to release its monthly report on the flows of financial instruments into and out of the U.S. at 9 am ET. Erroneous
The Federal Reserve's industrial production report is due out at 9:15 am ET. Economists estimate a 0.2 percent increase in the industrial production performance for October, while manufacturing output is estimated to have increased by 0.3 percent. Capacity utilization may edged up by 0.1 points at 79.4 percent.
In September, industrial production increased by 0.4 percent after tumbling by a revised 1.4 percent in August. The rebounded exceeded economist estimates for a 0.2 percent increase. The rebound by industrial production was partly due to a 1.5 percent jump in utilities output in September, which came after a 4.3 percent drop in August.
Atlanta Federal Reserve Bank President Dennis Lockhart is scheduled to speak at the 5th Annual University of Virginia Investing Conference, in Charlottesville, Virginia at 4:20 pm ET.
Stocks in Focus
Dell (DELL) reported third quarter non-GAAP earnings of 39 cents per share compared to 54 cents per share last year. Revenues fell 11 percent to $13.72 billion. The company said it expects 2-5 percent sequential revenue growth, while it expects at least $1.70 per share in earnings on a non-GAAP basis for the full year. The results and the guidance were weak.
Autodesk (ADSK) said its third quarter non-GAAP earnings rose to 47 cents per share from 44 cents per share last year. Revenues were nearly flat at $548 million. The earnings exceeded estimates, while the revenues trailed expectations. For the full year, the company expects non-GAAP earnings of $1.84-$1.92 per share on revenues of $2.28 billion to $2.31 billion. The guidance was lackluster.
Gap (GPS) reported third quarter earnings that came in line with estimates. Revenues were slightly ahead of estimates. The company raised its 2012 earnings per share guidance, which however was below the consensus estimate.
Intuit (INTU) reported a first quarter non-GAAP loss of 3 cents per share on revenues of $647 million, with revenues exceeding estimates. The company reiterated its full year guidance, which calls for non-GAAP earnings of $3.32-$3.38 per share on revenues of $4.55 billion to $4.65 billion. The guidance was fairly positive.
Marvell Technology (MRVL) reported third quarter non-GAAP earnings of 20 cents per share on revenues of $781 million. The earnings were in line, while the revenues beat estimates.
Aruba Networks (ARUN) reported first quarter non-GAAP earnings of 18 cents per share compared to 14 cents per share last year. Revenues rose 21 percent to $144.5 million. The results exceeded estimates.
SINA (SINA) reported third quarter non-GAAP net income of 17 cents per share on revenues of $147.7 million. For the fourth quarter, the company expects non-GAAP revenues of $132 million to $136 million. The results exceeded estimates, while the revenue guidance was below estimates.
Sears Holdings (SHLD) reported a third quarter adjusted loss per share from continuing operations of $1.99 compared to $2.55 in the year-ago period. Revenues declined to $548 million.
Knight Transportation (KNX) said its board has approved a special dividend of 50 cents per share.
Starbucks (SBUX) announced that its board has authorized a buyback of up to 25 million of its common shares.
Reckitt Benckiser announced that it will commence a tender offer on November 16th to acquire all outstanding shares of Schiff Nutrition (SHF) for $42 per share in cash, valuing the latter at $1.4 billion. The transaction was announced on October 30th.
Nike (NKE) announced a two-for-one split for both its Class A and Class B common shares. The stock split will be implemented in the form of a 100 percent stock dividend payable on December 24, 2012 to shareholders of record as on December 10th, 2012. The company also announced a 17 percent increase in its quarterly dividend. Neenah Paper (NP) announced a 25 percent increase in its quarterly dividend.
by RTT Staff Writer
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