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Fiscal Cliff Worries Continue To Overshadow Data

The major U.S. index futures are pointing to a mixed opening on Friday, with sentiment still jittery despite signals of economic recovery firming up in several clout-wielding economies. China reported further strengthening of manufacturing activity, while the pace of contraction of activity in the eurozone slowed. Although these signs are encouraging, the fiscal cliff is too grave a threat to ignore. This is reflected in the sentiment of traders, which has been vacillating depending on the developments on the fiscal cliff front. The industrial production report due before the markets open may also impact market mood.

U.S. stocks retreated on Thursday, as fiscal cliff fears intensified due to indecision among lawmakers. The release of some mixed economic data did not make it easy for the markets either.

The major averages opened on a nervous note and moved in an uneasy manner until late morning trading. Thereafter, the averages declined steadily until late trading before paring back some of their losses. The Dow Industrials ended down 74.73 points or 0.56 percent at 13,171 and the S&P 500 Index closed 9.03 points or 0.63 percent lower at 1,420, while the Nasdaq Composite Index ended at 2,992, down 21.65 points or 0.72 percent.

Twenty-five of the thirty Dow components closed lower, with Boeing (BA), Disney (DIS), UnitedHealth (UNH) and Exxon Mobil (XOM) leading the slide.

Biotechnology, oil service, gold and semiconductor were among the worst performing sectors of the session.

On the economic front, the Commerce Department reported that retail sales rose 0.3 percent month-over-month. Excluding autos, retail sales remained unchanged. Excluding a 4 percent drop in gasoline sales, retail sales were up 0.8 percent. The core reading that strips autos, gasoline and building materials, rose a better than expected 0.5 percent. Auto sales were up 1.4 percent and sales at building materials and garden equipment stores rose 1.6 percent. Clothing and sporting goods sales also improved.

Meanwhile, initial claims for unemployment benefits came in at 343,000 in the week ended December 8th compared to 372,000 in the previous week. The 4-week moving average fell to 381,500. Continuing claims calculated with a week's lag fell 23,000 to 3.2 million in the week ended December 1st.

The producer price inflation report showed a bigger than expected 0.8 percent drop in producer prices, which dragged the annual producer price inflation rate down to 1.5 percent compared to 2.3 percent in October. Energy prices declined 4.6 percent, while food prices rose 1.3 percent. Core producer prices rose a tame 0.1 percent compared to the previous month.

Business inventories rose 0.4 percent month-over-month in October, according to a report released by the Commerce Department. However, business sales fell by 0.4 percent. Therefore, the business inventories to sales ratio rose to 1.29 in October from 1.26 in the year-ago period.

Currency, Commodity Markets

Crude oil futures are climbing $0.43 to $86.32 a barrel after declining $0.88 to $85.89 a barrel on Thursday. Gold futures are currently edging down $0.10 to $1,696.70 an ounce. In the previous session, gold retreated $21.10 to $1,696.80 an ounce.

Among currencies, the U.S. dollar is trading at 83.54 yen compared to the 83.65 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3075 compared to yesterday's $1.3077.

Asia

The Asian markets closed on a mixed note, as the negative close on Wall Street and weak business sentiment data from Japan led to subdued trading in the region. The Japanese, Indonesian, Malaysian, South Korean and Taiwanese markets closed lower, while the rest of the major markets ended in positive territory.

After trading below the unchanged line in the morning, Japan's Nikkei 225 average recovered in the afternoon only to give up its gains in late trading and close down 5.17 points or 0.05 percent at 9,738.

Despite showing a degree of volatility, Australia's All Ordinaries hovered in positive territory for much of the session, closing up 2.20 points or 0.05 percent at 4,595. Material and financial stocks saw some strength, while, energy and healthcare stocks moved to the downside.

Hong Kong's Hang Seng Index closed at 22,606, up 160.40 points or 0.71 percent.

The results of the quarterly Tankan survey by the Bank of Japan showed that business sentiment among large manufacturers waned notably in the fourth quarter. The index measuring business sentiment among large manufacturers fell to -12 in the fourth quarter compared to -3 in the third quarter. Economists had expected a reading of -10.

Chinese manufacturing activity picked up in December, according to the results of a survey by Markit Economics. The manufacturing purchasing managers' index based on the survey rose to a 14 month high of 50.9 in December.

Europe

European stocks are trading on a mixed note after seeing lackluster sentiment in the previous session.

A Markit report showed that the private sector activity in the eurozone contracted at a slower rate in December. Preliminary estimates for the composite purchasing managers' index came in at 47.3 compared to 46.5 in November.

Flash estimates for the manufacturing index rose 1.1 points to 47.8, while the index for the service sector edged up 0.1 point to 46.3

U.S. Economic Reports

Consumer prices in the U.S. fell by a little more than expected in the month of November, according to a report released by the Labor Department, with the decrease in prices largely due to a sharp drop in energy prices.

The Labor Department said its consumer price index fell by 0.3 percent in November following a 0.1 percent increase in October. Economists had been expecting prices to edge down by 0.2 percent. Excluding the steep drop in energy prices as well as a modest increase in food prices, the core consumer price index inched up 0.1 percent in November after rising by 0.2 percent in October. Core prices had been expected to increase by 0.2 percent.

The Federal Reserve's industrial production report is due out at 9:15 am ET. Economists expected a 0.3 percent increase in industrial production in November, while manufacturing output is estimated to have increased by 0.4 percent. Capacity utilization is forecast to edge up to 78 percent.

In October, industrial production fell 0.4 percent month-over-month, with a 1.5 percent increase in mining output partly offsetting a 0.9 percent drop in manufacturing output and a 0.1 percent decrease in utilities output. Capacity utilization fell 0.4 percentage points to 77.8.

Stocks in Focus

Adobe Systems (ADBE) reported fourth quarter non-GAAP earnings of 61 cents per share, lower than 67 cents per share last year. Revenues fell to $852.84 million from $931.90 million last year. The results were ahead of estimates, while the guidance was soft.

Nordson (NDSN) reported fourth quarter non-GAAP earnings of $1.07 per share, higher than 86 cents per share last year. Net sales rose to $438.68 million from $331.02 million in the year-ago period. The results exceeded estimates. For the first quarter, the company expects earnings of 63-70 cents per share on sales of $343 million to $354 million.

Quiksilver (ZQK) reported fourth quarter pro forma earnings of 7 cents per share compared to 5 cents per share last year. Net revenues rose 12 percent to $279 million. The results trailed estimates.

PPG (PPG) said it has agreed to buy Akzo Nobel's North American architectural coatings business for $1.05 billion. Separately, the company announced a 31 percent increase in its quarterly dividend to 47 cents per share and an additional share repurchase authorization in the amount of $2 billion. The deal is expected to close early in the second quarter of 2013. The unit to be bought by PPG had revenues of $1.5 billion in 2011.

Amgen (AMGN) announced the appointment of its CEO Robert Bradway as the Chairman of the board, effective January 1st, 2013. Nasdaq OMX (NDAQ) said it has appointed interim Chairman Borje Ekholm to the position permanently.

Progress Energy (PRGS) announced the decision of its CFO Melissa Cruz to retire in 2013 for personal reasons. The company also said it is initiating a search process.

by RTT Staff Writer

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