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Wall Street Back To Being Defensive After Chinese Inflation Data


Wall Street has settled back to being defensive in the wake of more data from China, as signaled by the U.S. index futures, which point to a nearly flat open. Earlier in the day, China released faster than expected annual consumer price inflation data that rendered the mood of the region cautious. Nevertheless, Japan relished additional stimulus measures benevolently bestowed by the newly elected government. The markets may also look ahead to a domestic trade balance report and earnings from Wells Fargo (WFC), which incidentally is the first major bank earnings of the reporting season.

As of 6:30 pm ET, the Dow futures are slipping 7 points and the S&P 500 futures are moving down 0.60 points, while the Nasdaq 100 futures are up 0.75 points.

U.S. stocks rose for the second straight session, as economic confidence increased following the release of strong Chinese export data.

On the economic front, the Commerce Department is set to release its trade balance report for November at 8:30 am ET. Economists expect the trade deficit to narrow to $41.1 billion from $42.2 billion in the previous month.

Around the same time, the Labor Department will release its report on import and export prices for December. The export prices are expected to have edged down 0.1 percent compared to the previous month, while export prices may have inch=d up 0.1 percent.

Philadelphia Federal Reserve Bank President Charles Plosser is due to speak on the economic outlook at New Jersey Economic Leadership Forum in Somerset, New Jersey at 9:30 am ET.

The Treasury is scheduled to release its Treasury monthly budget for December at 2 pm ET. The report is expected to show that the budgetary balance reversed to a deficit of $20 billion in December compared to a surplus of $172.1 billion in November.

On the stocks front, PC makers may be in the spotlight after IDC reported that worldwide PC shipments fell 6.4 percent year-over-year to 89.8 million units in the fourth quarter. Despite seeing a 0.6 percent drop in shipments, HP saw its market share go up 0.9 percentage points to 16.7 percent in the quarter.

Chevron (CVX) said in its interim update that it expects fourth quarter earnings to be notably higher than in the third quarter. JDSU (JDU) confirmed the appointment of its acting CFO Rex Jackson as its CFO on a permanent basis.

Pacific Sunwear (PSUN) reported fourth quarter same store sales through January 6th rose 1 percent on a continuing operations basis. The company also said it expects gross margins of 21-22 percent, which represents a 200-300 basis point improvement over the year-ago period, although it is down from its earlier guidance of 22-25 percent. The company also lowered its bottom line expectations to the lower end of its earlier guidance for a loss of 9-17 cents per share compared to the consensus estimate for a loss of 11 cents per share.

The Asian markets closed on a mixed note, with the Japanese, New Zealand and Taiwanese markets closing higher, while the remaining markets experienced weakness. Even as stimulus announcement boosted the Japanese market, a report showing acceleration in Chinese inflation snuffed out Chinese stimulus hopes and introduced caution among Asian investors.

Japan's Nikkei 225 closed up 148.93 points or 1.40 percent at 10,802. Export stocks rallied, as the yen continued its downtrend but bank, telecom, realty and utility stocks came under selling pressure.

Australia's All Ordinaries closed down 11.40 points or 0.24 percent at 4,734. Material, energy, healthcare and utility stocks came under selling pressure, while consumer staple stocks gained ground.

Hong Kong's Hang Seng Index closed at 23,264, down 90.24 points or 0.39 percent. The Chinese market slipped on stronger than expected inflation data. The Shanghai Composite Index ended 40.66 points or 1.78 percent lower at 23,264. In India, weak trade data offset better than expected results reported by Infosys (INFY). The company reported better than expected December quarter earnings and also raised its revenue forecast for the full year ending March 31st.

On the economic front, the Chinese National Bureau of Statistics reported that China's annual inflation quickened to 2.5 percent in December from 2 percent in November, with the increase primarily stemming from an increase in food prices. Economists expected a more modest annual inflation rate of 2.3 percent.

Japan reported a current account deficit of 222.4 billion yen in November, according to a report released by Japan's Ministry of Finance.

After opening higher, European stocks gave back their gains in early trading and are currently trading mixed. Moody's cut its rating on Cyprus by three notches to Caa3 from B3, citing the additional governmental support the nation's banks would be needing.

A report released by the U.K. Office for National Statistics showed that U.K. industrial output rose 0.3 percent month-over-month compared to the 0.8 percent increase expected by economists. Manufacturing output unexpectedly fell 0.3 percent.

by RTTNews Staff Writer

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