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Lukewarm Data May Add To Economic Anxieties

1/15/2013 9:18 AM ET

The major U.S. index futures are pointing to a lower opening on Tuesday, with weakness stemming from a report that revealed that manufacturing in the New York region contracted for the sixth straight month. Retail sales rose slightly more than expected, with the upside coming primarily from auto sales. The insipid data points are likely to accentuate anxiety concerning the economy, especially as it has to navigate through trying times fraught with concerns over the debt ceiling and the fiscal situation. The unfolding reporting season could also keep investment mood cautious.

U.S. stocks traded in a lackluster manner like a rudderless ship striving to find direction on Monday amid a lack of any market moving catalysts. After opening on an insipid note, the Nasdaq Composite and the S&P 500 Index languished below the unchanged line for much of the session before closing lower. Meanwhile, the Dow Industrials recovered by the mid-session and hovered mostly above the unchanged line before closing up 18.89 points or 0.14 percent at 13,507.

Meanwhile, the S&P 500 Index closed down 1.37 points or 0.09 percent at 1,471, while the Nasdaq Composite closed at 3,118, down 8.14 points or 0.26 percent.

Sixteen of the thirty Dow components closed higher, while the remaining fourteen stocks ended in negative territory. Hewlett-Packard (HPQ), Cisco Systems (CSCO), Boeing (BA), Chevron (CVX) and UnitedHealth (UNH) were among the biggest gainers of the session. On the other hand, Bank of America (BAC), Verizon (VZ) and IBM (IBM) declined sharply.

Biotechnology, networking and computer hardware stocks gained ground in the session, while oil service stocks came under selling pressure.

Currency, Commodity Markets

Crude oil futures are receding $0.48 to $93.66 a barrel after rising $0.58 to $94.14 a barrel on Monday. Gold futures are currently adding $11 to $1,680.40 an ounce. In the previous session, the precious metal moved up $8.80 to $1,669.40 an ounce.

On the currency front, the U.S. dollar is trading at 88.78 yen compared to the 89.48 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.3344 compared to yesterday's $1.3382.

Asia

The major Asian markets closed on a mixed note, with the Japanese, Chinese, Indonesian, Indian, Malaysian and New Zealand markets advancing, while the Australian, Hong Kong, Taiwanese, South Korean and Singaporean markets ended lower. Sentiment remained muted as traders in the region stared at the uncertainty wrought by the U.S. debt ceiling and remained apprehensive about the U.S. bank earnings and first tier economic data due for the week.

Japan's Nikkei 225 average opened higher and moved sideways in the morning before trimming some of its gains and closing up 77.51 points or 0.72 percent at a 32- month high of 10,879.

The yen remained depressed after Bank of Japan governor Masaaki Shirakawa commented that the nation's economy remains weak and the central bank will continue to pursue massive monetary policy easing. Meanwhile, Japanese Economic Minister Akira Amari talked down the yen by suggesting that the nation faces risks from any excessive declines in the yen.

Export stocks were higher once again, while chemical and construction stocks moved to the downside. Olympus rose 7.67 percent and led the index's advance, while JTEXT, Mitsubishi Heavy, Daikin Industries, Kawaski Kisen Kaisha, Casio Computer, Ricoh, Daiwa House Industry, Taiyo Yuden, NTN and NEC also posted notable gains.

Australia's All Ordinaries ignored a nervous open and rose in early trading and remained above the unchanged line late afternoon trading. Thereafter, the index pulled back sharply and moved sideways in the last hour of trading. The index closed 2.70 points or 0.06 percent lower at 4,743. Material, industrial and telecom stocks led the declines, while energy and healthcare stocks saw some strength.

Hong Kong's Hang Seng Index closed at 23,382, down 31.75 points or 0.14 percent.

Europe

After opening lower, European stocks pared back their losses by early afternoon trading. The indexes, which moved back and forth across the unchanged line by the mid-day, are now declining sharply.

In corporate news, H&M Group reported that its sales, including VAT in local currencies, rose by 8 percent year-over-year in December. At the same time, comparable store sales fell 2 percent.

Music company HMV Group has sought bankruptcy protection, with the company's shares likely to be suspended from trading on the LSE with immediate effect. U.K. luxury goods retailer Burberry reported 7 percent revenue growth for its third quarter, thanks to solid sales in the run up to Christmas.

On the economic front, the harmonized index of consumer prices for Germany rose 2 percent year-over-year in December, according to revised estimates released by the German Federal Statistical Office. The growth was downwardly revised from the initial estimate of 2.1 percent.

A separate report released by the agency showed that German GDP rose 0.7 percent in price adjusted terms in 2012 compared to the 3 percent growth in 2011.

An inflation report released by the U.K. Office for National Statistics showed that U.K. annual consumer price inflation was unchanged at 2.7 percent for a third month in a row in December. The inflation was in line with expectations. On a monthly basis, consumer prices rose 0.5 percent compared to a 0.2 percent increase in November.

Eurostat reported that the eurozone's trade surplus increased to 11 billion euros in November from a surplus of 7.4 billion euros in October. Exports rose 0.8 percent month-over-month, while imports declined 1.5 percent.

U.S. Economic Reports

Boston Federal Reserve Bank President Eric Rosengren is due to speak on the economic outlook at a breakfast meeting in Providence, Rhode Island at 8 am ET.

With food prices showing a notable decrease, the Labor Department released a report showing that U.S. producer prices fell by slightly more than expected in December. The Labor Department said its producer price index dipped by 0.2 percent in December after falling by 0.8 percent in November. Economists had expected the index to edge down by 0.1 percent.

Excluding the drop in food prices as well as a modest decrease in energy prices, the core producer price index inched up by 0.1 percent in December. The increase by the core producer price index, which matched the increase seen in the previous month, came in below economist estimates for 0.2 percent growth.

Retail sales in the U.S. rose by more than anticipated in the month of December, according to a report released by the Commerce Department, with the sales growth partly due to a notable increase in auto sales.

The report showed that retail sales rose by 0.5 percent in December following a revised 0.4 percent increase in November. Economists had expected sales to edge up by 0.2 percent compared to the 0.3 percent growth originally reported for the previous month.

Excluding a 1.6 percent increase in sales by motor vehicle and parts dealers, retail sales increased by a more modest 0.3 percent in December compared to a 0.1 percent drop in November. The increase in ex-auto sales matched economist estimates.

The New York Federal Reserve manufacturing survey for January showed that the manufacturing sector in the region contracted for the sixth straight month. The general business conditions index based on the survey came in at -7.8 in January compared to -8.10 in December.

The new orders index declined 4 points to -7.2 and the shipments index moved down 15 points to -3.1. The employment indexes suggested weakness, with the employment index and the average workweek index remaining below 0 for the fourth straight month. Meanwhile, the 6-month outlook index improved slightly, although remaining depressed compared with the levels in early 2012.

Minneapolis Federal Reserve Bank President Narayana Kocherlakota is scheduled to speak on Fed actions and the macroeconomy to the Financial Planners Association of Minnesota in Golden Valley, Minneapolis at 8:50 am ET. Philadelphia Federal Reserve Bank President Charles Plosser is scheduled to speak on the economic outlook to the 34th Annual Economic Seminar in Rochester, New York at 9:30 am ET.

The Commerce Department will also release its business inventories report at 10 am ET. Economists expect business inventories to have increased by 0.3 percent in November compared to the 0.4 percent growth in October.

Business inventories rose 0.4 percent month-over-month in October. 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.

Stocks in Focus

Liberty Global (LBTYA) announced that following a tender offer by its subsidiary Binan Investments, it has 66.34 million shares and 3,000 warrants in Telenet, representing 58.4 percent of the issued and outstanding shares of Telenet.

Lennar (LEN) reported better than expected fourth quarter results.

RadioShack (RSH) announced that the end of its relationship with Target (TGT), where it helps operate Target Mobile in 1,500 Target stores, effective April 8, 2013.

Owens & Minor (OMI) said it has appointed operating VP and Treasurer Michael Lowry as CFO on an interim basis. Lowry will replace Andrew Edwards, who is leaving the company, effective February 7th, 2013 to pursue a new career opportunity.

Emulex (ELX) said it has extended the offer period for its 500 pence per share cash offer for Endace by 14 days to 1 p.m. London time on February 12, 2013.

Packaging Corp. of America (PKG) said it intends to increase its quarterly cash dividend by 25 percent.

Brocade (BRCD) announced the appointment of Lloyd Carney to the position of CEO, effective immediately.

InterMune (ITMN) said it plans to offer $85 million aggregate principal amount of convertible senior notes due 2017 and 12.50 million shares of its common stock in concurrent underwritten offerings.

Georgia Gulf (GGC) announced preliminary 2012 results, expecting adjusted EBITDA of $330 million to $340 million on net sales of about $3.3 billion. The sales guidance was about in line with estimates. The company said it benefited from higher operating rates and stronger export demand and pricing for its chemical products in the fourth quarter of 2012 compared to the year-ago quarter.

Radisys (RSYS) also announced preliminary results, expecting fourth quarter revenue near the high end of its guidance range and positive non-GAAP earnings per share compared to its previous guidance of a loss of 6 cents to break-even The company attributed the upward revision to strong software-solutions revenues.

ADTRAN (ADTN), Fulton Financial (FULT), Interactive Brokers (IBKR) and Linear Technology (LLTC) are among the companies due to release their quarterly results after the close of trading.

by RTT Staff Writer

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