The major U.S. index futures are pointing to a lower opening on Friday, with sentiment reflecting the uneasiness of traders following the recent strong run up, especially after the release of lukewarm earnings reports by conglomerate General Electric (GE) and Bank of America (BAC). Commodity prices are seeing a pullback and therefore, the support the markets received yesterday from commodity-related stocks may be withdrawn. Additionally, the markets may react to the industrial production report to be released just before the markets open.
After trading below the unchanged line for much of Thursday’s session, as profit takers pulled some money off the tables, U.S. stocks recovered in late trading to close modestly higher. A rally in oil stocks and positive reaction to economic reports helped to offset the weakness earlier in the session.
The Dow Industrials ended the session up 47.08 points or 0.47% at 10,063, the S&P 500 Index advanced 4.54 points or 0.42% to 1,097, and the Nasdaq Composite Index rose 4.54 points or 0.05% to 2,173.
Twenty of the thirty Dow components ended the session higher, with Microsoft (MSFT), Exxon Mobil (XOM), Wal-Mart (WMT), Pfizer (PFE), Merck (MRK), McDonald’s (MCD), Kraft Foods (KFT) and Chevron (CVX) posting notable gains. On the other hand, Bank of America (BAC) and Boeing (BA) declined 2.64% and 1.43%, respectively.
Among the sector indexes, the NYSE Arca Oil Index and the Philadelphia Oil Service Index advanced 1.42% and 2.17%, respectively. However, the NYSE Arca Airline Index fell 1.21% and the Philadelphia Semiconductor Index fell 1.41%. The NYSE Arca Disk Drive Index, the NYSE Arca Computer Hardware Index and the NYSE Arca Internet Index, the NYSE Arca Networking all fell more than 1% each.
On the economic front, the weekly jobs report showed that initial jobless claims fell to 514,000 in the week ended October 10th, dropping to their lowest levels since early January. Continuing claims also declined, while those receiving emergency unemployment compensation increased by 10,000 and those getting extended benefits rose by 6,000.
The consumer price inflation report released yesterday showed that the monthly consumer price inflation rate as well as the core consumer price inflation rate were both at 0.2% in September. On a year-over-year basis, core consumer prices rose 1.5%.
The results of the two manufacturing surveys released suggested expansion in the sector, although the degree of expansion relayed by the surveys presented a mixed picture.
The Philadelphia Fed’s survey showed that the manufacturing index fell to 11.5 in October from 14.1 in September. The new orders index rose 3 points to 6.2, marking the highest level since December 2007 and the employment index climbed to –6.8 in October from –14.3 in the previous month. However, the inventories index fell 13.7 points to –31.8.
On the other hand, the Empire State survey’s manufacturing index jumped to 34.6 in October, rising to its highest level since May 2004. The new orders index and the order backlogs index rose 12 points and 6 points, respectively. The employment index moved into positive territory for the first time since June 2008, rising to 10.4 in October from –8.3 in September. The 6-month future business conditions index rose 4 points to its highest level since November 2004.
Currency, Commodity Futures
Crude oil futures are trading down $0.49 at $77.09 a barrel after rallying $2.40 to $77.58 a barrel on Thursday, when it advanced following the release of EIA’s inventory data. The report showed that gasoline inventories fell by 5.2 million barrels in the week ended October 9th, 2009, but yet were just above the upper limit of the average range.
Distillate fuel inventories fell by 1.1 million barrels, although they remained above the upper boundary of the average range. However, crude oil inventories rose by 0.4 million barrels, remaining above the upper boundary of the average range. Refinery capacity utilization averaged 84% over the four weeks ended October 9th compared to 85.5% in the previous week.
Gold futures are currently trading down $5.40 at $1,045.20 an ounce. In the precious session, the precious metal slid $14.10 to $1,050.60 an ounce. Commerzbank is of the view that the price of gold could decline over the next few days after the Indian festival of Diwali, provided the U.S. dollar does not weaken any further and the euro/dollar pair remains below 1.50.
Among currencies, the U.S. dollar is trading at 91.22 yen after it strengthened to 90.555 yen at the close of New York trading on Thursday. Against the euro, the dollar is currently valued at $1.4866.
Asia
The major Asian markets ended Friday’s session on a mixed note, with the Japanese market extending its rally, while the Australian, Hong Kong and the South Korean markets closed lower.
Europe
After a positive start on Friday, the major European markets have turned lower by the afternoon and are currently trading notably lower. The French CAC 40 Index and the German DAX Index are moving down 1.06% and 1%, respectively, while the U.K.’s FTSE 100 Index is receding 0.62%.
In corporate news, Sony Ericsson, a joint venture between Sony (SNE) and Ericsson (ERIC), reported a third quarter loss of 164 million euros compared to a loss of 25 million euros in the year-ago period. The loss was narrower than the loss forecast by some analysts. Sales fell to 1.62 billion euros from 2.81 billion euros last year. The company said it continues to expect a 10% contraction in the global handset market in 2009.
On the economic front, the trade balance of the euro zone region showed a deficit of 4 billion euros in August compared to a surplus of 12.3 billion euros surplus in July. Economists had expected a trade surplus of 2.5 billion euros. A year-ago, the trade deficit was 11.3 billion euros. Imports fell by 27% compared to a 23% drop in exports.
U.S. Economic News
The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for August at 9 AM ET.
The industrial production report of the Federal Reserve is due out at 9:15 AM ET. Economists estimate that industrial production rose 0.2% in September, while capacity utilization is expected to come in at 69.8 %.
U.S. industrial output rose for the second straight month in August, increasing by 0.8% month-over-month in August compared to the 0.6% growth expected by economists. Manufacturing production climbed 0.6% and still rose 0.4% excluding motor vehicle/parts production, which jumped 5.5%. Capacity utilization came in at a higher-than-expected 69.6%.
The Reuters/University of Michigan's preliminary report on the consumer sentiment index for October is scheduled to be released at 9.55 AM ET. Consumer sentiment is expected to remain flat at 73.3.
Dallas Federal Reserve Bank President Richard Fisher is scheduled to deliver the keynote address at a conference co-sponsored by SMU's Cox School of Business in Dallas at 10:15 AM ET.
Earnings
Bank of America (BAC) reported a loss of 26 cents per share for its third quarter compared to a profit of 15 cents per share in the year-ago period. The recent third quarter’s results included a write down of $2.6 million and a charge of $402 million. Revenues climbed 33% to $26.04 billion. Analysts had estimated a loss of 21 cents per share on revenues of $27.61 billion.
General Electric (GE) said its third quarter earnings declined to 23 cents per share from 43 cents per share last year. On an adjusted basis, earnings were 22 cents per share. Revenues declined 20% to $37.8 billion. The consensus estimates had called for earnings of 20 cents per share on revenues of $37.8 billion.
Stocks in Focus
IBM (IBM) receded in Thursday’s after hours session despite reporting that its third quarter earnings rose to $2.40 per share from $2.38 per share in the year-ago period. Revenues came in at $23.6 billion, slightly ahead of the $23.4 billion consensus estimate. The company revised up its 2009 earnings guidance, with the company forecasting earnings of at least $9.85 per share, up from its earlier estimate of at least $9.70 per share.
Google (GOOG) may also see activity after it reported that its third quarter earnings rose to $5.13 per share from $4.06 per share in the year-ago period. On an adjusted basis, the company reported earnings of $5.89 per share, ahead of the $5.42 per share consensus estimate. Revenues rose 7% to $5.94 billion. Excluding traffic acquisition costs, the company reported revenues of $4.38 billion.
Advanced Micro Devices (AMD) is expected to be in focus after it reported a third quarter loss of 18 cents per share compared to a loss of 22 cents per share last year. Revenues fell 22% to $1.4 billion. Analysts estimated a loss of 42 cents per share on revenues of $1.26 billion.
Timken (TKR) may react to its announcement that it has reached an agreement with the United Steel Workers union over a new 4-year contract. Meanwhile, Nara Bancorp. (NARA) could be in focus after it said its third quarter net income available to common shareholders fell to 11 cents per share from 19 cents per share last year. Net interest income before provision for loan losses eased slightly to $24.23 million from the year-ago’s $24.75 million. Analysts estimated a loss of 23 cents per share on revenues of $25.68 million.
Valmont Industries (VMI) receded in Thursday’s after hours session after it said its fourth quarter sales are likely to be lower than the year-ago’s, while it expects earnings similar to last year’s levels. The company also reported third quarter sales of $434.01 million compared to $494.80 million in the year-ago period. The company’s earnings increased to $1.53 per share from $1.40 per share last year. The consensus estimates had called for earnings of $1.07 per share on revenues of $436.41 million.
Regions Financial (RF) is likely to react to its announcement that it has appointed Grayson Hall as its president and chief operating officer.
Universal Forest Products (UFPI) may see some activity after it reported third quarter earnings of 51 cents per share compared to a loss 10 cents per share last year. Net sales fell to $457.8 million from $610.7 million in the year-ago quarter. Analysts estimated a profit of 40 cents per share on revenues of $476.17 million. The company also said that the current economic conditions and uncertainties limit its ability to provide meaningful guidance and therefore has chosen to cease the practice of providing meaningful guidance for the foreseeable future.
Harsco (HSC) could also be in focus after it said it has signed a multi-million dollar supply contract that expands its business with a major asphalt shingle manufacturer in the U.S.
Navisite (NAVI) is likely to react to its announcement that its fourth quarter revenues fell 9% year-over-year to $36.9 million. On an adjusted basis, the company’s loss attributable common shareholders was 8 cents per share compared to a loss of 36 cents per share in the year-ago period.
Brooks Automation (BRKS) could gain ground after it said it expects to report revenues of $64 million for the fourth quarter, up 45% compared to the previous quarter. The company benefited from a sharp upturn in requirements from its semiconductor OEM accounts throughout the world. Analysts estimate revenues of $56.05 million for the quarter. |