The major U.S. index futures are pointing to a lower opening on Wednesday, with traders likely to use some disappointing economic reports as reason to take profits after yesterday's scintillating advance. A report released earlier in the day showed a bigger than expected drop in housing starts, while the Labor Department said producer prices rose much more expected. However, core producer prices remained benign, showing no growth in December.
Additionally, moves by China to restrict lending may cool off Chinese growth, which many analysts believe would upset the Chinese-led global growth. Earnings from some big Wall Street firms were disappointing as well. In reaction to the apprehension, commodities are trading lower, reversing yesterday's advance.
U.S. stocks opened Tuesday's session little changed, but they advanced strongly in early trading. Thereafter, the buying momentum slowed and the slope of the ascent flattened out, with the major averages closing at fresh multi-month highs with gains in excess of 1% each.
The Dow Industrials closed up 115.78 points or 1.09% at 10,725 and the Nasdaq Composite rose 32.41 points or 1.42% to 2,320, while the S&P 500 Index advanced 14.20 points or 1.25% to 1,150.
Twenty-six of the thirty Dow components closed higher, with DuPont (DD), 3M Co. (MMM), Pfizer (PFE) and Verizon Communications (VZ) ending with gains in excess of 2% each. AT&T (T), McDonald's (MCD), Cisco Systems (CSCO), Merck (MRK) and IBM (IBM) also advanced strongly.
Among the sector indexes, the Dow Jones Utility Average rose 1.45%, the NYSE Arca Airline Index gained 1.57% and the Dow Jones U.S. Basic Materials Average advanced 1.82%. The Philadelphia Semiconductor Index moved up 1.79%. Oil, oilfield services, gold, housing financial, disk drive, hardware, software, networking and Internet stocks also gained ground in the session.
The Treasury reported yesterday that foreigners bought a net total of $126.8 billion worth of U.S. securities, notably higher than the $25 billion expected by economists.
Meanwhile, the National Association of Home Builders reported that its housing market index fell to 15 in January from 16 in the previous month. Economists had expected a reading of 17. The present conditions index fell 1 point to 15 and the index measuring prospective buyer traffic eased 1 point to 12, while the future outlook index remained unchanged at 26. The association attributed the sluggish reading to consumer concerns about job security and competition from foreclosed homes on the market, which is impacting demand.
Earnings- Chugging Along…
According to Sam Stovall, Chief Investment Strategist at Standard and Poor's, the fourth quarter of 2009 will see a recovery in operating earnings per share, with the companies constituting the S&P 500 expected to record a profit of $16.08 compared to a loss of $0.09 in the year-ago period. The firm expects all 10 of the sectors in the index to post earnings in the fourth quarter. Financial and IT firms are likely to record the biggest gains, while telecommunication, utility and consumer staple stocks could record the smallest advances.
On Tuesday, eight S&P 500 companies reported earnings, with five of them five reporting better than expected results and one reporting in-line results, while the remaining 2 missed expectations.
Commodity, Currency Markets
Crude oil futures are receding $1.39 to $77.63 a barrel after they broke a 5-session losing streak on Tuesday, advancing $1.02 to $79.02 a barrel. The commodity rose on Tuesday despite the dollar strengthening in the session and apparently in reaction to views that demand will improve when growth stabilizes.
Gold futures are sliding $14.20 to $1,125.80 an ounce. In the previous session, gold gained $9.50 to $1,140 an ounce.
On the currency front, the U.S. dollar is weakening to 90.89 yen compared to the 91.1475 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.4138.
Asia
The major Asian markets ended on a mixed note on Tuesday, with the Australian, the Malaysian and the South Korean markets closing higher, while the Chinese, Hong Kong, Indian and the Japanese markets ended on a weak note.
Japan's Nikkei 225 average opened higher, but it reversed course as selling pressure set in and declined steadily to close down 27.38 points or 0.25% at 10,738. Financial and technology exporters saw significant weakness. Shipping, steel and real estate also ended mostly lower. On the other hand, heavy machinery makers and pharma stocks gained ground in the session.
On the economic front, Japan's Ministry of Economy, Trade & Industry reported that the tertiary activity index fell a seasonally adjusted 0.2% month-over-month in November, partially reversing the 0.4% increase in the previous month. The decrease was exactly in line with economists' expectations. Annually, the index fell 3.6% compared to the 4.3% decline in October.
Meanwhile, Australia's All Ordinaries, which traded notably higher, gave back its gains over the course of trading to close up merely 5.50 points or 0.11% at 4,895. Most sector stocks, barring energy, material and IT stocks, advanced.
BHP Billiton and Rio Tinto advanced in the session, while Lihir Gold and Newcrest Mining declined. BHP Billiton released today its half-yearly production update, saying that its iron ore production climbed 11% year-over-year in the fourth quarter due to stronger demand, primarily from China. Among the four major banks, ANZ rose and National Australia Bank ended flat, while Commonwealth Bank and Westpac receded.
Hong Kong's Hang Seng Index, which rose on Tuesday, opened lower and moved sideways in the morning, and in the afternoon, additional selling pressure dragged the index lower. Thereafter, the index consolidated to close down 391.81 points or 1.81% at 21,286.
Europe
The major European averages are trending lower on Wednesday, with the French CAC 40 Index and the German DAX Index declining 1.15% and 0.82%, respectively, while the U.K.'s FTSE 100 Index is receding 0.95%.
On the economic front, the Office for National Statistics reported that the number of people seeking jobseekers' allowance fell by 15,200 in December compared to the previous month. The unemployment rate for the three-month period from September to November was 7.8%, the same as for the previous three months period ended in October. However, average earnings, excluding bonuses, was 424 pounds per week in November and the regular pay for the three months ended November rose 1.1% year-over-year, the smallest increase on record.
Meanwhile, Germany's Federal Statistical Office announced that Germany's producer price index fell 5.2% year-over-year in December, slower than the 5.9% decline in the previous month. Economists expected a decrease of 5.1%. On a monthly basis, producer prices edged down 0.1% in December compared to a 0.2% increase in November.
The minutes of the Bank of England's January Monetary Policy Committee showed that policymakers unanimously decided to continue with the asset purchase program totaling 200 billion pounds using central bank reserves.
U.S. Economic Reports
New residential construction showed a notable decrease in the month of December, according to a report released by the Commerce Department, with the data likely to add to recent concerns about the sustainability of the recovery in the housing market.
The report showed that housing starts fell 4% to an annual rate of 557,000 in December from the revised November estimate of 580,000. Economists had been expecting starts to edge down to 572,000 from the 574,000 originally reported for the previous month.
The Labor Department reported a modest increase in producer prices in the month of December that came as a surprise to economists, as food prices showed a notable increase offsetting a drop in energy prices.
The producer price index edged up by 0.2% in December following an unrevised 1.85 increase in November. Economists had been expecting prices to come in unchanged after the sharp jump in the previous month.
Excluding the changes in food and energy prices, core producer prices were unchanged in December after increasing by 0.5% in the previous month. Core producer prices had been expected to edge up by 0.1%.
Earnings
Bank of America (BAC) reported that its fourth quarter net loss widened to 60 cents per share from 48 cents per share in the year-ago period. Revenue net of interest expense on a fully-taxable equivalent basis rose 59% year-over-year to $25.4 billion. Analysts estimated a loss of 53 cents per share on revenues of $26.84 billion.
Morgan Stanley's (MS) fourth quarter net income from continuing operations was 93 cents per share compared to a loss of $1.26 per share last year. The recent quarter's results reflected preferred dividends and the repurchase of TARP capital. Net revenues rose to $23.4 billion from $18.2 billion last year.
Stocks in Focus
IBM (IBM) receded in Tuesday's after hours session despite reporting fourth quarter earnings of $3.59 per share compared to $3.27 per share last year. Total revenues rose 1% to $27.2 billion. Analysts estimated earnings of $3.47 per share on revenues of $26.96 billion. For the full year 2010, the company estimates earnings of at least $11 per share compared to the $9.88 per share consensus estimate. The company had earlier projected earnings between $10 and $11 per share.
SRA International (SRX) is likely to gain ground after it announced that the FDA has awarded the company the Mission Accomplishment and Regulatory Compliance Services Integration contract. The company noted that the single-award indefinite delivery, indefinite quantity contract has a total ceiling of $98 million over a five-year period of performance.
Cree, Inc. (CREE) could be in focus after it reported that its second quarter revenues rose 35% year-over-year to $199.5 million. On a non-GAAP basis, the company reported earnings of 38 cents per share compared to 20 cents per share last year. Analysts estimated earnings of 30 cents per share on revenues of $186.81 million. For the third quarter, the company expects non-GAAP earnings of 41-44 cents per share on revenues of $215 million to $225 million. The consensus estimates call for earnings of 28 cents per share on revenues of $189.81 million.
CSX Corp. (CSX) declined in Tuesday's after hours session after it reported fourth quarter earnings from continuing operations of 77 cents per share, lower than 92 cents per share last year. The Street estimated earnings of 76 cents per share. Revenues fell 12% to $2.3 billion, slightly shy of the $2.39 billion consensus estimate. For the full year, the company expects earnings from continuing operations of $2.87 per share, while analysts estimate earnings of $2.85 per share.
Charles Schwab (SCHW) also came under selling pressure in Tuesday's after hours session after it announced that it has commenced an underwritten public offering of 26.3 million shares. Separately, the company reported fourth quarter earnings of 14 cents per share on revenues of $986 million. In the year-ago period, the company reported earnings of 27 cents per share on revenues of $1.28 billion. Analysts estimated earnings of 15 cents per share on revenues of $993.45 million.
Sirius XM (SIRI) is expected to see buying interest after it reported that it ended 2009 with 18.77 million subscribers following the addition of 257,028 subscribers on a net basis in the fourth quarter. The company also said it expects to generate a positive cash flow of over $100 million for 2009.
Rambus (RMBS) advanced strongly in Tuesday's after hours session after it said it has reached an agreement with Samsung Electronics, settling all claims between them regarding licensing Rambus' patent portfolio covering all Samsung semiconductor products. As part of the agreement, Samsung will invest $200 million in Rambus stock and also pay an initial $200 million payment and a quarterly payment of $25 million for the next 5 years.
Intermune (ITMN) could move to the downside after it announced an offer of 5 million shares in an underwritten public offering. The company noted that it would sell all shares issued.
CACI International (CAI) may move in reaction to its announcement that it has signed an agreement to buy SystemWare, Inc. The company did not reveal the financial terms of the deal but said the deal is expected to be closed by February 1, 2010.
Prosperity Bancshares (PRSP) is likely to be in focus after it announced the signing of a definitive agreement to buy the three Texas retail bank branches of U.S. Bank. Prosperity said it would pay about $420 million in deposits as well as purchase certain loans and other assets attributable to the branches.
PPD, Inc. (PPDI) may see weakness after it said it expects 2010 revenues in the range of $1.31 billion to $1.43 billion and earnings per share in the range of $1-$1.12. The company also said it is taking necessary steps to complete the spin-off of its compound partnering business and therefore has not included contribution from this business in the calculation of earnings for the third and fourth quarters of 2010. Analysts currently estimate earnings of $1.28 per share on revenues of $1.31 billion.
CIT Group (CIT) could be in focus after it announced the appointment of Peter Tobin as acting CEO. The company noted that Tobin would replace Jeffrey Peek, whose resignation as Chairman and CEO was effective January 15th, 2010.
Blyth (BTH) could gain ground after it announced the payment of $1 per share as a special cash dividend to its shareholders of record as of February 2nd, 2010.
Adtran (ADTN) could also be in focus after it reported that its fourth quarter sales rose 11% year-over-year to $124.23 million. The company's earnings per share rose to 29 cents per share from 27 cents per share in the year-ago period. Analysts estimated earnings of 27 cents per share on revenues of $120.47 million.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.