The major U.S. index futures are pointing to a higher opening on Tuesday, although there is no guarantee that the upward momentum can be sustained amid the encircling uncertainty. The Asian markets had a mixed session, while the European have shrugged off their early weakness and are currently trading higher. Early optimism is keeping commodity prices higher.
Even as markets digest President Barack Obama's plan to create jobs and his small business lending program, the pending homes sales report to be released during the trading hours could also have an impact on the trading direction. The jobs report to be released on Friday should serve to create anxiety among traders and keep some of them on the sidelines.
U.S. stocks opened Monday's session higher after two consecutive sessions of sharp declines, helped by solid personal income and spending data. Buying interest picked up thereafter, as a positive manufacturing reading generated some optimism about the economic outlook. After showing a slow and steady advance for the rest of the session, the major averages closed notably higher.
The Dow Industrials ended up 118.20 points or 1.17% at 10,186 and the Nasdaq Composite Index advanced 23.85 points or 1.11% to 2,171, while the S&P 500 Index gained 15.31 points or 1.43% to close at 1,089.
Twenty-eight of the thirty Dow components ended the session higher, with Alcoa (AA), DuPont (DD), McDonald's (MCD), Exxon Mobil (XOM) and Chevron (CVX) advancing strongly.
Among the sector indexes, the Dow Jones Transportation Average rose 1.71%, the NYSE Arca Airline Index rallied 3.39% and the Dow Jones U.S. Basic Materials Average climbed 4.34%. The NYSE Arca Oil Index gained 2.51% compared to a 3.61% advance by the Philadelphia Oil Service Index, while the NYSE Arca Gold Bugs Index surged up 5.57%. The NYSE Arca Securities Broker/Dealer Index rose 2.14%.
In the technology space, the Philadelphia Semiconductor Index moved up 3.05%, while the NYSE Arca Computer Hardware and the NYSE Arca Disk Drive Index also rose over 3%. The NYSE Arca Networking Index gained 2.09%.
The relative strength index of the Dow Industrials shows that the index is currently at grossly oversold levels, although it is broadly within the uptrending channel formed since March 2009. On the downside, the index has some support around the 9,961 level, while the index may struggle to break above overhead resistances around 1,0203 and its 50-day moving average of 1,0435.
On the economic front, the Bureau of Economic Analysis' personal income and outlays report showed that personal income rose 0.4% month-over-month in December compared to expectations for a 0.3% increase. At the same time, personal spending increased 0.2%, slightly softer than the 0.3% rate expected by economists. Consequently, the personal savings rate rose to 4.8% in December from 4.5% in the previous month. Real spending was up a mere 0.1%.
Personal income growth was supported by a reduction in personal taxes, while wages and salaries grew at an anemic 0.1% rate. The core price index for personal consumption expenditures was up 0.1% in December.
The Institute for Supply Management's purchasing managers' index rose to 58.4 in January from 54.9 in November, with the latest month's reading the highest since August 2004. Thirteen of the eighteen industries showed growth. The new orders index rose 1.1 points and the index of order backlogs climbed 6 points to 56. The employment index continued to climb, rising 3 points to 53.3. Despite increasing 3.5 points, the inventories index remained below '50' at 46.5.
Meanwhile, the Commerce Department's construction spending report revealed a 1.2% month-over-month decline in spending for December. The previous month's drop was revised downwards to a 1.2% decline from the 0.6% drop estimated initially. Private as well as public construction spending fell 1.2% each. In the private category, multi-family house construction spending fell 4.4%, offsetting a 0.6% increase in spending on single-family homes, while non-residential construction spending edged up 0.2%.
Commodity, Currency Markets
Crude oil futures are trading up $0.61 at $75.04 a barrel after advancing $1.54 to $74.43 a barrel on Monday. In the previous session, the black gold derived strength from positive manufacturing PMI reports from China, some European nations as well as the U.S. Additionally, reports of the closure of three of Shell's pumping stations in Nigeria following terrorist attacks may have also lent support to prices.
The recent pullback is in line with analysts' calls for a correction, especially after the sharp run up seen in most of 2009, which according to Commerzbank, can be explained only to some extent by an increase in demand and was largely due to a markedly increased investor interest. However, once the economic environment stabilizes, the prices of commodities are expected to recover significantly.
Gold futures are currently advancing $6.40 to $1,111.40. In the previous session, the precious metal jumped $21.20 to $1,105 an ounce.
On the currency front, the U.S. dollar is trading at 90.55 yen compared to the 90.6098 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is trading at $1.3942.
Asia
The major Asian markets had a mixed session on Tuesday, with the Australian and Japanese markets recording handsome gains, while the South Korean, Chinese and the Indian markets declined. A commodity rally spurred an advance in the commodity space. In Australia, sentiment was supported by an unexpected decision from the nation's central bank to hold interest rates unchanged.
Japan's Nikkei 225 average opened higher and saw further strength in early trading. Although the index pared back some of its gains thereafter, it ended 166.07 points or 1.63% higher at 10,371, rising for the second straight session.
A majority of stocks advanced in the session, with exporters and resource stocks leading the gains. A few defensive sectors such as utility and pharma and construction stocks saw weakness.
On the economic front, Japan's Ministry of Health, Labor and Welfare reported that Japan's total cash earnings fell by 6.1% year-over-year in December. In November, the measure had declined 2.4%. Special cash earnings fell a steeper 10.6%. A separate report released by the Bank of Japan showed that Japan's monetary base rose 4.9% year-over-year in January.
Australia's All Ordinaries opened unchanged, but it rose sharply in early trading and moved sideways thereafter. In late trading, the index legged up further to close up 84 points or 1.85% at 4,629, rebounding from a 2-session slide. Energy and material stocks jumped solidly and were responsible for the bulk of the market's upside.
The Reserve Bank of Australia, or RBA, decided to keep the official cash rate on hold at 3.75%, taking most analysts by surprise. The decision comes after three successive rate hikes were delivered starting with October's policy meeting, with markets widely anticipating a fourth 25 basis points increase.
RBA Governor Glenn Stevens noted that lenders across the country generally raised interest rates a little more than the benchmark rate in recent months and most loan rates had risen by close to a percentage point. "Since information about the early impact of those changes is still limited, the board judged it appropriate to hold a steady setting of monetary policy for the time being," he said in a statement.
Meanwhile, a survey by National Australia Bank showed that business confidence fell sharply in December, with the RBA's three straight rate increases widely blamed. The business confidence index stood at 11 in December, down from 19 in the previous month. The business conditions index, meanwhile, remained stable at 10.
Hong Kong's Hang Seng Index opened notably higher, but it retraced most of its gains by early afternoon trading. Thereafter, the index showed some indecision before closing up 38.47 points or 0.19% at 20,282. Most property and China-related stocks showed strength, while financial stocks came under selling pressure. Retail and utility stocks closed on a mixed note.
Europe
After showing some volatility in the morning on Tuesday, the major European averages have moved firmly to the upside following two straight sessions of advances. The French CAC 40 Index and the German DAX Index are gaining 0.69% and 0.46%, respectively, while the U.K.'s FTSE 100 Index is moving down 0.17%.
In corporate news, oil giant BP (BP) reported fourth quarter replacement cost profit per ADS of $1.10 compared to 84 cents last year. Sales and other operating revenues climbed to $70.98 billion from the year-ago's $61.48 billion. The company's production rose 3% to 4.05 billion barrels of oil equivalents per day. Analysts estimated earnings of $1.51 per share on revenues of $56.34 billion.
On the economic front, the German Federal Statistical Office reported that Germany's retail sales rose a seasonally and calendar adjusted 0.8% in real terms in December compared to the previous month. In November, retail sales slid a revised 1.1%. Economists had estimated a 0.9% increase for the recent month. On a year-over-year basis, retail sales declined 2.5%, the same rate as in the previous month.
A report released by CIPS/Markit showed that the U.K.'s construction purchasing managers' index rose to 48.1 in January from 47.1 in the previous month. Economists had estimated a decline by the index to 47.
Separately, Eurostat said the euro area's producer prices fell 2.9% year-over-year in December following a 4.4% decline in November. Economists had estimated a bigger 3% drop.
U.S. Economic Reports
Individual automakers are scheduled to release their monthly U.S. sales results for January. The data will reveal the unit sales of domestically produced cars and light duty trucks, including sports utility vehicles and mini-vans, during the month.
Data on Pending Home Sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 AM ET. A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. The index is expected to show a 1.1% increase for December.
In November, the pending home sales index declined 16% month-over-month. Economists had expected a more modest decline of 2%. The decline was apparently the pay back phenomena from the first time homebuyers' credit, which motivated homebuyers to bring forward their purchases to meet the initial expiry deadline of November 30th. The stimulus measure has since been extended.
After showing decent gains in the past three months, the Northeast, Midwest and South showed sharp declines. On a year-over-year basis, the index rose 19.3%, although much of the increase was due to easier comparisons.
Treasury Secretary Timothy Geithner is due to testify before the Senate Finance Committee on the fiscal year 2011 budget at 10 AM ET. Around the same time, Paul Volcker, the Chair of the President's Economic Recovery Advisory Board, will testify on regulations to limit high-risk bank activities before the Senate Banking Committee in Washington.
Earnings
Entergy (ETR) reported fourth operational earnings of $1.75 per share compared to 99 cents per share last year. Analysts estimated earnings of $1.55 per share. The company reaffirmed its 2010 operational guidance in the range of $6.40-$7.20 per share compared to the consensus estimate of $6.70 per share.
Pepsi Bottling Group (PBG) reported fourth quarter comparable earnings per share of 59 cents per share on revenues of $2.92 billion. The consensus estimates had called for earnings of 43 cents per share on revenues of $3.82 billion.
D.R. Horton (DHI) said its first quarter homebuilding revenues rose to $1.11 billion from $900.3 million last year. The company reported net income of 56 cents per share compared to a loss of 20 cents per share last year. Analysts estimated a loss of 14 cents per share on revenues of $960.15 million. Archer Daniels Midland Co.'s (ADM) second quarter net income attributable to ADM shareholders declined 2% to 88 cents per share. Net sales fell 5% to $15.9 billion. The consensus estimates had called for earnings of 72 cents per share on revenues of $16.54 billion.
Hershey (HSY) reported that its fourth quarter net sales rose to $1.41 billion from $1.38 billion last year, while analysts estimated revenues of $1.42 billion. The company's earnings rose to 55 cents per share from 36 cents per share in the year-ago period. On an adjusted basis, the company reported earnings of 63 cents per share, ahead of the 60 cents per share consensus estimate. The company reaffirmed its 2010 net sales growth guidance of 3%-5% and its adjusted earnings per share growth guidance of 6%-8%.
Stocks in Focus
Barnes & Noble (BKS) may be in focus after the company revealed in a filing that activist investor Ron Burkle is seeking to raise the stake he and his affiliates are hold in the bookseller to 37%. This follows the company adopting a shareholder rights plan in the form of a poison pill to ward off the threat of a takeover after Burkle and his associates continued to amass a stake in the company late last year. Burkle has sought not to implement the poison pill, allowing him to acquire the 37% stake he intends to buy, and also preventing the Riggio family from building up further stake in the pretext of being the right holders.
Weyerhaeuser (WY) could see some activity after the company announced along with Mitsubishi that the two companies have signed an agreement to explore possibilities of collaborating with the biomass-to-energy business.
Continental Airlines (CAL) may move in reaction to its announcement that its January load factor rose 4 points year-over-year to 77.2%. Traffic and capacity increased 8.5% and 4%, respectively.
Thermo Fisher Scientific (TMO) is likely to react to its announcement that it has signed an agreement to buy Finland-based provider of tools for molecular analysis Finnzymes. The company generated revenues of $20 million in 2009.
Tupperware Brands (TUP) could gain ground after it reported that its first quarter sales rose 10% to $626 million. On an adjusted basis, the company reported non-GAAP earnings of $1.22 per share compared to 90 cents per share last year. Analysts estimated earnings of $1.04 per share on revenues of $615.15 million. The company raised its full year 2010 GAAP earnings guidance by 8 cents per share to $3.25-$3.35 per share, while on a non-GAAP basis, the company expects earnings of $3.41-$3.51 per share. The consensus estimates call for earnings of $3.43 per share last year.
Reinsurance Group of Australia (RGA) is also likely to see some activity after it reported that its fourth quarter operating income rose to $1.70 per share from $1.45 per share last year. Net premiums rose to $1.60 billion from last year's $1.39 billion. Analysts estimated earnings of $1.58 per share on revenues of $1.80 billion.
Anadarko Petroleum (APC) could react to its announcement that its fourth quarter adjusted earnings were 4 cents per share on revenues of $2.41 billion, down from $2.93 billion last year. Analysts estimated earnings of 3 cents per share on revenues of $2.36 billion. Separately, the company announced an agreement with Western Gas Partners (WES) to sell its midstream assets in Southwest Wyoming to the latter for $254.4 million.
CIT (CIT) may see some activity after it announced that its President and CEO Alexander Mason will leave the company, effective February 26, 2010. The company also announced the appointment of Peter Jobin as the interim CEO.
Rent-A-Center (RCII) receded in Monday's after hours session after it reported fourth quarter revenues of $672.9 million, down from $699.8 million last year. The company's adjusted net earnings rose 40.4% to 66 cents per share. Analysts estimated earnings of 56 cents per share on revenues of $664.95 million. For the first quarter, the company expects total revenues of $692 million to $712 million, and for the full year, the company estimates revenues of $2.70 billion to $2.76 billion. The consensus estimates call for revenues of $709.30 million for the first quarter and $2.72 billion for the year.
Hologic (HOLX) could also be in the spotlight after it reported first quarter revenues of $412.4 million, down 3.9% from the year-ago period. The company's net income declined to 10 cents per share from 15 cents per share last year. On a non-GAAP basis, the company reported adjusted net income of 29 cents per share, ahead of the 26 cents per share consensus estimate. For the second quarter, the company expects non-GAAP adjusted earnings of 29 cents per share on revenues of $410 million to $415 million. The company raised its 2010 revenue guidance to $1.64 billion to $1.655 billion, while it expects non-GAAP adjusted earnings of $1.16-$1.20 per share. Analysts estimate earnings of $1.18 per share on revenues of $1.65 billion for the year.
Plum Creek Timber (PCL) is also likely to see activity after it reported fourth quarter earnings of 17 cents per share on revenues of $258 million. This represents a decline from the year-ago earnings of 57 cents per share on revenues of $461 million. Analysts estimated revenues of $262.64 million for the quarter. For 2010, the company expects earnings of $1.25-$1.45 per share, and for the first quarter, the company estimates income from continuing operations of 34-39 cents per share. Analysts estimate earnings of $1.44 per share for the year and 14 cents per share for the first quarter. Analysts' estimates typically exclude one-time items.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.