Beyond the Numbers
Market Optimism Persists as Consumer Sentiment Data Looms
5/17/2013 9:15 AM
The major U.S. index futures are pointing to a higher opening on Friday, with sentiment remaining positive despite the extended rally. Although there was a pause yesterday, the major averages settled close to their record highs notwithstanding the release of lukewarm data. Corporate earnings the markets got to digest during the session have largely been negative. The markets now turn to a consumer sentiment reading and a report on the leading economic indicators index by the Conference, both due shortly after the markets open. Asian stocks closed mostly higher, while the European markets have shrugged off some early weakness and are currently higher.
After showing resilience in recent sessions, U.S. stocks had an off day on Thursday, as traders digested a batch of mixed economic reports and disappointing earnings from Wal-Mart (WMT). The major averages opened lower after separate reports showed that jobless claims rose by more than expected and housing starts fell by more than expected. After trading mostly sideways close to the unchanged line with a negative bias for the better part of the session, the averages pulled back in late trading, closing lower.
The Dow Industrials ended down 42.47 points or 0.28 percent at 15,233 and the S&P 500 Index closed 8.31 points or 0.50 percent lower at 1,651, while the Nasdaq Composite ended at 3,465, down 6.37 points or 0.18 percent.
Twenty-three of the thirty Dow components closed lower, with Wal-Mart slipping 1.70 percent after reporting disappointing results. Disney (DIS), Home Depot (HD), Intel (INTC), Pfizer (PFE) and Travelers Companies (TRV) were also among the biggest decliners of the session. On the other hand, Cisco Systems (CSCO) rallied 12.62 percent in reaction to its quarterly results and Hewlett-Packard (HPQ) rose 1.86 percent.
Airline, biotechnology, retail and housing stocks retreated sharply, while networking and computer hardware stocks saw some strength.
On the economic front, U.S. housing starts declined 16.5 percent month-over-month in April to a seasonally adjusted annual rate of 853,000. Single as well as multiple-unit starts were weaker than in the previous month. At the same time, building permits, an indicator of future housing activity, rose 14.3 percent to a near 5-year high of 1.017 million units.
The Labor Department reported that jobless claims climbed 32,000 to 360,000 in the week ended May 11th, marking the second straight week of gains and the highest level since the end of March. The four-week average rose to 339,250 from 338,000 in the previous month, while the continuing claims calculated with a week’s lag fell to 3.009 million in the week ended May 4th from 3.013 million in the week ended April 27th.
The results of the Philadelphia Federal Reserve’s survey showed a contraction in manufacturing activity in May. The diffusion index of business activity declined to –5.2 in May from 1.3 in April. The new orders index retreated further into negative territory to –7.9 from –1 and the shipments index slipped 12 points to –8.5. The unfilled orders index moved down to –9.3 from –6.4 and the employment indexes also deteriorated in May. Meanwhile, the 6-month outlook index climbed to 32.3 from 19.5 in April.
Consumer prices declined for the second straight month in April. The headline consumer price index declined 0.4 percent month-over-month in April following a 0.2 drop in March. The decline was mainly premised on softer gasoline prices. Core consumer price inflation was at 0.1 percent for the second straight month. The annual rate of core inflation fell to 1.7 percent, remaining well below the Fed’s 2 percent target.Currency, Commodity Markets
Crude oil futures are rising $0.53 to $95.69 a barrel after rising $0.86 to $95.16 a barrel on Thursday. Gold futures are currently declining $16.40 to $1,371.30 an ounce. In the previous session, the precious metal fell $9.30 to $1,386.90 an ounce.
Among currencies, the U.S. dollar is trading at 102.49 yen compared to the 102.26 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2829 compared to yesterday’s $1.2882.Asia
Most major Asian markets closed mostly higher despite the negative lead from Wall Street overnight. The Chinese and Indonesian markets led the gains in the region, with the key averages in these markets rising in excess of 1 percent each. The Australian, Malaysian, Indian and Japanese advanced, while the Indian, New Zealand, Singaporean and Taiwanese markets retreated.
After languishing in the red in the morning, Japan’s Nikkei 225 average recovered by the mid-session and advanced thereafter, ending the day 100.88 points or 0.67 percent higher at 15,138.
Cement makers rose notably, with Sumitomo Osaka and Taiheiyo Cement rallying strongly. Real estate, paper, construction, marine transportation and export stocks also firmed up in the session. On the other hand, utility, banking, telecom, retail and some technology stocks lost ground.
Australia’s All Ordinaries hovered in positive territory throughout the session, ending 15.60 points or 0.30 percent higher at 5,160. Energy and material stocks advanced strongly and financial stocks also found some strength, while consumer staple stocks retreated.
China’s Shanghai Composite jumped 31.06 points or 1.38 percent before closing at 2,283.
On the economic front, a report released by Japan’s Cabinet Office showed that core machinery orders rose a seasonally adjusted 14.2 percent month-over-month in March compared to expectations for a 3.5 percent increase. Annually, core machinery orders rose 2.4 percent, belying expectations for a 4.9 percent drop.
The Conference Board said its leading economic indicators index for China rose 1.5 percent in April following a 0.6 percent drop in March. Four of the six components contributed positively to the index in April. Europe
After seeing weakness in early trading, European stocks staged a recovery in late morning trading and are currently uniformly higher. Automakers are seeing strength after a survey by ACEA showed that new car sales in the EU rose for the first time in 19 months in April.
In corporate news, container shipping firm AP Moller-Maersk reported that its first quarter net income declined, but the decline is not as bad as the drop forecast by some analysts. The company maintained its full year outlook.
On the economic front, Eurostat reported that construction orders received by the eurozone fell 7.9 percent year-over-year in March and were 1.7 percent lower than in the previous month. U.S. Economic Reports
Reuters and the University of Michigan are scheduled to the release the preliminary reading of their consumer sentiment index for May at 9:55 am ET. Economists expect an increase by the index to 78 in May from 76.4 in April.
The Conference Board will release its U.S. leading economic indicators index for April at 10 am ET. The consensus expectations call for a 0.3 percent increase by the index following a 0.1 percent drop in March.
The leading economic indicators index unexpectedly edged down 0.1 percent in March, snapping three straight months of gains. The weakness stemmed primarily from consumer expectations and building permits. The coincident economic indicators index also dipped 0.1 percent, while the lagging economic indicators index rose 0.3 percent.
Minneapolis Federal Reserve Bank President Narayana Kocherlakota is due to participate in a panel on monetary policy and financial regulation at the University of Chicago Booth School at 1:45 pm ET.Stocks in Focus
Dell (DELL) reported first quarter non-GAAP earnings of 21 cents per share, down 51 percent year-over-year. Revenues fell 2 percent to $14.074 billion. The earnings missed estimates, while the revenues were ahead of expectations.
Autodesk (ADSK) reported first quarter non-GAAP earnings of 42 cents per share on revenues of $570 million, down 3 percent year-over-year. For the full year, the company expects net revenue growth of about 3 percent. The company forecast second quarter non-GAAP earnings of 39 to 44 cents per share on revenues of $550 million to $570 million. The results trailed expectations and the guidance was weak as well.
Quiksilver (ZQK) announced a multi-year profit improvement plan, including clarifying the positioning of its 3 flagship brands, divesting non-core brands and licensing of secondary or peripheral product categories, which would also reduce its cost structure. When fully implemented in 2016, the plan is expected to improve the company’s EBITDA by $150 million.
SINA (SINA) reported first quarter non-GAAP earnings of 2 cents per share on net revenues of $126 million, up 19 percent year-over-year. For the second quarter, the company expects non-GAAP net revenues of $143 million to $147 million. The results exceeded estimates and the guidance was positive.
Group 1 Automotive (GPI) announced a 6.7 percent increase in its dividend to 16 cents per share.
Yahoo (YHOO) said the Superior Court of Justice for the Federal District in Mexico has granted the company’s appeal, overturning a non-final judgment of $2.75 billion against Yahoo and its Mexican unit by a civil court.
Brocade (BRCD) reported second quarter non-GAAP earnings of 17 cents per share, up from 15 cents per share last year. Revenues fell 8 percent sequentially to $538.8 million. The earnings beat estimates, while the revenues were shy of expectations.
Aruba Networks (ARUN) reported third quarter non-GAAP earnings of 11 cents per share on revenues of $147.1 million. The results missed expectations.
Nordstrom (JWN) reported first quarter earnings of 73 cents per share compared to 70 cents per share a year ago, while net sales rose 4.8 percent to $2.5 billion. The company said it continues to expect annual earnings consistent with its previous outlook of $3.65-$3.80 per share but lowered its sales guidance. The results trailed expectations and the guidance was lackluster.
ViaSat (VSAT) reported fourth quarter non-GAAP earnings of 19 cents per share on revenues of $308.7 million. The results exceeded estimates.
Williams (WMB) announced a 4 percent increase in its second quarter dividend to $0.3525 per share. The company also said it is targeting a 20 percent increase in its full year dividend in 2013, 2014 and 2015.