Beyond the Numbers
Sentiment Tentative due to Lackluster Data, European Concerns
5/31/2012 9:29 AM
The major U.S. index futures are pointing to a higher opening on Thursday, although they have come off their highs. Among the economic reports released earlier in the day, a private sector survey showed smaller than expected job gains and jobless claims rose more than expected. A revised report from the Commerce Department report also showed a smaller than initially estimated growth. Commodities are seeing a rebound after recent losses, while the euro has come off its lows as Ireland votes on the European treaty for trimming deficit. In the absence of a solution for the eurozone debt crisis, the markets may face difficulty finding direction.
Spanish financial worries generated significant selling pressure in the U.S. markets on Wednesday, sending stocks sharply lower. The mood was further dampened by a domestic housing report showing an unexpected drop in pending home sales for April.
After opening sharply lower, the major averages saw further downside in early trading before moving roughly sideways for the rest of the session. The Dow Industrials ended down 160.83 points or 1.28 percent at 12,420 and the S&P 500 Index closed 19.10 points or 1.43 percent lower at 1,313, while the Nasdaq Composite Index receded 33.63 points or 1.17 percent before closing at 2,837.
Twenty-nine of the thirty Dow components closed lower, with Alcoa (AA), Bank of America (BAC), Exxon Mobil (XOM), Caterpillar (CAT), Chevron (CVX) and JP Morgan Chase (JPM) recording sharp declines.
Transportation, resource, financial, housing, semiconductor, computer hardware and networking stocks were among the worst performers of the session.
On the economic front, the National Association of Realtors reported that its pending home sales index fell 5.5 percent to 95.5 in April. Economists had expected a modest increase. Currency, Commodity Markets
Crude oil futures are slipping $0.57 to $87.25 a barrel after plunging $2.94 to a 7-month low of $87.82 a barrel on Wednesday. An ounce of gold is currently fetching $1,567.40, up $1.70 from the previous session’s close of $1,565.70. On Wednesday, gold added $14.70.
Among currencies, the U.S. dollar is trading at 78.64 yen compared to the 79.08 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2391 compared to yesterday’s $1.2367.Asia
The Asian markets retreated, weighed down by the negative lead from Wall Street overnight. Fears regarding Spain's banking system have been spreading like wildfire, as hopes of the nation bailing out its banking system is fading given the anemic economic outlook.
Japan's Nikkei 225 average opened notably lower and moved sideways in the morning before paring some of its losses thereafter. The index ended down 90.46 points or 1.05 percent at 8,543. Along with the European woes, the strength of the yen and weak domestic industrial output data also hurt sentiment.
The All Ordinaries of Australia closed 15 points or 0.36 percent lower at 4,134, with energy stocks leading the market lower. Material stocks also saw notable losses.
Hong Kong's Hang Seng Index closed down 60.70 points or 0.32 percent at 18,630, South Korea's Kospi retreated 0.08 percent and China's Shanghai Composite closed moderately lower.
On the economic front, Japanese industrial output rose 0.2 percent month-over-month in April, slightly lighter than expected.
India's fiscal year fourth quarter GDP rose 5.3 percent year-over-year, slower than the 9.1 percent growth in the year-ago quarter, as manufacturing output contracted. Europe
European stocks are currently mixed, as M&A news and strength in beaten down commodities has supported sentiment, offsetting concerns regarding the domestic debt situation. Some positive domestic economic data has also provided a reason to stay invested.
U.K.'s IT services firm Logica announced a deal to be bought by CGI Group for 1.7 billion pounds.
A government report showed that Germany's unemployment rate edged down 0.1 percentage points to 6.7 percent in April. A separate report showed that German retail sales rose for the second straight month. U.S. Economic Reports
Employment in the U.S. private sector rose by less than expected in the month of May, according to a report released by payroll processor ADP, with the report providing further signs of sluggishness in the labor market.
ADP said private sector employment rose by 133,000 jobs in May following a downwardly revised increase of 113,000 jobs in April. Economists had expected an increase of about 154,000 jobs compared to the addition of 119,000 jobs originally reported for the previous month.
While the U.S. economy saw continued growth in the first quarter of 2012, the Commerce Department released a report showing that the pace of growth was slower than previously estimated.
The report showed that GDP increased at an annual rate of 1.9 percent in the first quarter compared to the initial estimate of 2.2 percent growth. The downward revision to the pace of growth came in line with expectations.
The Commerce Department said the revision to the pace of growth reflected downward revisions to private inventory investment, state and local government spending and consumer spending as well as an upward revision to imports, which are a subtraction in the calculation of GDP.
New claims for unemployment in the U.S. rose by more than expected for the last full week of May, according to figures released by the Labor Department.New unemployment claims came in at a seasonally adjusted level of 383,000 for the week ending May 26, up 10,000 from the previous week's revised level of 373,000.
The initial unemployment claims level was higher than the predictions of most economists who had expected new claims to hold steady at the 370,000 level initially reported for the previous week. The four-week rolling average of new unemployment claims, a figure that eases some of the week-to-week volatility in the reports, showed a slight, 3,750 increase to 374,500 from the previous week's revised average of 370,750.
The results of the Institute for Supply Management-Chicago's business survey for May are scheduled to be released at 9:45 am ET. Economists expect the business barometer index based on the survey to edge down to 56.1.
The index fell 6 points to 56.2 in April, marking the lowest reading since November 2009. The new orders index declined roughly 6 points to 57.4 and the production index fell 11.5 points to 57.1, while the order backlogs index rose 2.5 points. The employment index also improved, rising 2.4 points to 58.7.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended May 25th at 11 am ET.
Crude oil inventories rose by 0.9 million barrels to 382.5 million barrels in the week ended May 18th. Inventories remained above the upper limit of the average range.
On the other hand, gasoline inventories declined by 3.3 million barrels and were in the lower limit of the average range. Distillate stockpiles also fell, edging down by 0.3 million barrels and remained in the lower limit of the average range. Refinery capacity utilization averaged 87.2 percent over the four weeks ended May 18th compared to 86.3 percent over the previous four weeks. Stocks in Focus
TIVO (TIVO) reported a wider than expected first quarter loss on revenues of $67.8 million, above the $54.89 million consensus estimate. The company expects to report a loss for its second quarter, while its revenue guidance was slightly shy of estimates.
Zumiez (ZUMZ) reported a 13.7 percent jump in comparable store sales for May.
Costco (COST) reported that its comparable store sales rose 4 percent in May, while its net sales climbed 7 percent. Excluding the impact of gasoline prices, comparable store sales were up 6 percent.
Lions Gate (LGF) reported a fourth quarter loss of 17 cents per share compared to a profit of 34 cents per share last year. Revenues rose to $645.2 million from $376.9 million last year.
Coldwater Creek (CWTR) reported a first quarter loss of 20 cents per share, narrower than the loss of 32 cents per share last year. Net sales fell to $169.9 million from the year-ago quarter’s $179.8 million. The loss was in line with estimates, while the revenues trailed expectations.
F5 Networks (FFIV) announced the resignation of its Executive Vice President of worldwide sales Mark Anderson. The company also said Senior Vice President, America Sales Dave Feringa will take over for Anderson.
In conjunction with its investor day, PARAXELEL (PRXL) reconfirmed its fourth quarter and full year guidance. For the quarter, the company expects GAAP earnings of 28-30 cents per share on service revenue of $376 million to $381 million. For the full year, the company expects adjusted earnings of $1.04-$1.06 per share on service revenues of $1.380 billion to $1.385 billion. The company also said it expects Fiscal Year 2013 GAAP earnings of $1.31-$1.47 per share on revenues of $1.625 billion to $1.655 billion. The guidance surrounded the consensus estimates.