Market Analysis

The major U.S. index futures are pointing to a lower opening on Thursday, with sentiment cautiously apprehensive ahead of the EU summit. Although no breakthrough developments are expected from the meeting, if the leaders show some proclivity to resolve their differences, it could be market positive. Among the domestic economic reports released earlier in the day, jobless claims fell, but remained above the level expected by economists. Risk currencies are seeing a pullback, although crude oil is showing some strength. Given very little trading cues aside of the EU summit, markets may tread around for want of direction.

U.S. stocks extended their gains on Wednesday after a couple of domestic economic reports encouraged traders to pick up stocks despite the eurozone debt threat.

The major averages opened higher after the Commerce Department released a report showing a notable increase in durable goods orders. The averages legged up in early trading, thanks to a positive pending home sales data. Thereafter, the averages moved roughly sideways before closing notably higher.

The Dow Industrials ended up 92.34 points or 0.74 percent at 12,627 and the S&P 500 Index added 11.86 points or 0.90 before closing at 1,332, while the Nasdaq Composite Index closed at 2,875, up 21.26 points or 0.74 percent.

Twenty-four of the thirty Dow components closed higher, with JP Morgan Chase (JPM), Bank of America (BAC), Alcoa (AA), Chevron (CVX), DuPont (DD), General Electric (GE) and Coca-Cola (KO) leading the Dow’s gains.

Housing, financial, biotechnology, semiconductor, utility and energy were among the best performing sectors of the session, while retail stocks saw some weakness.

Durable goods orders rose 1.1 percent month-over-month in May after declining by 0.2 percent in April. Excluding transportation orders, the order growth was merely 0.4 percent, which was below expectations. That said, orders for machinery, computers, electrical equipment and transportation equipment all increased. Core orders, defined as non-defense capital goods order, excluding aircrafts, increased by 1.6 percent in May, while shipments of this category of goods edged up by 0.4 percent, reversing the 0.6 percent drop in April.

The National Association of Realtors reported that its pending home sales index surged up 5.9 percent month-over-month in May. The index was up 13.3 percent from the year-ago period. Pending home sales rose in all four regions.

Currency, Commodity Markets

Crude oil futures are adding $0.51 to $80.72 a barrel after advancing $0.85 to $80.21 a barrel on Wednesday. The previous session’s gains came amid the release of the positive U.S. economic data and the oil inventory report, which showed that crude oil inventories edged down by 0.1 million barrels in the week ended May 22nd to 387.2 million barrels. Inventories continued to remain above the upper limit of the average range.

Distillate inventories decreased by 2.3 million barrels and were below the lower limit of the average range. Meanwhile, gasoline stockpiles rose by 2.1 million barrels, yet remained in the lower limit of the average range. Refinery capacity utilization averaged 91.9 percent over the four weeks ended June 22nd compared to 91 percent over the previous four weeks.

Gold futures, which rose $3.50 to $1,578.40 an ounce in the previous session, are currently slipping $7.70 to $1,570.70 announce.

Among currencies, the U.S. dollar is trading at 79.41 yen compared to the 79.72 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2433 compared to yesterday’s $1.2469.

Asia

The major Asian markets end mixed ahead of the EU summit, as the positive lead from the U.S. overnight and positive Japanese retail sales data allayed some of the misgivings surrounding what is likely to emerge out of the meeting.

Japan’s Nikkei 225 average opened higher and moved sideways in the morning before moving steadily higher in the afternoon. The index closed up 143.62 points or 1.65 percent at 8,874, its highest level since May 17th. A majority of stocks advanced, with financial, real estate and utility stocks leading the gains. Mining stocks came under selling pressure.

After moving sharply higher in early trading, Australia’s All Ordinaries moved broadly sideways until early afternoon trading. The average gradually shed all of its gains and moved back and forth across the unchanged line in a narrow range before closing modestly higher. At the close of trading, the index was up 1.60 points or 0.04 percent at 4,086.

Hong Kong’s Hang Seng Index retreated in a late hour sell-off, closing down 151.68 points or 0.79 percent at 19,025. The Indian, Chinese, Indonesian, Taiwanese and Malaysian markets also closed lower, while the New Zealand, Singaporean and South Korean markets advanced.

On the economic front, a report released by Japan’s Ministry of Economy, Trade and Industry showed that Japanese retail sales rose 3.6 percent year-over-year in May compared to the 3 percent increase forecast by economists. That said, the growth rate eased from recent months, reflecting the slowdown in domestic consumption amid intensifying worries concerning the global economy.

Europe

The major European averages have reversed course and are trading notably lower, as disappointing German employment data and apprehensions ahead of the EU summit weigh on sentiment.

In corporate news, U.K. department store Debenhams reported 3.9 percent sales growth for the 16 week period ending June 23rd, benefiting from incremental sales triggered by the Queen’s diamond jubilee and the Easter bank holiday. Packaging company DS Smith reported strong full year profit growth.

On the economic front, a report released by the German Federal Labor Agency showed that the number of unemployed people in Germany rose by 7,000 in June from the previous month. Economists expected a more modest increase of 3,000. At the same time, the unemployment rate ticked up to 6.8 percent.

The results of a series of surveys by the European Commission showed that confidence waned in the eurozone region. The business climate index fell to –0.94 in June from –0.79, the economic sentiment index declined to 89.9 from 90.5 and the consumer confidence index worsened to –19.8 from –19.3.

House prices in the U.K. unexpectedly fell in June, according to a report released by Nationwide. Separately, the U.K. Office for National Statistics released its revised first quarter GDP report, which confirmed the 0.3 percent GDP decline initially estimated. With the economy having now contracted for the second straight quarter, it has re-entered the recession territory.

Italy sold a targeted amount of 5-year and 10-year bonds at rates higher than at May auctions. Demand for the 5-year bond was higher than in the May auction, while demand for the 10-year bond was lower than in May.

U.S. Economic Reports

U.S. economic growth in the first three months of the year came in line with expectations, according to a report released by the Commerce Department, with the pace of growth unrevised from the previous estimate.



The Commerce Department said that GDP increased at an annual rate of 1.9 percent in the first quarter compared to the 3.0 percent growth seen in the fourth quarter. The unrevised pace of growth came in line with the expectations of economists.

Downward revisions to exports, consumer spending, and private inventory investment were offset by an upward revision to non- residential fixed investment and a downward revision to imports, which are a subtraction in the calculation of GDP.

New claims for unemployment fell somewhat for the week but nevertheless remained slightly higher than predicted, according to figures released by the Labor Department. The DOL put the level of initial unemployment claims at a seasonally adjusted level of 386,000 forthe week ending June 23, a decrease of 6,000 from the previous week's revised level of 392,000.



The decrease, however, comes after the previous week's level of new claims was revised up from the 387,000 initially reported. Most economists had predicted a somewhat lower level of 385,000 new claims.

Stocks in Focus

Paychex (PAYX) reported fourth quarter earnings of 34 cents per share on revenues of $551.5 million, up 6 percent year-over-year. The earnings were in line, while the revenues missed estimates. For 2013, the company expects net income growth of 5-7 percent and service revenue growth of 5-6 percent.

Hutchinson Technology (HTCH) announced third quarter net sales of $60 million, lower than $65.5 million last year, as shipments came in at 100 million suspension assemblies, lower than its guidance of 105 million to 115 million. Analysts estimated revenues of $70.30 million for the quarter.

Herman Miller (MLHR) reported fourth quarter adjusted earnings of 28 cents per share compared to 30 cents per share last year. Net sales fell 4.7 percent to $420.7 million. The results trailed estimates. For the first quarter, the company expects earnings of 37-41 cents per share on revenues of $440 million to $460 million. The guidance surrounded the consensus estimates. Meanwhile, the company increased its quarterly dividend to 9 cents per share from $0.022 per share.

Pacific Ethanol (PEIX) announced that it intends to offer units consisting of common stock and warrants in an underwritten public offering.

Harman International (HAR) announced that its board has approved an increase in its annual cash dividend to 60 cents per share, translating to a quarterly rate of 15 cents per share compared to its previous dividend of $0.075 per share.

Casella Waste Systems (CWST) reported a fourth quarter loss of $49.1 million or $1.83 per share, including a non-cash asset impairment charge of $40.7 million and a $0.3 million loss on debt modification. Revenues fell 0.3 percent to $109.2 million, about in line with estimates. For 2013, the company expects revenues of $482 million to $492 million, below the consensus estimate of $494.17 million.

Wendy’s (WEN) announced preliminary second quarter same store sales growth of 3 percent for Wendy’s North America company-operated restaurants. The company also reaffirmed its 2012 adjusted EBITDA from continuing operations guidance of $320 million to $335 million.

Red Hat (RHT) announced a deal to buy FuseSource from Progress Software (PRGS). Meanwhile, Progress Software reported second quarter non-GAAP earnings of 21 cents per share lower than 38 cents per share last year. Revenues fell 12 percent to $114.6 million. The results exceeded expectations. For the third quarter, the company expects core revenues of $90 million to $95 million. The company also reiterated its full year core revenue growth forecast of 5 percent on a constant currency basis.

Bayer Healthcare and Onyx Pharma (ONXX) announced that the FDA has granted priority review designation to Bayer’s NDA for its colorectal cancer treatment.

News Corp. (NWSA) announced that its board has authorized its plan of separation of publishing and media and entertainment businesses into two distinct publicly traded companies.

Accenture (ACN), Nike (NKE), Research In Motion (RIMM), Smith & Wesson (SWHC) and TIBCO Software (TIBX) are among the companies due to release their quarterly results after the markets close.

Family Dollar Stores (FDO) said its third quarter profit and sales improved from the year-ago quarter, but missed analysts' expectations by a whisker.

QUALCOMM (QCOM) announced its plan to modify its corporate structure. The new corporate structure will feature the parent company, Qualcomm Inc., which includes QTL and corporate functions, as well as most of its patent portfolio; and a new wholly owned subsidiary, Qualcomm Technologies, Inc., which will operate substantially all of research and development activities, as well as product and services businesses, including its semiconductor business, QCT.