Market Analysis

The major U.S. index futures are pointing to a sharply higher opening on Friday, with sentiment getting a boost from the non-farm payrolls report, which showed bigger than expected job growth for July. Despite the increase, the jobless rate ticked up to 8.3 percent. The job optimism may help the markets temporarily forget economic worries and shake off the pessimism that has clouded the markets for the past three sessions. The service sector reading based on the Institute for Supply Management’s survey due to be released after the markets open may also impact market mood.

U.S. stocks declined on Thursday, stung over the disappointment handed out by the European Central Bank, which did not announce any concrete measures to appease the markets.

The major averages opened lower despite the jobless claims report showing a smaller than expected increase in claims. Instead, traders chose to focus on the central bank decision across the Atlantic. Although the averages pared their losses in early trading, they moved lower yet again and languished below the unchanged line for the better part of the session.

The Dow Industrials fell 92.18 points or 0.71 percent before closing at 12,879 and the S&P 500 Index ended down 10.14 points or 0.74 percent at 1,365, while the Nasdaq Composite closed at 2,910, down 10.44 points or 0.36 percent.

Twenty-six of the thirty Dow components closed lower, with Alcoa (AA), JP Morgan Chase (JPM), DuPont (DD) and Cisco Systems (CSCO) leading the slide. Financial, biotechnology and resource stocks were the worst performing sectors of the session.

Currency, Commodity Markets

Crude oil futures are rising $0.99 to $88.12 a barrel after declining $1.78 to $87.13 a barrel on Thursday. Gold futures are currently slipping $0.40 to $1,590.30 an ounce. In the previous session, the precious metal declined $16.60 to $1,590.70 an ounce.

Among currencies, the U.S. dollar is trading at 78.69 yen compared to the 78.24 yen it fetched at the close of trading on Thursday. Against the euro, the dollar is valued at $1.2245 compared to yesterday’s $1.2180.

Asia

The Asian markets ended on a mixed note, as the lackluster lead from Wall Street and the impending release of the U.S. non-farm report kept sentiment subdued in most markets in the region.

Japan’s Nikkei 225 average languished in negative territory throughout the session before closing down 98.07 points or 1.13 percent at 8,555. Export stocks came under selling pressure, with technology stocks such as Sharp and Sony tumbling 28.09 percent and 6.95 percent, respectively. The stocks were reacting to weaker than expected June quarter results. Meanwhile, Tokyo Electric rallied 9.22 percent.

Australia’s All Ordinaries closed down 47.10 points or 1.10 percent at 4,243, with material stocks serving as a huge drag. Energy stocks also tumbled in the session.

Hong Kong’s Hang Seng Index ended at 19,668, down 24.02 points or 0.12 percent. Meanwhile, China’s Shanghai Composite Index added 21.61 points or 1.02 percent before closing up 2,133. The Malaysian, Indonesian and the Singaporean markets also ended higher for the day.

On the economic front, the results of a survey by Markit Economics and HSBC showed that the Chinese service sector expanded at a faster rate in July, with the services purchasing managers’ index rising to 53.1 in July from 52.3 in June.

Europe

The major European averages are advancing strongly, with all three major averages in the region showing strong gains. Bank and technology stocks are leading the rally.

In corporate news, French insurer AXA reported higher first quarter operating profits that were higher than analysts’ expectation. German insurer Allianz also reported better than expected second quarter results. Meanwhile, Dexia reported a narrower loss for its first half.

IAG reported an operating loss for its first half, reflecting weakness in its Iberian unit and higher fuel costs. The company also reduced its 2012 outlook. Royal Bank of Scotland (RBS) reported a loss of 1.9 billion pounds for the first half, as it set aside 310 million pounds to cover costs related to a computer crash and miss-selling products to customers.

The service sector in the eurozone contracted in July, although at a slower pace, according to the results of a survey by Markit Economics. The service sector index rose 0.8 points to 47.9 in July compared to the flash estimate of 47.6. The final composite output index came in at 46.5 in July compared to 46.4 in June.

Meanwhile, service sector activity in the U.K. weakened in July, with the service sector index declining to 51 in July from 51.3 in June.

Eurostat reported that the euro area’s retail sales edged up 0.1 percent month-over-month in June compared to expectations for a 0.1 percent drop. On a year-over-year basis, retail sales declined 1.2 percent, less severe than the 1.9 percent drop expected by economists.

U.S. Economic Reports

Employment in the U.S. rose by more than anticipated in the month of July, according to a report released by the Labor Department, although the report also showed an unexpected uptick by the unemployment rate.



The Labor Department said non-farm payroll employment increased by 163,000 jobs in July following a downwardly revised increase of 64,000 jobs in June. Economists had expected employment to increase by about 100,000 jobs compared to the addition of 80,000 jobs originally reported for the previous month.



Despite the job growth, the unemployment rate edged up to 8.3 percent in July from 8.2 percent in June. The increase surprised economists, who had expected the unemployment rate to come in unchanged.

The Institute for Supply Management is scheduled to release the results of its non-manufacturing survey at 10 am ET. The non-manufacturing index is expected to show a reading of 52 for July.



The service sector index fell to 52.1 in June from 53.7 in May, hitting the lowest level since January of 2010. The business activity index slipped to 51.7 from 55.6 and the new orders index also declined about 2 points to 53.3. The order backlogs index indicated a contraction, dropping 5.5 points to 47.5. On the other hand, the employment index rose 1.5 points to 52.3.

Stocks in Focus

AIG (AIG) reported second quarter after tax operating income of $1.06 per share, up from 68 cents per share last year. Analysts had expected earnings of 57 cents per share.

NYSE Euronext (NYX) reported second quarter non-GAAP earnings of 51 cents per share, down from 61 cents per share last year. Net revenues fell 9 percent to $602 million. The earnings exceeded estimates by a penny, while the revenues trailed estimates.

Mohawk (MHK) reported second quarter adjusted earnings of $1.14 per share on net revenues of $1.5 billion. The earnings exceeded estimates, while the revenues were below expectations.

ViaSat (VSAT) reported a first quarter loss of 18 cents per share on a non-GAAP basis on revenues of $241.8 million. The loss was wider than analysts had estimated, while the revenues beat estimates.

Kraft Foods (KFT) reported second quarter operating earnings of 68 cents per share on revenues of $13.3 billion. While the earnings exceeded estimates, the revenues trailed expectations. The company said its first half results are on track with its previous guidance for 5 percent net revenue growth and at least 9 percent operating earnings per share growth on a constant currency basis. The company also announced plans to spin off its North American grocery business on October 1st.

LinkedIn (LNKD) reported in line second quarter earnings, while its revenues exceeded expectations. The company raised its full year revenue guidance and also issued above-consensus revenue guidance for the third quarter.

Consolidated Edison (ED) reported second quarter earnings from ongoing operations of 61 cents per share compared to 57 cents per share last year. The earnings were ahead of estimates. Operating revenues fell year-over-year and were below the consensus estimate. The company reaffirmed its 2012 ongoing earnings guidance, which surrounds the consensus estimate.

Blue Nile (NILE) reported better than expected second quarter results, and its 2012 guidance was also healthy.

ValueClick’s (VCLK) second quarter earnings and revenues were ahead of estimates. The company also issued above-consensus earnings guidance for the third quarter, while its revenue guidance was below estimates.

Fluor (FLR) also reported better than expected second quarter results, while it raised the low end of its 2012 earnings guidance.

Public Storage (PSA) reported second quarter adjusted funds from operation of $1.62 per share compared to $1.43 per share last year. The earnings exceeded estimates. Revenues increased and also were ahead of estimates.

Peet’s Coffee (PEET) reported second quarter earnings of 30 cents per share, lower than 38 cents per share in the year-ago period. Net revenues rose 5 percent to $95.4 million. The results trailed expectations.

Microchip Technology (MCHP) said its first quarter non-GAAP earnings came in at 48 cents per share, while non-GAAP net sales fell 5.9 percent to $352.4 million. The earnings came in line, while the revenues were below estimates. For the second quarter, the company estimates non-GAAP earnings of 50-52 cents per share on net sales of $412 million to $430 million. The company also announced the completion of its acquisition of SMSC.

Thor (THO) announced preliminary fourth quarter sales, forecasting sales of $887.21 million, ahead of the consensus estimate of $822.04 million.

Synaptics (SYNA) reported fourth quarter non-GAAP net income of 54 cents per share compared to 57 cents per share last year. Net revenues rose to $63.40 million from the year-ago quarter’s $60.59 million. The results exceeded estimates. For the September quarter, the company expects revenues of $120 million to $128 million.