Market Analysis

The major U.S. index futures are pointing to a lackluster opening on Friday. The advances that have come on the back of positive tidings from Europe may be difficult to sustain, as traders stare at an uncertain economic outlook. Domestic corporate tidings have been largely mixed. The markets may now take cues from a domestic consumer sentiment data to be released shortly after the markets open.

U.S. stocks advanced solidly on Thursday after showing trepidation in recent sessions over the likelihood of stimulus support from central banks and governments. The optimism stemmed from comments from German Chancellor Angela Merkel that the European Central Bank’s approach to defend the euro is in line with the ideology of the politicians in the region.

The major averages opened on a nervous note after the Commerce Department released a mixed housing starts report and the jobless claims data rose about in line with expectations. In about an hour after the open, the averages began to climb before seeing some consolidation in late trading.

The Dow Industrials ended up 85.33 points or 0.65 percent at 13,250 and the S&P 500 Index closed 9.98 points or 0.71 percent higher at 1,416, while the Nasdaq Composite Index closed at 3,062, up 31.46 points or 1.04 percent.

Twenty-three of the thirty Dow components closed higher and one stock closed unchanged, while the remaining six stocks ended in negative territory. Cisco (CSCO) led the Dow’s gains with a 9.63 percent upside. Home Depot (HD) and Microsoft (MSFT) also rose notably. On the other hand, Wal-Mart (WMT) retreated over 3 percent in reaction to its financial results.

Resource, housing, retail, semiconductor and networking stocks were among the best performers of the session.

On the economic front, initial jobless claims rose to a 2-week high of 366,000 in the week ended August 11th, although the 4-week average fell to 363,750.

Meanwhile, the Commerce Department said housing starts declined 1.1 percent month-over-month to a seasonally adjusted annual rate of 746,000 units. However, the drop was from June’s strong reading of 754,000 units. Single-family starts fell 6.5 percent, while the volatile multi-family starts rose 12.4 percent. Building permits rose 6.8 percent to a 4-year high of 812,000 units.

The results of the Philadelphia Federal Reserve’s manufacturing survey showed that manufacturing activity in the region continued to contract. The headline manufacturing index improved to –7.1 in August from –12.9 in July. The new orders index rose 1.4 points, yet remained in contraction zone at –5.5, while the order backlogs index declined by 6.7 points to –16.2. The employment index remained little changed at –8.6. The 6-month outlook index fell by about 7 points to 12.5, the lowest level in about a year.

Currency, Commodity Markets

Crude oil futures are easing $0.12 to $95.48 a barrel after advancing $1.27 to $95.60 a barrel on Thursday. Gold futures are currently slipping $1.60 to $1,617.60 an ounce. In the previous session, the precious metal climbed $12.60 to $1,619.20 an ounce.

On the currency front, the U.S. dollar is trading at 79.41 yen compared to the 79.35 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2348 compared to yesterday’s $1.2355.

Asia

The major Asian markets, tracking the positive close on Wall Street overnight. Some earnings disappointment weighed on the Shanghai Composite Index, which fluctuated between gains and losses before ending marginally higher. The positive vibes generated by Merkel’s solidarity with the European Central Bank and positive U.S. building permits data also added to the optimism among traders in the region.

Japan’s Nikkei 225 average opened with modest gains and rose sharply in late morning trading. Thereafter, the average moved broadly sideways before closing up 69.74 points or 0.77 percent at 9,163. Most stocks, barring defensive utility and pharma stocks, moved to the upside.

Australia’s All Ordinaries closed 40.30 points or 0.93 percent higher at 4,394. Energy and consumer staple stocks were among the biggest gainers, while material stocks also rallied.

Dainippon Screen Manufacturing, Sumitomo Metal Industries, Sharp, JTEKT, Okuma and Alps Electric led the Nikkei’s advance.

Hong Kong’s Hang Seng Index ended at 20,116.07, up 153.12 points or 0.77 percent.

Europe

The major European averages opened higher and are holding above the unchanged line ahead of the release of the U.S. consumer sentiment reading.

In corporate news, Heineken is reportedly in discussions with Fraser & Neave for buying the rest of the stake it already does not own in Asia Pacific Breweries, with a sweetened $55 per share bid. Swiss Life reported a decline in its profits for its first-half.

U.S. Economic Reports

The preliminary report of the Reuters/University of Michigan's consumer sentiment survey for August is scheduled to be released at 9.55 am ET. The consumer sentiment index is expected to have edged down to 72 from 72.3 in the previous month.

The Conference Board is scheduled to release a report on the U.S. leading economic indicators index for July at 10 am ET. The consensus estimate calls for a 0.2 percent increase in the index.



The leading economic indicators index for the U.S. fell 0.3 percent month-over-month in June following a 0.4 percent increase in May and a 0.1 percent decline in April. At the same time, the coincident economic index and the lagging economic indicators index climbed 0.2 percent each.

Stocks in Focus

Gardner Denver (GDI) announced a restructuring initiative, which is expected to generate annualized pre-tax cost savings of $35-$40 million by 2016. Of the total annualized savings, $10 million to $15 million will be achieved in 2013. The initiative includes consolidation of manufacturing facilities and reduction of associated staffing levels.

Brocade (BRCD) announced that its CEO Michael Klayko intends to resign once a successor is identified by the board. Separately, Brocade (BRCD) reported third quarter non-GAAP earnings of 14 cents per share and revenues of $555.3 million. The results exceeded estimates.

ScanSource (SCSC) reported fourth quarter earnings of 71 cents per share on revenues of $754.5 million. The earnings were ahead of estimates, while revenues trailed estimates. The company issued below-consensus earnings and revenue guidance for the first quarter.

Aeropostale (ARO) reported a second quarter adjusted loss of 2 cents per share on net sales of $485.3 million, up 4 percent. For the third quarter, the company expects earnings of 25-30 cents per share. The results trailed estimates, while the guidance was also weak.

Gap (GPS) said its second quarter earnings rose to 49 cents per share from 35 cents per share last year, while revenues rose 6 percent to $3.58 billion. The company raised its 2012 earnings guidance to $1.95 to $2 per share. The results were ahead of estimates, while the guidance trailed estimate despite the upward revision.

DryShips (DRYS) reported a loss for its second quarter, which was in line with estimates, while its revenues missed estimates.

Marvel Technology’s (MRVL) second quarter results were below estimates.

Parkway Properties (PKY) announced the appointment of David R. O’Reilly as its CFO, effective August 16. O’Reilly was serving as the interim CFO along with his responsibilities as EVP and chief investment officer.