Beyond the Numbers
Upbeat Domestic Data May Lend Support Despite Mixed Views on ECB Action
9/6/2012 9:23 AM
The major U.S. index futures are pointing to a higher opening on Thursday, with futures perked up by some upbeat domestic job market data. Jobless claims fell by more than expected, while the private sector added more jobs than had been anticipated in August. Meanwhile, across the Atlantic, the European Central Bank announced outright monetary transactions in secondary markets for sovereign bonds. That said, strict conditionalities have been attached to these purchases, limiting the ability of all and sundry to take advantage of it. The euro has given back some gains following ECB President Mario Draghi’s press conference. The markets may also take cues from the results of the Institute for Supply Management’s service sector survey for August.
The lackluster run by U.S. stocks continued on Wednesday, as trading showed a lack of direction in the absence of any solid market moving cues. With the much-awaited European Central Bank meeting coming up and a few labor market statistics due to be released, traders adopted a cautious stance, dreading to make any meaningful moves. The major averages opened little changed and moved back and forth across the unchanged line for much of the session before closing mixed.
The Dow Industrials ended up 11.54 points or 0.09 percent at 13,048, while the S&P 500 Index closed 1.50 points or 0.11 percent lower at 1,403 and the Nasdaq Composite Index ended at 3,069, down 5.79 points or 0.19 percent.
Nineteen of the thirty Dow components closed higher, with Disney (DIS), Hewlett-Packard (HPQ), Boeing (BA) and Alcoa (AA) advancing strongly. On the other hand, American Express (AXP) fell over 2 percent.Currency, Commodity Markets
Crude oil futures are adding $0.73 to $96.09 a barrel after rising $0.06 to $95.36 a barrel on Wednesday.
The weekly inventory report released by the American Petroleum Institute late Wednesday showed that crude oil inventories rose by 5.5 million barrels in the week ended September 1st.
An ounce of gold is currently fetching $1,706.70 an ounce, up $2.70 from the previous session’s close of $1,694 an ounce. On Wednesday, the precious metal slid $2.
Among currencies, the U.S. dollar is trading at 78.86 yen compared to the 78.39 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2591 compared to yesterday’s $1.2601.Asia
Most Asian markets stayed afloat, as stimulus hopes kicked in some buying along with strong Australian jobs data.
After spending the bulk of a volatile session below the unchanged line, Japan’s Nikkei 225 index stalled a four-session decline and closed up merely 0.75 points or 0.01 percent at 8,681.
The yen’s weakness supported export stocks, with Shiseido, Yahoo Japan, All Nippon Airways, Pioneer and Oki Electric rising over 3 percent each. Meanwhile, Nippon Yusen, Kobe Steel and Sharp were the biggest decliners of the session.
Australia’s All Ordinaries opened higher and moved sharply higher in early trading. Thereafter, the index went about a consolidation move before closing up 33.90 points or 0.70 percent at 4,332.
Energy and material stocks advanced strongly, lifting the overall markets, as risk appetite perked up on stimulus hopes and the strong domestic employment data.
Hong Kong’s Hang Seng Index closed 64.23 points or 0.34 percent higher at 19,209. China’s Shanghai Composite Index added 14.24 points or 0.70 percent before closing at 2,052, aided by talks about a potential stimulus announcement for the railway sector.
On the economic front, a report released by the Australian Bureau of Statistics showed that Australia’s jobless rate eased to 5.1 percent in August from 5.2 percent in July. Economists expected the rate to increase to 5.3 percent. At the same time, the economy lost 8,800 jobs, defying expectations for an addition of 5,000 jobs. Europe
The major European markets are trading higher amid the ECB and Bank of England decisions, although stocks gave back some of their early gains.
Spain sold 3.5 billion euros in short-term bonds at an auction, with borrowing costs declining, although demand remained lackluster.
German airline Air Berlin reported declines in its load factor and passengers carried during August, while easyJet reported an increase in the number of passengers it carried.
In economic news, the jobless rate for France calculated based on ILO standards rose to 10.2 percent in the second quarter from 10.1 in the first quarter.
A report released by Lloyds Bank’s Halifax division showed that U.K. house prices fell 0.4 percent month-over-month in August compared to a 0.7 percent drop in July.
The revised report released by Eurostat showed that the eurozone economy contracted by 0.2 percent sequentially in the second quarter, in line with the initial estimate. In a report released by the OECD, the organization conceded that recession in some key eurozone economies would hurt global growth.
The European Central Bank held its benchmark interest rate unchanged at a record low for the second straight month. The main refinancing rate was maintained at 0.75 percent, following the meeting of the Governing Council in Frankfurt. In the ensuing press conference, the ECB president Mario Draghi said the bank’s governing council has agreed on the modalities of outright monetary transactions.
Meanwhile, Bank of England policymakers refrained from expanding their quantitative easing, as the current GBP 50 billion extension is set to last through November. That said, the case for more stimulus is seen in the pipeline, given the weak economic condition.U.S. Economic Reports
Private sector employment in the U.S. rose by much more than expected in the month of August, according to a report released by payroll processor Automatic Data Processing, Inc. (ADP), with the data likely to generate some optimism about the government data due on Friday.
ADP said private sector employment increased by 201,000 jobs in August following a revised increase of 173,000 jobs in July. Economists had expected employment to increase by about 149,000 jobs compared to the addition of 163,000 jobs originally reported for the previous month.
In another upbeat sign for the sluggish labor market, the Labor Department released a report showing a bigger than expected drop in first-time claims for unemployment benefits in the week ended September 1st.
The report said initial jobless claims fell to 365,000 from the previous week's revised figure of 377,000. Economists had expected jobless claims to edge down to 370,000 from the 374,000 originally reported for the previous week.
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 53 for August.
The service sector survey for July showed that the non-manufacturing index rose to 52.6 in July from 52.1 in June. The business activity index climbed 5.5 points to 57.2 and the new orders index rose a point to 54.3. Meanwhile, the employment index slipped to 49.3, indicating a contraction for the first time since December 2011.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended August 31st at 11 AM ET.
Distillate stockpiles edged up by 0.9 million barrels and were below the lower limit of the average range. Meanwhile, gasoline inventories fell by 1.5 million barrels and were in the lower half of the average range. Refinery capacity utilization averaged 91.9 percent over the four weeks ended August 24th compared to 92.1 percent over the four weeks ended August 17th.Stocks in Focus
FuelCell (FCEL) reported a third quarter net loss of 6 cents per share compared to a loss of 7 cents per share last year. Revenues fell to $29.7 million from the year-ago quarter’s $31.2 million. The results trailed expectations.
ABM Industries (ABM) reported third quarter adjusted income from continuing operations of 37 cents per share, lower than 51 cents per share last year. Revenue edged up 0.3 percent to $1.079 billion. The results were below estimates. The company lowered its 2012 adjusted income from continuing operations guidance to $1.36-$1.42 per share, which includes 11 cents per share in a one-time benefit.
Men’s Wearhouse (MW) said its second quarter earnings rose to $1.15 per share compared to adjusted earnings of $1.11 per share last year. Net sales rose 1 percent to $662.3 million. The earnings exceeded estimates, while the revenues were slightly below estimates. The company raised its full year earnings guidance to $2.74-$2.80 per share and sales growth guidance to 4.8-5.6 percent.
Korn/Ferry (KFY) reported first quarter earnings of 22 cents per share, down from 33 cents per share last year. Total revenues also declined to $196 million from the year-ago quarter’s $214.6 million. The results exceeded estimates. While cautioning of challenges and uncertainty in the global financial markets and economy, the company said it expects second quarter fee revenues of $180 million to $195 million and adjusted earnings of 16-22 cents per share. Analysts estimate earnings of 18 cents per share.
H&R Block (HRB) reported an adjusted loss of 38 cents per share for its first quarter compared to a loss of 37 cents per share last year. Revenues fell 4 percent to $96 million. The loss was narrower than analysts’ expectations, while the revenues fell short of expectations.
Verifone (PAY) reported third quarter non-GAAP earnings of 75 cents per share compared to 49 cents per share last year. The company’s non-GAAP net revenues rose to $493 million from $317 million last year. The earnings beat estimates, while the revenues were about in line with estimates. For the full year, the company expects non-GAAP earnings of $2.73-$2.75 per share on revenues of $1.893 billion to $1.898 billion. The earnings guidance was above expectations, while the revenue outlook fell short of expectations.
RPM International (RPM) announced the acquisition of nail care enamel and coatings maker Kirker Enterprises, which has annual sales in excess of $100 million. The companies did not reveal the terms of the deal.
Entergy (ETR) announced that it has appointed Leo Denault as its chairman and CEO following incumbent CEO Wayne Leonard’s decision to retire on January 31st, 2013. The company also announced the appointment of Andrew Marsh, currently VP, system planning, as its EVP and CFO.
Avis Budget (CAR) said it has agreed to buy New Zealand’s Apex Car Rentals. The acquisition is due to close in October 2012.
Cooper Companies (COO), Quiksilver (ZQK) and Smith & Wesson (SWHC) are among the companies due to release their results after the markets close.