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Beyond the Numbers

Consolidation Phase Likely to Continue as Retail Sales Come in Line
2/13/2013 9:14 AM

The major U.S. index futures are pointing to a higher opening on Wednesday, with sentiment holding up after Commerce Department reported retail sales growth in line with expectations. The markets could also react to earnings reports, with tech space particularly in focus ahead of Cisco’s (CSCO) earnings report. In the absence of any other major economic reports to impact trading, the major averages could bounce around current levels with the support of the momentum they have been witnessing.

U.S. stocks closed Tuesday’s session on a mixed note, underlining the resilience of the markets despite the overbought levels and the absence of any major catalysts. The major averages opened on a tentative note and were found lingering close to the unchanged line with a slight positive bias in the morning.

The Dow Industrials and the S&P 500 Index advanced in the mid-session, reaching the day’s high in late afternoon trading before giving back some gains and yet closing modestly higher. The Nasdaq Composite traded mostly below the unchanged line before closing lower.

The Dow Industrials ended up 47.46 points or 0.34 percent at 14,019 and the S&P 500 Index closed 2.42 points or 0.16 percent higher at 1,519, while the Nasdaq Composite ended at 3,187, down 5.51 points or 0.17 percent.

Twenty-four of the thirty Dow components closed higher and one stock ended unchanged, while the remaining five stocks retreated. Bank of America (BAC) rallied 3.25 percent and led the Dow’s advance, while Alcoa (AA), Home Depot (HD), Hewlett-Packard (HPQ), JP Morgan Chase (JPM) and AT&T (T) also advanced notably. Meanwhile, Coca-Cola (KO) fell 2.72 percent in reaction to its quarterly results and Cisco Systems declined over 1 percent ahead of its quarterly results.

Housing and financial stocks were among the best performers of the session.

Currency, Commodity Markets

Crude oil futures are rising $0.30 to $97.81 a barrel after rising $0.48 to $97.51 a barrel on Tuesday. An ounce of gold is currently valued at $1,651.50, up $1.90 from the previous session’s close of $1,649.60. In the previous session, gold edged up $0.50.

Among currencies, the U.S. dollar is trading at 93.47 yen compared to 93.48 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.3478 compared to yesterday’s $1.3455.

Asia

The Asian markets, with the exception of Japan, closed higher even as China, Hong Kong and Taiwan remained closed for Lunar New Year holidays. The yen built on its New York session’s gains and exerted downward pressure on Japanese equities.

Japan’s Nikkei 225 average opened lower and languished slightly below the unchanged line until the afternoon. Thereafter, the index pulled back sharply before seeing some consolidation in late trading. The index closed 117.71 points or 1.04 percent lower at 11,251. Exports stocks retreated due to the yen’s strength, while insurance, finance, pharma, utility and telecom stocks gained ground. Pioneer slumped 10.67 percent and led the Nikkei’s retreat, while Tokyo Electric, Mitsubishi Materials, Mitsumi Electric, Kobe Steel and Daikin Industries also saw notable losses.

Australia’s All Ordinaries opened higher and rose sharply initially and then steadily until the afternoon. Thereafter, the index broadly consolidated before closing up 43 points or 0.86 percent at a fresh multi-year high of 5,025. Positive domestic earnings and a positive consumer confidence reading lifted the spirits of the market. Financial stocks advanced strongly in the session, helped by upbeat results from Commonwealth Bank, while material and energy stocks also saw notable buying interest.

South Korea’s Kospi rallied 1.56 percent and Singapore’s Straits Times Index rose close to 1 percent, while the Indian, Indonesian and Malaysian averages ended moderately higher.

A survey by Westpac and the Melbourne Institute showed that consumer confidence in Australia improved notably in February. The consumer confidence index based on the survey rose 7.7 percent to 108.3.

Meanwhile, the Bank of Japan reported that an index measuring domestic corporate service prices rose 0.4 percent month-over-month in January compared to the 0.2 percent increase expected by economists. Annually, prices were down 0.2 percent.

Europe

After trading on a mixed note in reaction to some lukewarm domestic data and mixed earnings, European stocks have moved uniformly higher following the release of the U.S. retail sales report.

In corporate news, French banking giant Societe Generale reported a loss for its fourth quarter, hurt by write downs and charges. Dutch financial services giant ING reported a subpar profit for its fourth quarter and also announced the elimination of an additional 2,400 jobs.

French oil giant Total reported higher profit and revenues for its fourth quarter, capitalizing on higher crude prices and better refining margins. European travel and tour operator TUI reported a loss before interest, taxes and amortization on an underlying basis for its first quarter, which however was narrower than what analysts had expected. Brewer Heineken report a higher profit for 2012.

On the economic front, German wholesale price inflation slowed to its lowest level in six months in January, according to a report released by the German Federal Statistical Office. The inflation rate slowed to 2.3 percent from 3.2 percent in December.

U.S. Economic Reports

Retail sales in the U.S. saw a modest increase in the month of January, according to a report released by the Commerce Department. The report showed that retail sales crept up by 0.1 percent in January following a 0.5 percent increase in December. The modest increase in sales matched economist estimates.



Excluding a 0.1 percent drop in sales by motor vehicle and parts dealers, retail sales rose by 0.2 percent in January compared to a 0.3 percent increase in December.

While fuel import prices showed a notable rebound in the month of January, the Labor Department released a report showing that U.S. import prices increased by less than anticipated for the month.



The report showed that import prices rose by 0.6 percent in January following a revised 0.5 percent decrease in December. Economists had expected import prices to increase by 0.8 percent compared to the 0.1 percent drop originally reported for the previous month.

Meanwhile, the Commerce Department said export prices rose by 0.3 percent in January, matching economist estimates. The increase in export prices followed a 0.1 percent dip in December.

The Commerce Department is scheduled to release its business inventories report at 10 am ET. Economists expect business inventories at the end of December to have increased by 0.3 percent, the same pace as in the previous month.



Business inventories rose 0.3 percent month-over-month in November. Annually, inventories were up 5.5 percent. At the same time, business sales climbed 1 percent compared to the previous month, while rising 4.3 percent annually. The business inventories to sales ratio came in at 1.28 in November, unchanged from October.

The Energy Information Administration will release its weekly petroleum inventory report at 10:30 am ET.



Crude oil inventories rose by 2.6 million barrels to 371.7 million barrels in the week ended February 1st. Inventories were well above the upper limit of the average range.

Gasoline stockpiles rose by 1.7 million barrels and were in the upper limit of the average range. Meanwhile, distillate inventories declined by 1 million barrels and remained near the lower limit of the average range. Refinery capacity utilization averaged 85.2 percent over the four weeks ended February 1st compared to 86.4 percent over the four weeks ended January 25th.

St. Louis Federal Reserve Bank President James Bullard is scheduled to speak on the economy and monetary policy to the Arkansas State University's Agribusiness Conference, Jonesboro, Arkansas at 11:10 am ET.

Stocks in Focus

DDR (DDR) reported fourth quarter operating funds from operations of 27 cents per share on revenues of $210.87 million. The results were better than expected. For 2013, the company continues to expect operating funds from operations of $1.07-$1.11 per share, surrounding the consensus estimate.

Emulex (ELX) said it has received acceptances for 88 percent of the shares in Endace, taking another step towards completing its acquisition of the New Zealand based network visibility infrastructure provider.

Cliff Natural (CLF) announced that it is offering to sell 9 million of its common shares at $0.125 per share and 20 million of its depository shares each representing a 1/40th interest in a share of its new mandatory convertible preferred stock. The company reduced its quarterly cash dividend by 76 percent after it reported a decline in its fourth quarter profits and revenues, which however were above estimates.

Albermale (ALB) announced a 20 percent increase in its quarterly dividend to 24 cents per share. The company’s board also authorized an increase in its existing share repurchase authorization to 15 million from 3.9 million shares.

FMC Technology (FTI) reported fourth quarter earnings of 50 cents per share on revenues of $1.8 billion, exceeded the consensus estimate. For 2013, the company estimates earnings of $2.05-$2.25 per share, below the consensus estimate of $2.36 per share.

Western Union (WU) reported fourth quarter adjusted earnings of 42 cents per share on revenues of $1.4 billion. The results were ahead of estimates, although the company issued weak 2013 guidance.

NETGEAR (NTGR) reported fourth quarter non-GAAP earnings of 55 cents per share, lower than 69 cents per share last year. Revenues rose slightly to $310.4 million. The results exceeded estimates. The company also said it expects first quarter net revenues of $290 million to $305 million, below the $317.55 million consensus estimate.

Clearwire (CLWR) reported a narrower fourth quarter loss from continuing operations, while its revenues fell 14 percent. The results trailed expectations.

General Electric (GE) said it would sell its remaining 49 percent equity interest in its joint venture with Comcast (CMCSA), which includes NBCUuniversal as well as the NBCU floors in 30 Rockfeller Center for $18.1 billion. The deal has been approved by the boards of both companies. GE expects the pre-tax gain from the sale amounting to $1 billion to be offset by restructuring in 2013.

Separately, Comcast announced a 20 percent increase in its dividend to 78 cents per share on an annualized basis. The company also said it plans to repurchase $2 billion of its stock in 2013. The company reported fourth quarter adjusted earnings per share of 52 cents per share on revenues of $15.94 billion. The results were below expectations.

WellPoint (WLP) announced the appointment of Joseph Swedish as its new CEO, effective March 25th, 2013, succeeding interim CEO John Cannon.

Moody’s (MCO) said its board authorized a new $1 billion share repurchase program.

Applied Materials (AMAT), Avis Budget (CAR), Cisco Systems (CSCO), Cloud Peak Energy (CLD), Ingram Micro (IM), Liberty Global (LBTYA), MetLife (MET), NetApp (NTAP), Nvidia (NVDA), Pioneer Natural Resources (PXD), TripAdvisor (TRIP), Weight Watchers (WTW) and ValueClick (VCLK) are among the companies due to release their quarterly results after the close of trading.



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