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Low Volume Volatile Trading Likely Ahead of Long Weekend
3/28/2013 9:30 AM

The major U.S. index futures are pointing to a slightly higher opening on Thursday, with sentiment reflecting the uneasy optimism of traders following the heady gains the markets notched up in the first quarter. Domestically, separate reports released ahead of the open showed that jobless claims rose more than expected and fourth quarter GDP growth was upwardly revised by less than expected. A regional manufacturing report due to be released shortly after the markets open may also impact trading.

At the same time, Cypriot banks have reopened after a nearly 2-week hiatus and traders may closely watch the developments in the banking sector of the Mediterranean nation. Trading action is likely to be light ahead of the long weekend, although volatility cannot be ruled out due to the end-of-the-quarter churning of portfolios.

U.S. stocks closed Wednesday’s session on a mixed note, although they cut most of their early session losses. The major averages opened notably lower as eurozone concerns intensified after borrowing costs increased at an Italian debt auction and Cyprus prepared for re-opening its banks. However, the averages gradually recouped their losses over the course of the session before ending mixed.

The Dow Industrials ended down 33.49 points or 0.23 percent at 14,526 and the S&P 500 Index slid 0.92 points or 0.06 percent before closing at 1,563, while the Nasdaq Composite closed at 3,257, up 4.04 points or 0.12 percent.

Biotechnology, oil service and gold stocks were among the best performers of the session.

Twenty of the thirty Dow components declined in the session, with JP Morgan Chase (JPM), Coca-Cola (KO) and Verizon (VZ) leading the slide, while UnitedHealth (UNH) advanced strongly.

On the economic front, the National Association of Realtors reported that its pending home sales fell 0.4 percent month-over-month. The previous month’s steep jump was downwardly revised to 3.8 percent from 4.5 percent. Pending home sales showed month-over-month increases in the Midwest and the West, while pending sales fell in the South and the Northeast.

The S&P 500 Index settled further away from its all time closing high on Wednesday. With early indications suggesting some downside, traders should remain wary of key long-term supports around the 1,558 level and its 21-day MA of 1,547.



Currency, Commodity Markets

Crude oil futures are rising $0.23 to $96.35 a barrel after rising $0.24 to $96.58 a barrel on Wednesday.

The previous session’s gain came despite the lackluster equity market sentiment and the release of the weekly inventory report, which showed that crude oil stockpiles rose by 3.3 million barrels to 385.9 million barrels in the week ended March 22nd. Inventories were above the upper limit of the average range.

On the other hand, gasoline inventories fell by 1.6 million barrels and remained in the middle of the average range. Distillate stockpiles declined by 4.5 million barrels and were near the lower half of the average range. Refinery capacity utilization averaged 83.1 percent over the four weeks ended March 22nd compared to 82.9 percent over the four weeks ended March 15th.

Gold futures, which rose $9.90 to $1,607.20 an ounce in the previous session, are currently slipping $5.10 to $1,602.10 an ounce.

Among currencies, the U.S. dollar is trading at 94.26 yen compared to the 94.52 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2806 compared to yesterday’s $1.2783.

Asia

The major Asian markets closed on a mixed note, as the Australian, Chinese, Hong Kong, Japanese, Singaporean and Taiwanese markets closing lower, while the rest of the major markets advanced. The insipid mood on Wall Street overnight along with eurozone uncertainties weighed on sentiment.

Japan’s Nikkei 225 average opened lower and slipped steadily in the morning before going about a consolidation move in the afternoon. The index closed down 157.83 points or 1.26 percent at 12,336.

Resource and export stocks led the declines, with the former reacting to lower commodity prices and the latter to the yen’s strength.

GS Yuasa plunged 11.11 percent after reports of overheating issues with its batteries. Nippon Light Metal, Tosoh, Kawasaki Kisen Kaisha, Hokuetsu, Amada, Sumitomo Metal and Mitsui OSK Lines were also among the notable decliners.

Australia’s All Ordinaries also languished below the unchanged line throughout the session before closing 27.10 points or 0.54 percent lower at 4,980. Energy, material, consumer staple and financial stocks came under selling pressure, while defensive healthcare and utility stocks saw some strength.

Hong Kong’s Hang Seng Index closed at 22,300, down 165.19 points or 0.74 percent.

On the economic front, a measure of inflation in Australia compiled by TD Securities and the Melbourne Institute showed a 0.2 percent month-over-month increase in March after remaining unchanged in February. The annual increase was 2.1 percent, marking the slowest rate of growth in 8 months. A separate government report showed that private sector credit in Australia rose at a less than estimated pace of 0.2 percent.

Japan’s Ministry of Economy, Trade and Industry reported that retail sales in Japan fell 2.3 percent year-over-year in February compared to expectations for a 1.8 percent drop. Chinese industrial profits rose 17.2 percent year-over-year in the January-February period, according to a report released by the National Bureau of Statistics.

Europe

European stocks opened higher but has since then seen some volatility. The major averages in the region are currently moderately higher.

In corporate news, John Malone owned Liberty Global announced that it has bought a 12.65 percent stake in Netherlands-based cable TV operator Ziggo for 632.5 million euros. TNT Express announced a deal to sell its Chinese domestic road operations to private equity firm CITIC.

Oil giant Total said it will record a loss of $1.65 billion in its first quarter related to the sale of its 49 percent stake in its Voyageur Upgrader project to Canada’s Suncor Energy.

The results of a consumer confidence survey by GfK showed that U.K. consumer confidence remained unchanged for a third straight month in March, although remaining at depressed levels. The consumer confidence index remained at –26 in March.

Nationwide reported that U.K. house prices rose 0.8 percent year-over-year in March, roughly in line with expectations for a 0.9 percent increase. On a monthly basis, prices were unchanged compared to expectations for a 0.2 percent increase.

A report released by German Federal Statistical Office showed that German retail sales rose 0.4 percent month-over-month in February, while economists expected a steeper 3 percent increase. Annually, sales fell 2.2 percent, contrasting expectations for a 1.2 percent increase.

The German Federal Labor Agency reported that the number of unemployed in Germany rose by 13,000 in March from the previous month. Economists expected a 2,000 drop. The jobless rate was unchanged at 6.9 percent in March. Meanwhile, the Federal Statistical Office’s survey showed that the jobless rate measured based on ILO standards was unchanged at 5.4 percent.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits increased by more than expected in the week ended March 23rd, according to a report released by the Labor Department.



The report showed that initial jobless claims rose to 357,000, an increase of 16,000 from the previous week's revised figure of 341,000. Economists had expected jobless claims to edge up to 340,000 from the 336,000 originally reported for the previous week.

U.S. economic activity in the final three months of 2012 increased at a faster rate than previously estimated, according to a report released by the Commerce department. The Commerce Department said GDP increased at an annual rate of 0.4 percent in the fourth quarter compared to the previously reported 0.1 percent increase.



Despite the upward revision, the pace of GDP growth still came in below economist estimates for an increase of 0.6 percent.

The ISM-Chicago will release the results of its regional manufacturing survey at 9:45 am ET. The consensus expectations call for a small drop in the business barometer to 56.1 in March from 56.8 in February.



Business activity in the region expanded at a faster rate in February. The business barometer rose 1.2 points to 56.8, marking the highest level since March 2012. The new orders index rose 2 points to 60.2 and the order backlogs index climbed more than 4 points to 50.9. Meanwhile, the production and employment indexes fell from the month-ago levels.

The Kansas Federal Reserve is scheduled to release its manufacturing index at 11 am ET. Economists expect the index to improve to –3 in March from –10 in February.

Stocks in Focus

PVH (PVH) reported fourth quarter non-GAAP earnings of $1.60 per share, higher than $1.19 per share in the year-ago period. Revenues rose to $1.64 billion from $1.53 billion last year. The results were ahead of expectations. For 2013, the company expects non-GAAP earnings of $7 per share on revenues of $8.2 billion. The earnings guidance trailed expectations, while the revenues were ahead of expectations.

Accenture (ACN) reported second quarter earnings that beat estimates, while its revenues were shy of estimates. The company’s third quarter revenues were below estimates.

GameStop (GME) reported better than expected fourth quarter results, while it said it expects to see a challenging environment in the first half of the year.

BlackBerry (BBRY) swung to a profit in its fourth quarter, but its revenues declined from the year ago period. The company shipped approximately 6 million BlackBerry smartphones and approximately 370 thousand BlackBerry PlayBook tablets during the fourth quarter.

Red Hat (RHT) reported fourth quarter non-GAAP net income of 36 cents per share, higher than 29 cents per share in the year-ago period. Revenues rose 17 percent to $348 million. The earnings were ahead of estimates, while the revenues missed expectations.

Paychex (PAYX) reported third quarter earnings of 40 cents per share, up 8 percent year-over-year, while revenues rose 4 percent to $593.3 million. The results were better than expected. For 2013, the company expects total service revenue growth of 5-6 percent and net income growth of 5-7 percent.

Progress Software (PRGS) reported first quarter non-GAAP earnings from continuing operations of 23 cents per share on revenues of $89.27 million. The earnings missed estimates by a penny, while the revenues were ahead of estimates. For the second quarter, the company expects revenues to be flat with the year-ago period on a currency neutral basis.

Biogen Idec (BIIB) said the FDA has approved its TECFIDERA as a new first-line oral treatment for people with relapsing forms of multiple sclerosis. The company also said it would make the oral capsule available in the U.S. in the coming days.

Books-A-Million (BAMM) reported fourth quarter net income from continuing operations of 52 cents per share compared to 48 cents per share last year. Net sales edged down 0.8 percent to $165.6 million.

Genworth (GNW) said it has agreed to sell its wealth management business to a partnership of Aquiline Capital Partners and Genstar Capital for about $412.5 million. The company said it will record an after-tax loss of about $40 million related to the sale.

Pfizer (PFE) said the European Commission has granted conditional marketing authorization for BOSULIF in the European Union for the treatment of adult patients with chronic myelogenous leukemia.

Texas Industries (TXI) reported a third quarter loss from continuing operations of 30 cents per share compared to a loss from continuing operations of 90 cents per share in the year-ago period. Net sales improved to $141.36 million from $121.89 million last year. The results were ahead of estimates.

H.B. Fuller (FUL) reported first quarter adjusted earnings from continuing operations of 40 cents per share, up 20 percent year-over-year, while revenues rose 39 percent to $479.84 million. The earnings missed estimates, while the revenues exceeded expectations. The company maintained its 2013 earnings guidance of $2.55-$2.65 per share, surrounding the consensus estimate.

Pacific Ethanol (PEIX) reported a fourth quarter loss of 4 cents per share compared to a loss of 3 cents per share a year ago. Revenues fell to $197.02 million from $241.80 million last year.



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