Market Analysis

The major U.S. index futures are pointing to a lower opening on Friday, with sentiment faltering after the Commerce Department released a report, which showed that the U.S. economy expanded in the fourth quarter, although at a slower than expected pace. The data should come as a disappointment for traders, who were viewing the U.S. as a bright spot in contrast to the debt-debilitated economic condition in Europe. Domestic earnings continue to be mixed. The results of a consumer sentiment survey to be released shortly after the markets open may also give direction to the markets.

Despite seeing early strength on Thursday on the back of lingering Fed optimism, the major averages gradually gave back their gains over the course of the session, falling below the unchanged line by the mid-session. The averages declined further before stabilizing in late trading and closing moderately lower.

The declines came about amid the release of mixed economic data and earnings news and the lingering European debt worries.

The Dow Industrials ended down 22.33 points or 0.18 percent at 12,735 and the S&P 500 Index closed at 1,318, down 7.62 points or 0.57 percent. Meanwhile, the Nasdaq Composite ended 13.03 points or 0.46 percent lower at 2,805.

Twenty-three of the thirty Dow components closed lower, with Alcoa (AA), Hewlett-Packard (HPQ) and AT&T (T) receding sharply. Meanwhile, 3M Co. (MMM) added 1.27 percent and Caterpillar (CAT) rallied 2.07 percent, with both moving higher in reaction to positive earnings and optimistic guidance.

Airline and gold stocks moved to the upside, while biotechnology, oil, oil service, financial, housing and semiconductor stocks came under selling pressure.

On the economic front, the durable goods orders report showed a better than expected 3 percent increase in durable goods orders in December compared to the previous month. Excluding transportation orders, orders were still up 2.1 percent. More importantly, core capital goods orders, which exclude defense aircraft and parts, rebounded by 2.9 percent in December. Shipments of this category of goods, which is directly plugged into GDP calculations, improved 2.6 percent.

Meanwhile, jobless claims rose 21,000 to 377,000 in the week ended January 21st. However, the four-week average fell to 377,500 from the previous week’s revised reading of 380,000. Continuing claims calculated with a week’s lag rose 88,000 to 3.554 million.

U.S. new home sales unexpected declined by 2.2 percent to a seasonally adjusted annual rate of 307,000 units in December. Thus, the metric reversed the previous month’s 2.3 percent increase. Additionally, there were downward revisions to the previous three months. Inventories measured in terms of months of supply were almost unchanged at 6.1.

The Conference Board reported that its leading indicators index rose 0.4 percent month-over-month in December. The lagging and coincident indicator indexes rose 0.3 percent each. The Treasury yield curve, initial jobless claims and average workweek made positive contributions to the leading indicators index, while consumer expectations served as a drag.

Commodity, Currency Markets

Crude oil futures are rising $0.09 to $99.79 a barrel after advancing $0.30 to $99.70 a barrel on Thursday. Gold futures are currently slipping $4 to $1,722.70 an ounce. In the previous session, the precious metal added $26.60 to $1,726.70 an ounce.

Among currencies, the U.S. dollar is trading at 76.85 yen compared to the 77.45 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3100 compared to yesterday’s $1.3109.

Asia

The major Asian markets experienced uneasy trading before closing mostly higher, although the Japanese market ended modestly lower. The Chinese and Taiwanese markets remained closed on account of the Lunar New Year holiday.

Japan’s Nikkei 225 average moved nervously across the unchanged line in a narrow range in the morning before seeing a reprieve in the mid-session. However, stocks declined in the afternoon, with the index closing down 8.25 points or 0.09 percent at 8,841, as traders digested disappointing earnings from blue chips including NEC and Nintendo.

Australia’s All Ordinaries closed 19.40 points or 0.45 percent higher at 4,349 and Hong Kong’s Hang Seng Index closed at 20,502, up 62.53 points or 0.31 percent.

In economic news, a report released by Japan’s Ministry of Internal Affairs and Communications showed that Japan’s core consumer price index declined 0.1 percent year-over-year in December. In November, the decline was a steeper 0.2 percent. Meanwhile, a separate government report showed that retail sales in Japan rose 2.5 percent year-over-year in December.

Europe

After seeing lackluster sentiment in early trading, the European markets are currently moving lower. The French CAC 40 Index and the U.K. FTSE 100 Index are receding 1.11 percent and 0.63 percent, respectively, while the German DAX Index is down 0.10 percent.

Meanwhile, Italy successful auctioned 11 billion euros worth of treasury bills in two tranches at relatively benign credit terms.

U.S. Economic Reports

The U.S. economy continued to gain steam in the fourth quarter of 2011 but failed to reach the expansion most economists had predicted. The 2.8 percent growth for the final quarter of 2011 reported by the Commerce Department was markedly higher than the 1.8 percent growth posted for the third quarter.



According to the Commerce Department, the increase in GDP was driven by increases in private inventories, consumer spending and residential fixed investments. Those increases were partially offset by a slowing of nonresidential fixed investments, a downturn in federal spending and an increase in imports.

The Reuters/University of Michigan's final report on the consumer sentiment index for January is scheduled to be released at 9:55 am ET. The consumer sentiment index is expected to be maintained unchanged at the mid-month reading of 74.

Stocks in Focus

Earnings

Ford (F) reported below-consensus operating profit for its fourth quarter.

Honeywell (HON) reported fourth quarter profit and earnings that were above estimates.

Chevron’s (CVX) profit declined from the year-ago period.

Arkansas Best (ABFS) reported fourth quarter earnings of 5 cents per share compared to a loss of 12 cents per share last year. Revenues rose 5.9 percent to $463.2 million. The results trailed estimates.

Eastman Chemical (EMN) reported fourth quarter adjusted earnings from continuing operations of 71 cents per share compared to 70 cents per share last year. Sales revenues rose to $1.72 billion from the year-ago’s $1.46 billion. The earnings were below estimates, while revenues exceeded estimates. The company said it expects adjusted earnings from continuing operations of $1.05-$1.15 per share for the first quarter, ahead of the consensus estimate of $1.03 per share. The company also announced a deal to buy smaller rival Solutia (SOA).

Timken (TKR) reported better than expected fourth quarter earnings, while its revenues were about in line with estimates. The company’s 2012 guidance was lackluster.

Ryland’s (RYL) fourth quarter earnings were better than expected.

Synaptics (SYNA) reported better than expected second quarter results, while its revenue guidance was below the consensus estimate.

KLA-Tencor (KLAC) reported second quarter non-GAAP earnings and revenues that exceeded estimates.

Storage equipment maker Emulex (ELX) reported solid second quarter results and issued upbeat guidance for its third quarter.

Motorola Mobility (MMI), which has agreed to be acquired by Google (GOOG), reported better than expected fourth quarter results.

Juniper Networks (JNPR) reported fourth quarter non-GAAP earnings that beat estimates, while its revenues were slightly shy of estimates. However, the company issued very bleak guidance for the first quarter.

Starbucks (SBUX) reported better than expected first quarter results. The company also raised the low end of its 2012 earnings per share guidance.

Rambus (RMBS) reported a sharp drop in its non-GAAP earnings for the fourth quarter to 8 cents per share from 28 cents per share, as revenues declined to $83.36 million from $90.24 million last year.

Other Corporate News

J.S. Smucker (SJM) said its board has increased its stock repurchase authorization by 5 million shares.

Arthur J. Gallagher (AJG) announced a 3 percent in its regular quarterly dividend to 34 cents per share.

Sallie Mae (SLM) also announced an increase in its quarterly dividend to 12.5 cents per share from 10 cents per share. The company also said its board has authorized a $500 million stock buyback program.

Group 1 Automotive (GPI) announced the acquisition of Hilton Head BMW in Blufton, S.C. The company expects the acquisition to add $45 million in annual revenues.

Chubb’s (CB) board approved a new share repurchase program to buy back up to $1.2 billion worth of its stock.

Seagate (STX) said its board has approved a 39 percent increase in its quarterly dividend to 25 cents per share. The board also authorized an additional $1 billion stock buyback program.