Market Analysis

Beyond the Numbers

Positive Momentum Lingers as Traders Look to Data For Clarity
2/24/2012 9:23 AM

The major U.S. index futures are pointing to a modestly higher opening on Friday. Among the global markets, Asian stocks closed mostly higher, while the European markets are also broadly higher, although the U.K. market is trading on a lackluster note amid the release of some mixed earnings. Meanwhile, crude oil futures have been going from strength to strength, with supply concerns and economic optimism fanning an extended rally in the commodity. Along with the direction of oil prices, a consumer sentiment and new homes sales data due to be released shortly after the markets open may determine the market moood of the day.

After seeing some weakness in early trading on Thursday, U.S. stocks recovered and ended moderately higher, as macroeconomic data continued to lend support despite some mixed earnings reports. A German showing continued improvement in business confidence and the U.S. weekly jobless claims data reinforced the economic optimism.

The major U.S. averages opened lower but reversed course in early trading, moving above the unchanged line. Thereafter, the averages moved broadly sideways, posting moderate gains for the rest of the session.

The Dow Industrials added 46.02 points or 0.36 percent before closing at 12,985 and the S&P 500 Index closed at 1,364, up 5.80 points or 0.43 percent, while the Nasdaq Composite ended 23.81 points or 0.81 percent higher at 2,957.

Twenty-one of the thirty Dow components closed higher, with Procter & Gamble (PG) advancing over 3 percent and leading the gains. JP Morgan Chase (JPM) and IBM (IBM) also advanced strongly. On the other hand, Hewlett-Packard (HPQ) fell 6.53 percent in reaction to its quarterly results and Pfizer (PFE) slid 1.54 percent.

Biotechnology, financial, housing and oil stocks advanced strongly, while airline stocks came under selling pressure.

Commodity, Currency Focus

Crude oil futures are trading up $0.60 at $108.43 a barrel after advancing $1.55 to $107.83 a barrel on Thursday. The previous session’s advance came amid the increase in risk appetite and the release of a report showing that crude oil stockpiles rose by 1.6 million barrels to 340.7 million barrels in the week ended February 17th. Inventories remained in the upper limit of the average range.

Meanwhile, gasoline inventories fell by 0.6 million barrels and yet were in the upper limit of the average range. Distillate stockpiles edged down by 0.2 million barrels and were in the middle of the average range. Refinery capacity utilization averaged 83.5 percent over the four weeks ended February 17th compared to 82.7 percent in the previous week.

Gold futures, which rose $15 to $1,786.30 an ounce in the previous session, are currently slipping $5.10 to $1,781.20 an ounce.

Among currencies, the U.S. dollar is trading at 80.62 yen compared to the 79.9965 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3406 compared to yesterday’s $1.3373.


The markets in the Asia-Pacific region also cheered the Greek parliament’s approval of a debt swap deal with its private sector creditors, which will help the beleaguered nation wipe off some 107 billion euros in debt.

After seeing volatility, Japan’s Nikkei 225 average advanced in the afternoon, settling up 51.81 points or 0.54 percent at 9,647. Export stocks capitalized on the still-weak yen.
Australia’s All Ordinaries ended up 21.50 points or 0.49 percent at 4,389 and Hong Kong’s Hang Seng added 25.87 points or 0.12 percent before closing at 21,407.


The major European averages are also mostly higher, with the German DAX Index and the French CAC 40 Index rising 0.51 percent and 0.41 percent, respectively, while the U.K.’s FTSE 100 is unchanged.

In corporate news, SAP (SAP) said it will recommend that6 its supervisory board propose an 83 percent increase in its dividend to 1.10 euros per share. Volkswagen reported a 15.41 billion euro-profit for 2011 compared to 6.84 billion euros last year, as sales rose about 26 percent to 159.34 billion euros.
German chemical maker BASF reported higher 2012 profits and revenues, helped by a strong showing by its emerging markets segment.

Lloyds reported a loss of for 2.81 billion pounds for 2011, which however was in line with expectations.
Spanish telecom operator Telefonica reported a drop in its 2011 earning and also said it expects its profit margin to decline in 2012.

Germany confirmed its initial fourth quarter GDP reading, which showed a 0.2 percent sequential decline. The fourth quarter expansion by the U.K. economy was also confirmed at 0.2 percent.

U.S. Economic Reports

Reuters and the University of Michigan's final report on the consumer sentiment index for February is scheduled to be released at 9:55 am ET. The consumer sentiment index is expected to be upwardly revised to 73 from the mid-month reading of 72.5.

The Commerce Department is due to release its new home sales report for January at 10 am ET. The consensus estimate calls for new homes sales of 315,000.

U.S. new home sales unexpectedly 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 three previous months. Inventories measured in terms of months of supply were almost unchanged at 6.1.

Stocks in Focus

AIG (AIG) reported fourth quarter operating income of 82 cents per share compared to a loss of $15.99 per share last year. Analysts had expected earnings of 82 cents per share for the quarter.

Citigroup (C) said it has sold 145.3 million shares or its 9.85 percent stake in India’s HDFC, with the total proceeds estimated at $1.9 billion at the current exchange rate. Citi will realize an after-tax gain of $722 million.

FTI Consulting (FCN) reported fourth quarter adjusted earnings of 93 cents per share on revenues of $390.7 million, up 9.7 percent. For 2012, the company estimates earnings of $2.80-$3 per share on revenues of $1.60 billion to $1.72 billion.

Cooper Tire and Rubber (CTB) could be in focus after the United Steelworkers said that it has reached a tentative agreement with the company on behalf of the 1,051 members of USW Local 207L, who have been locked out since November 28, 2011 at its Ohio plant.

J.C. Penney (JCP) reported a loss for its fourth quarter, while revenues fell 4.9 percent.

Crocs (CROX) issued below-consensus guidance for the first quarter despite reporting better than expected fourth quarter earnings. However, revenues were below estimates.

Newmont Mining (NEM) reported 2011 quarter adjusted income from continuing operations of $4.39 per share compared with $3.85 per share last year. The earnings were below estimates. Revenues rose to $10.36 billion, in line with estimates.

BlackRock (BLK) announced an increase in its stock repurchase program by 5 million share.

HealthSouth (HLS) reported fourth quarter earnings of 50 cents per share compared with $7.15 per share last year. The recent quarter’s results included a tax expense of 14 cents per share, while the year-ago quarter’s included a benefit of $6.82 per share. The company’s net operating revenues rose to $518.1 million from $490.9 million in the year-ago period. The results exceeded estimates.

Nordson (NDSN) reported first quarter adjusted earnings of 62 cents per share, while its sales rose 2 percent to $276 million. For the second quarter, the company expects earnings of 83-91 cents per share on revenues of $313 million to $326 million. The first quarter results exceeded estimates, while the second quarter guidance was fairly positive.

Public Storage (PSA) reported fourth quarter adjusted funds from operations of $1.66 per share, up 14.5 percent. The earnings missed estimates. Meanwhile, the company raised its quarterly dividend by 16 percent to $1.10 per share.

Gap (GPS) said its board has approved a new $1 billion stock buyback program and also a 1 percent increase in its annual dividend to 45 cents per share. Separately, the company reported fourth quarter earnings of 44 cents per share on sales of $4.3 billion. The earnings exceeded estimates, while the revenues were in line. For 2012, the company expects earnings per share of $1.75-$1.80, surrounding the consensus estimate of $1.79 per share.

Salesforce.com (CRM) reported fourth quarter non-GAAP earnings of 43 cents per share on revenues of $632 million. The results exceeded estimates. The company raised its 2013 revenue guidance above the consensus estimate.
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