Market Analysis

Beyond the Numbers

See-sawing Mood Continues in Markets
3/21/2012 9:23 AM

The major U.S. index futures are pointing to a mixed opening on Wednesday, with sentiment turning jittery after some early strength. Asian stocks closed mostly lower, while European stocks have turned lower amid the budget presentation in the U.K. Stocks may now largely move in reaction to the existing home sales report to be released shortly after the markets, although some support could come from some upbeat earnings announcements, including those from Oracle (ORCL).

U.S. stocks retreated on Tuesday, as growth worries took hold after a Chinese move to raise retail fuel prices. The major U.S. averages opened lower and slipped further in early trading. The averages pared their losses over the course of the session but still ended the day in the red.

The Dow Industrials ended down 68.94 points or 0.52 percent at 13,170 and the S&P 500 Index closed 4.23 points or 0.30 percent lower at 1,406, while the Nasdaq Composite Index closed at 3,074, down 4.17 points or 0.14 percent.

On the economic front, the Commerce Department reported that U.S. housing starts fell by 1.1 percent month-over-month to 698,000 in February. However, the negativity was offset by an upward revision to the previous month’s starts to 706,000. A 9.9 percent drop in single-family starts more than offset a 26.2 percent increase in multi-family starts. At the same time, building permits jumped 5.1 percent to 717,000, the highest level since October 2008.

Twenty of the thirty Dow components closed lower, with Alcoa (AA), Chevron (CVX), DuPont (DD), Hewlett-Packard (HPQ) and United Technologies (UTX) slipping over 1 percent each. On the other hand, Home Depot (HD) and Cisco Systems (CSCO) rose 2.94 percent and 2.14 percent, respectively and Home Depot (HD) rose over 1 percent.

Transportation and oil service sector stocks came under selling pressure, while retail stocks gained ground.

Currency, Commodity Markets

Crude oil futures are rising $0.15 to $106.22 a barrel after tumbling $2.49 to $106.0.7 a barrel on Tuesday.

A report released by the American Petroleum Institute late Tuesday showed that crude oil stockpiles fell by 1.4 million barrels in the week ended March 16th. Gasoline stockpiles fell by 1.4 million barrels, while distillate inventories rose by 596,000 barrels.

An ounce of gold is currently fetching $1,650.30, up $3.30 from the previous session’s close of $1,647. In the previous session, gold fell $20.30.

Among currencies, the U.S. dollar is trading at 84.04 yen compared to the 83.70 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.3225 compared to yesterday’s $1.3225.


Asian stocks ended mostly lower, weighed down by the negative lead from Wall Street overnight.

The Japanese market, which opened after Tuesday’s public holiday, retreated moderately. The Nikkei 225 Index languished below the unchanged line throughout the session before closing down 55.50 points or 0.55 percent at 10,087. A majority of stocks declined, with financial stocks seeing particular weakness.

Australia’s All Ordinaries extended its slide, dropping 18.60 points or 0.43 percent to 4,347. Material stocks led the retreat. Hong Kong’s Hang Seng Index ended down 31.61 points or 0.15 percent at 20,857.

On the other hand, the Shanghai Composite Index rose marginally and India’s Sensex rallied strongly.


The major European markets have turned lower after seeing some strength in early trading.

In corporate news, Spanish retailer Inditex reported a 12 percent increase in profits for its full year on a strong expansion in Asia. U.K. grocer Sainsbury also saw an increase in its full year sales. Italian insurer Generali reported a decline in its 2011 profits and also cut its dividend by more than half.

U.S. Economic Reports

The National Association of Realtors is scheduled to release its report on existing home sales for February at 10 am ET. Economists estimate existing home sales of 4.61 million for the month.

Existing home sales surged up 4.3 percent month-over-month in January, while economists had expected a much more modest increase. Single-family home sales rose 3.8 percent compared to an 8.3 percent jump in the sales of condominiums.

Inventories of existing homes fell 0.4 percent to 2.31 million homes, while inventories measured in terms of months of supply also declined to a 6-year low of 6.1 months. The median price of an existing home fell 4.6 percent month-over-month to $154.7 million.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended March 16th at 10:30 am ET.

Crude oil stockpiles rose by 1.8 million barrels to 347.5 million barrels in the week ended March 9th. Crude stockpiles were in the upper limit of the average range.

Meanwhile, gasoline inventories declined by 1.4 million barrels but still remained in the upper limit of the average range. Distillate inventories fell by 4.7 million barrels, remaining in the middle of the average range.

Refinery capacity utilization averaged 83.9 percent over the four weeks ended March 9th compared to 84.2 percent over the previous four weeks.

Stocks in Focus

Oracle (ORCL) reported third quarter non-GAAP earnings of 62 cents per share on non-GAAP revenues of $9.1 billion. The company’s non-GAAP new software license revenues rose 7 percent to $2.4 billion. The earnings exceeded estimates, while the revenues were broadly in line.

Jabil Circuit (JBL) reported second quarter core earnings of 58 cents per share, higher than the 54 cents per share reported for the year-ago period. Net revenues rose to $4.2 billion from $3.9 billion in the second quarter of 2011. The earnings were in line, while revenues exceeded estimates. For the third quarter, the company expects core earnings of 60-70 cents per share on net revenues of $4.2 billion to $4.4 billion. The guidance surrounded the consensus estimates.

Merck (MRK) and ARIAD Pharma (ARIA) announced that a FDA committee voted 13 to 1 against the use of their investigational agent ridaforolimus as maintenance therapy for patients with metastatic soft-tissue sarcoma. The FDA will consider the committee’s recommendation while making its decision regarding the NDA for the treatment.

Murphy Oil (MUR) announced that the election of Claiborne Deming as Chairman of its board has been advanced, effective immediately compared to the earlier plan of him taking office on May 1st, 2012.

Fulton Financial (FULT) announced that its chairman and CEO Scott Smith will retire on December 31, 2012. The company also announced that president and COO Philip Wenger will succeed Smith, effective January 1, 2013.

OMNOVA Solutions (OMN) reported first quarter income from continuing operations of 23 cents per share on revenues of $275.9 million, up 1.5 percent.

AAR (AIR) said its third quarter earnings rose to 50 cents per share from 44 cents per share last year, as revenues improved to $534.2 million from last year’s $458 million. The results were ahead of estimates.

Cintas (CTAS) reported third quarter earnings of 58 cents per share compared to 41 cents per share last year. Revenues climbed 7.9 percent to $1.01 billion. The earnings were better than expected, while the revenues met estimates. The company raised its 2012 earnings per share guidance to $2.24-$2.27 per share, above the consensus estimate of $2.20 per share.

On Assignment (ASGN) announced that it has signed an agreement to acquire technology staffing firm Apex Systems for $600 million, including debt. On a pro forma basis, the combined revenues of the companies were $1.3 billion in 2011.

Clarcor (CLC), Discover Financial Services (DFS), H.B. Fuller (FUL), Herman Miller (MLHR), Shoe Carnival (SCVL) and Sonic (SONC) are among the companies due to release their quarterly results after the markets close.
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