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Beyond the Numbers

Traders Skeptical as Economic Data Turns Lackluster
3/29/2012 9:20 AM

The major U.S. index futures are pointing to a lower opening on Thursday, with sentiment impacted by a lack of any positive catalysts that could help to extend the recent upward momentum. A much-awaited economic report released earlier in the day showed that jobless claims came in ahead of estimates, although declining from the week ago levels. The decline came about due to an upward revision to the previous week’s reading.

Consumer electronics retailer Best Buy (BBY) reported fourth quarter adjusted earnings that came in above estimates. However, revenues were shy of estimates. The stock is down in pre-market trading.

U.S. stocks extended their losses on Wednesday amid the release of a mixed durable goods orders report. The major U.S. averages opened on a nervous note but declined steadily till late afternoon trading. Thereafter, the averages pared their losses but still ended moderately lower.

The Dow Industrials ended down 71.52 points or 0.54 percent at 13,126 and the S&P 500 Index closed at 1,406, down 6.98 points or 0.49 percent. The Nasdaq Composite receded 15.39 points or 0.49 percent before closing at 3,105.

Twenty of the thirty Dow components closed lower, with Alcoa (AA) (down 2.29 percent), Caterpillar (CAT) (down 3.52 percent) and United Technologies (UTX) leading the slide. On the other hand, Coca-Cola (KO), Bank of America (BAC) and American Express (AXP) added over 1 percent each.

Resource and semiconductor stocks paced the declines, while airline and financial stocks also recorded gains.

On the economic front, U.S. durable goods orders rose by a less than expected 2.2 percent in February compared to the previous month. That said, even after excluding transportation orders, which rose 3.9 percent, order growth came in at 1.6 percent. Non-defense capital goods orders, excluding aircrafts, often considered a proxy for capital spending, rose 1.2 percent and shipments of this category of goods edged up 0.5 percent.

Currency, Commodity Markets

Crude oil futures are receding $0.36 to $105.05 a barrel after declining $1.92 to $105.41 a barrel on Wednesday.

The previous session’s drop came amid the release of the soft durable goods orders data and the inventory report, which showed that crude oil stockpiles rose by 7.1 million barrels to 353.4 million barrels in the week ended March 23rd. Inventories remained in the upper limit of the average range.

Gasoline inventories fell by 3.5 million barrels but still remained in the upper limit of the average range. Distillate stockpiles also fell, dropping by 0.7 million barrels, and remained in the middle the average range.

Refinery capacity utilization averaged 83.3 percent over the four weeks ended March 23rd compared to 83.1 percent over the previous four weeks.

The most actively traded June gold futures are currently rising $1.50 to $1,662 an ounce. In the previous session, gold fell $27.20 to $1,660.50 an ounce.

Among currencies, the U.S. dollar is trading at 82.23 yen compared to the 82.90 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.3278 compared to yesterday’s $1.3317.

Asia

Most Asian stocks retreated yet again, as the mood was uncertain due to the lackluster nature of the recently released domestic and overseas economic data.

Japan’s Nikkei 225 average languished below the unchanged line throughout the session before closing down 67.78 points or 0.67 percent at 10,115. Most stocks, barring those belonging to the defensive sectors, retreated in the session. Meanwhile, Sharp rose for the second straight session in reaction to Foxconn’s investment in the company.

Australia’s All Ordinaries ended down 9.50 points or 0.21 percent at 4,422. Energy stocks retreated sharply and material stocks also saw notable losses, while healthcare stocks firmed up.

Hong Kong’s Hang Seng Index fell a steeper 276.03 points or 1.32 percent before ending at 20,609.

Europe

Sentiment in Europe is downbeat, with the averages in the region down for a third straight session. The French CAC 40 Index is receding close to 1 percent compared to a 1.08 percent retreat by the German DAX Index, while the U.K.’s FTSE 100 Index is declining 0.75 percent.

In corporate news, Swedish retailer H&M reported a small increase in its first quarter profits, as margins were hurt by higher costs and deeper markdowns. The U.K.’s Imperial Tobacco said its financial performance for its year ending September 2012 was in line with expectations. The company also said it expects strong profit and sales growth for the second quarter.

On the economic front, a report released by the German Federal Labor Agency showed that Germany’s unemployment rate edged down 0.1 percentage points to 6.7 percent in February. Economists had expected the rate to have remained unchanged at 6.8 percent. A Federal Statistical Office report showed that the unemployment rate remained unchanged at 5.7 percent.

The results of a survey by the European Commission showed that its economic sentiment index edged down to 94.4 in February from 94.5 in January. Economists had expected the rate to hold steady.

U.S. Economic Reports

With a downward revision to exports offset by an upward revision to non-residential fixed investment, the Commerce Department released a report showing that the pace of U.S. economic growth in the fourth quarter was unrevised.



The report showed that GDP increased at an annual rate of 3.0 percent in the fourth quarter, unchanged from the previous estimate and in line with economist estimates. The GDP growth in the fourth quarter still reflects a notable acceleration from the 1.8 percent growth seen in the third quarter.

While the Labor Department released a report on showing a modest drop in initial jobless claims in the week ended March 24th, jobless claims came in above economist estimates due to an upward revision to the previous week's data.



The report showed that jobless claims edged down to 359,000 from the previous week's revised figure of 364,000. Economists had expected jobless claims to edge up to 350,000 from the 348,000 originally reported for the previous week.

The Kansas City Federal Reserve is scheduled to release the results of its manufacturing survey for February at 11 am ET.

Philadelphia Federal Reserve Bank President Charles Plosser will speak to the Rotary Club of Wilmington at 1 pm ET. He will also take questions from the audience and the media.

Atlanta Federal Reserve Bank President Jeffrey Lacker is due to speak to the UNC School of Law's Banking Institute and will take questions from the audience and the media, in Charlotte. The speech is scheduled for 6:45 pm ET.

Stocks in Focus

Forest Labs (FRX) and Almirall announced that the FDA will require a 3-month extension to complete its review of the data supporting the NDA for aclidinium bromide, a maintenance treatment for obstructive pulmonary disease. The companies said that the FDA did not seek any additional data and that the FDA action is now expected by July 2012.

Illumina (ILMN) recommended that its shareholders not take any action at this time in response to Roche’s sweetened $51 per share cash offer.

Texas Industries (TXI) reported a third quarter loss of 87 cents per share compared to a loss of 75 cents per share a year ago. Total sales fell to $65.47 million from the year-ago quarter’s $70.01 million. The loss was wider than what analysts had expected, while revenues exceeded expectations.

H.B. Fuller (FUL) reported first quarter adjusted earnings of 44 cents per share on recenues of $375.26 million. For 2012, the company expects earnings of $2.05-$2.15 per share on net revenue growth of 6-9 percent.

Red Hat (RHT) announced that its board has authorized the repurchase of up to $300 million worth of shares. The company reported fourth quarter adjusted earnings of 29 cents per share on revenues of $297.01 million. The results exceeded estimates.

Paychex (PAYX) reported third quarter earnings of 37 cents per share, in line with estimates. Revenues rose 7 percent to $569.5 million and also exceeded estimates. The company reaffirmed its 2012 guidance.

Resource Connection (RECN) reported third quarter earnings that exceeded estimates, while its revenues were slightly shy of estimates.

Mosaic’s (MOS) third quarter profits and revenues declined from a year ago. The company also warned of compressed margins for the rest of the year and also cut its capital spending outlook for 2012.

S&P announced that S&P MidCap 400 constituent Fossil (FOSL) will replace Medco Health Solutions (MHS) in the S&P 500 Index. S&P SmallCap 600 consiituent BioMed Realty (BMR) will replace Fossil in the S&P MidCap 400 Index and Innophos Holdings (IPHS) will replace BioMed Realty Trust in the S&P SmallCap 600 Index after the close of trading on a date to be announced.

Research In Motion (RIMM), Tibco Software (TIBX) and Xyratex (XRTX) are among the companies due to release their quarterly results after the markets open.



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