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Overbought Levels Make Mood Cautious Despite Positive Data

3/15/2012 9:42 AM ET

The major U.S. index futures are trading higher on Thursday, with sentiment still shaky despite the release of a report showing a bigger than expected drop in jobless claims and another showing a faster pace of expansion of the manufacturing than had been anticipated. The overbought levels of the markets may traders wary and keep sentiment subdued even in the face of modestly positive economic evidence.

U.S. stocks went about in a listless way throughout Wednesday's session before closing on a mixed note.

The major averages, which came into Wednesday's session following recent gains, moved back and forth across the unchanged line in the absence of any compelling catalysts. The Dow Industrials tacked on 16.42 points or 0.12 percent before closing at 13,194 and the Nasdaq Composite Index edged up 0.85 points or 0.03 percent before settling at 3,041, while the S&P 500 Index closed down 1.67 points or 0.12 percent at 1,394.

The breadth among the Dow components was titled in favor of the decliners, with seventeen of the thirty Dow components closing lower. Bank of America (BAC) led the Dow higher with a 4.12 percent gain. Boeing (BA) and General Electric (GE) ended up over 1 percent each and Travelers Companies (TRV) added close to 1 percent. On the other hand, Disney (DIS), Hewlett-Packard (HPQ), Kraft Foods (KFT), Caterpillar (CAT) and Exxon Mobil (XOM) were among the worst decliners.

Bank stocks gained ground, while gold, utility, transportation, oil, oil service and housing stocks came under selling pressure.

Currency, Commodity Markets

Crude oil futures are rising $0.57 to $106 a barrel after retreating $1.28 to $105.43 a barrel on Wednesday. Wednesday's decline came amid the release of the weekly oil inventory report, which showed that 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.

Gold futures, which plunged $51.30 to $1,642.90 an ounce in the previous session, are currently rising $3.30 to $1,646.20 an ounce.

Among currencies, the U.S. dollar is trading at 83.3545 yen compared to the 83.7312 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.3059 compared to yesterday's $1.3033.

Asia

The major Asian markets also showed some degree of uncertainty and closed on a mixed note, as traders cautiously waited for some key U.S. manufacturing readings, the U.S. jobless claims data and bond auctions by some European nations.

Japan's Nikkei 225 average stayed afloat throughout the session before closing up 72.76 points or 0.72 percent at an 8-month high of 10,123. Export-dependent stocks rallied strongly, capitalizing on the yen's weakness. Automakers saw marked buying interest.

Australia's All Ordinaries languished below the unchanged line throughout the session before closing down 8.70 points or 0.20 percent at 4,367. Material stocks retreated, while consumer staple and energy stocks also came under selling pressure.

Hong Kong's Hang Seng Index ended up 45.64 points or 0.21 percent at 21,354. India's Sensex declined after the Reserve Bank of India announced its decision to retain interest rates unchanged, as expected.

Europe

The major European markets are trading on a lackluster note despite the release some fairly positive corporate news from the region.

In corporate news, Lufthansa reported a loss of 13 million euros for the full year, weighed down by higher fuel costs, slowing traffic and losses related to its U.K. unit, which it is seeking to divest.

Swedish retailer H&M reported a 2 percent increase in its February sales, benefiting from an extra day due to 2012 being a leap year.

German fertilizer firm K+S reported higher operating profits for the fourth quarter and the full year and also raised its dividend for 2011. The company also said it expects stable revenues for 2012 and a slight dip in operating profits. Heidelberg Cements expects higher profits for 2012 after reporting higher profits and sales for 2011.

U.K.'s Home Retail reported a 7.7 percent drop in sales at its Agros stores and a 2.6 drop in sales at its Homebase stores.

Eurostat released a pair of reports, including a report showing that the number of employed individuals in the euro area fell 0.2 percent sequentially in the fourth quarter. A separate report showed that hourly labor costs rose by 2.8 percent year-over-year in the fourth quarter, faster than the 2.6 percent increase in the previous quarter.

The European Central Bank's monthly bulletin showed that it expects a slow recovery, with first half growth being crimped by adverse factors. However, the bank sees a modest pick up in economic activity in the second half and a further improvement in 2013.

U.S. Economic Reports

U.S. producer prices increased by less than expected in February, according to figures released by the Labor Department. The Labor Department said its producer price index for finished goods increased by 0.4 percent, on a seasonally adjusted basis. While that increase is bigger than the 0.1 percent increase reported for January, it still comes in below the 0.5 percent increase predicted by most economists.

Much of the core PPI increase can be traced to a 0.6 percent rise in the costs of pharmaceutical preparations, with a 0.5 percent increase in civilian aircraft also playing a notable role.

Much of the core PPI increase can be traced to a 0.6 percent rise in the costs of pharmaceutical preparations, with a 0.5 percent increase in civilian aircraft also playing a notable role.

Activity in the New York manufacturing sector has expanded at a moderate pace in the month of March, according to a report released by the Federal Reserve Bank of New York on Thursday, with the index of activity in the sector showing an unexpected increase.

The New York Fed said its general business conditions index rose to 20.2 in March from 19.5 in February, with a positive reading indicating growth in the manufacturing sector. The increase surprised economists, who had expected the index to drop to a reading of 17.5.

New unemployment claims in the U.S. fell to a lower level than most economists had expected, according to figures released by the Labor Department. For the week ended March 10th, the Labor Department reported a seasonally adjusted level of 351,000 new jobless claims, a drop of 14,000 from the previous week's revised level of 365,000.

While the previous week's figure was revised up somewhat from the 362,000 initially reported, claims for the latest week came in below the 355,000 predicted by most economists.

As a result of the bigger than expected decrease, jobless claims matched the four-year low that was set in the week ended February 11th. Labor actual Department officials said that seasonal factors had predicted a 4.7 percent drop in new claims. However, the figures showed an 8.3 percent decline, resulting in the overall drop in the seasonally adjusted figures.

As a result of the bigger than expected decrease, jobless claims matched the four-year low that was set in the week ended February 11th. Labor actual Department officials said that seasonal factors had predicted a 4.7 percent drop in new claims. However, the figures showed an 8.3 percent decline, resulting in the overall drop in the seasonally adjusted figures.

The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for January at 9 am ET.

The results of the Philadelphia Federal Reserve's manufacturing survey are due out at 10 am ET. Economists expect the diffusion index of current activity to show a reading of 11.5 for March.

The Philadelphia Fed's manufacturing index rose to 10.2 in February from 9 in January. The internal details were mixed, however. The new orders index rose about 5 points and the order backlogs index climbed 6 points. The employment indexes were mixed, with the number of employees index dropping 10.5 points to 1, while the average workweek index rose to 5.1 points to 10.1. The 6-month outlook index declined to a 4-month low of 33.3.

Stocks in Focus

RADVISION (RVSN) announced a deal to be acquired by Avaya for $11.85 per share in cash. The total value of the deal is $230 million.

ADTRAN (ADTN) lowered its first quarter guidance, citing a slower than normal start to the seasonal buying pattern at some of its carrier customers and a delay in both the start and ramp of orders from a carrier customer.

PG&E Corp. (PCG) announced a 5.9 million share common stock offering valued at $250 million, with the offering intended to meet a part of its estimated equity needs in 2012.

Capital One Financial (COF) announced an underwritten public offering of $1.25 billion worth of its common stock. The company said it intends to use the net proceeds to fund a portion of its previously announced acquisition of HSBC's U.S. credit card business.

Northern Trust (NTRS) announced a 2 cent increase in its common stock dividend to 30 cents per share. The company also said its board approved a 10 million stock buyback authorization.

Guess?, Inc. (GES) reported fourth quarter earnings of $1.05 per share compared to $1.11 per share last year, which included a one-time gain of 5 cents per share. Revenues rose 2.5 percent to $775.8 million. The earnings were in line, while revenues were below estimates. For the full year, the company expects earnings of $2.50-$2.65 per share on revenues of $2.74 billion to $2.78 billion. For the first quarter, the company expects earnings of 25-28 cents per share on revenues of $560 million to $575 million. The guidance was below estimates.

Rue21, Inc. (RUE) reported fourth quarter earnings of 52 cents per share, higher than 44 cents per share last year. Net sales were up 15.7 percent at $190.1 million. The earnings exceeded estimates, while revenues trailed expectations. For 2012, the company expects earnings of $1.74-$1.79 per share, and for the first quarter, earnings are estimated at 42-44 cents per share. The full year guidance surrounded the consensus estimate, while the first quarter guidance suggests that the company may meet or miss expectations.

by RTT Staff Writer

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