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Markets Convinced Of Economic Momentum

3/16/2012 9:18 AM ET

The major U.S. index futures are pointing a higher opening on Friday, with sentiment remaining upbeat about economic prospects. An economic report released earlier in the day showed that consumer prices rose at a slower rate than had been anticipated. The focus now shifts to the industrial output and consumer sentiment data to see if these data confirm the economic momentum indicated by recent data points. Although Asian stocks closed mostly lower, the European markets are seeing some strength.

After showing some apprehension early in the session on Thursday, the major averages advanced steadily till afternoon trading, as economic data, including manufacturing and jobless claims readings offering solace that all is well with the economy. Some selling followed in the afternoon, although the averages held above the unchanged line and before advancing again before closing moderately higher.

The Dow Industrials ended up 58.66 points or 0.44 percent at 13,253 and the S&P 500 Index closed 8.32 points or 0.60 percent higher at 1,403. Meanwhile, the Nasdaq Composite Index closed at 3,056, up 15.64 points or 0.51 percent.

Twenty-two of the thirty Dow components closed higher, with Bank of America (BAC) (up 4.52 percent) and JP Morgan Chase (JPM) (up 2.57 percent) leading the gains. Dupont (DD) and General Electric (GE) also recorded strong gains. On the other hand, Cisco Systems (CSCO) slid 1.41 percent.

Transportation, biotechnology, basic material, financial, semiconductor and housing stocks were among the best performers of the session.

On the economic front, the initial claims for unemployment benefits fell 14,000 to 351,000 in the week ended March 10rh from an upwardly revised reading of 365,000 in the previous week. Continuing claims for the week ended March 3rd fell 84,000 to 3.34 million.

Manufacturing readings released yesterday suggested continuing momentum in the sector. The New York Federal Reserve's survey showed the manufacturing activity picked up pace in March. The business activity index based on the survey rose to 20.21 in March from 19.53 in February. However, the new orders index slipped 2.89 points to 6.84 and the shipments index declined 4.58 points to 18.21. On the other hand, the employment indexes improved from the month-ago levels.

The Philadelphia Fed's survey showed that its manufacturing index rose to 12.5 in March from 10.2 in February. The new orders index slipped 3.3 points to 11.7 and the order backlogs index slipped to -11 from 2.2. The shipments index was down 11.5 points. While the number of employees index rose 5.7 points to 6.8, the average workweek index slid 7.4 points to 2.7. The 6-month outlook index edged down 0.4 points to 32.9.

Meanwhile, producer prices rose 0.4 percent month-over-month in February, with higher energy responsible for much of the upside. However, the annual rate of producer price inflation cooled off to 3.3 percent from 4.1 percent, benefiting from an easier comparison. The monthly increase in core producer prices was 0.2 percent, in line with estimates.

Currency, Commodity Markets

Crude oil futures are trading up $0.61 at $105.72 a barrel after declining $0.32 to $105.11 a barrel on Thursday. Gold futures are currently slipping $11.70 to $1,647.80 an ounce. In the previous session, the precious metal added $16.60 to $1,659.50 an ounce.

On the currency front, the U.S. dollar is trading at 83.57 yen compared to the 83.573 yen it fetched at the close of trading on Thursday. Against the euro, the dollar is valued at $1.3126 compared too yesterday's $1.3080.

Asia

The major Asian markets closed another lackluster session mostly lower, with the jittery mood primarily reflecting the uneasiness of traders over the overbought levels.

After remaining below the unchanged line for the better part of the session, Japan's Nikkei 225 average sneaked above the unchanged line in late trading. The index closed up 6.55 points or 0.06 percent at 10,130.

Australia's All Ordinaries closed down 2.20 points or 0.05 percent at 4,365 and Hong Kong's Hang Seng Index closed 35.68 points or 0.17 percent lower at 21,318. Meanwhile, China's Shanghai Composite added 1.30 percent following a late session rally and India's Sensex reacted to the budget presentation, closing down 1.27 percent at 17,466.

Europe

The major European averages are trading higher amid some volatility. Yesterday, the International Monetary Fund approved a 28 billion euro-loan to Greece as part of the second bailout package even as it remained skeptical about the nation's ability to successfully implementing the required reforms to bring in fiscal discipline.

In corporate news, Credit Agricole said it expects its first quarter to benefit from a debt buyback gain, which could offset the losses from its exposure to tarnished Greek sovereign debt. Sanofi-Aventis (SNY) announced a deal to buy medical device company Pluromed. The company did not disclose the terms of the transaction.

In the lone piece of significant economic evidence from the region, Eurostat reported that the eurozone's trade balance showed a deficit of 7.6 billion euros in January compared to a surplus of 9.1 billion euros in December.

U.S. Economic Reports

With energy prices showing a substantial increase, the Labor Department released a report on Friday showing a moderate increase in U.S. consumer prices in the month of February. The Labor Department said its consumer price index rose by 0.4 percent in February following a 0.2 percent increase in January. Economists had expected the index to increase by about 0.5 percent.

Excluding food and energy prices, the core consumer price index edged up by 0.1 percent in February compared to a 0.2 percent increase in the previous month. Core prices had been expected to increase by about 0.2 percent.

The Federal Reserve's industrial production report is due out at 9:15 am ET. Economists estimate 0.5 percent growth in industrial production for February.

Industrial output remained unchanged in January. The softness of the headline number reflected a 2.5 percent decline in utilities output. Mining output also fell 1.8 percent. Manufacturing output was up 0.7 percent, helped by 6.8 percent jump in motor vehicle output. Capacity utilization remained almost flat at 78.5 percent.

The preliminary report of the Reuters/University of Michigan's consumer sentiment survey for March is scheduled to be released at 9.55 am ET. The consumer sentiment index is expected to edge down to 75.3 from February's 76

Stocks in Focus

UPS (UPS) reiterated that it remains in constructive discussions with TNT Express regarding a potential purchase of the entire issued share capital of TNT Express.

Mylan (MYL) said its Canadian subsidiary has received approval from Health Canada for Mylan-Rosuvastatin Calcium tablets of strength 5 mg, 10 mg, 20 mg and 40 mg. The tablets are a generic version of AstraZeneca's cholesterol drug Crestor.

Fluor (FLR) was awarded a government contract to offer technical assistance and project management services for recovery efforts after national disasters. The contract has a potential value of up to $500 million over 5 years.

Quicksilver (KWK) said the filing of its 10-K statement for the year ended December 31st, 2011 will be delayed beyond the extended due date of March 15th due to efforts to complete its 2011 integrated contract and financial statement audit. The company also reduced its fourth quarter and full year results and now expects fourth quarter net income of 16 cents per share on revenues of $226.097 million. The company's full year earnings estimate is now at 55 cents per share on revenues of $946.62 million.

JDA Software (JDAS) also announced a delay in the filing of its 10-K report with the SEC beyond the extended due date of March 15th, 2012.

Panera Foods (PNRA) announced the appointment of its founder and executive Chairman and President and CEO bill Moreton as co-CEOs, effective immediately.

by RTT Staff Writer

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