The major U.S. index futures are pointing to a lower opening on Friday notwithstanding the upbeat manufacturing data released earlier in the day. Intel's (INTC) encouraging earnings point towards healthy corporate profit growth and JP Morgan (JPM), the first of the major Wall Street firms to report earnings, posted stellar bottom line results, although the top line left much to be desired.
Traders may also look ahead to the Federal Reserve's industrial production report and the Reuters/University of Michigan's consumer sentiment survey for additional cues. With the major averages holding up fairly well for much of the week in anticipation of strong evidence for recovery, some profit taking could not be ruled, especially ahead of the long weekend.
Notwithstanding disappointment on the jobs and consumer fronts, U.S. stocks managed to close Thursday's session modestly higher. The major averages opened lower and saw some volatility in early trading, before they showed divergence. The Dow and the Nasdaq Composite Index recovered a few minutes into trading and advanced steadily to close higher.
While the Dow Industrials closed up 29.78 points or 0.28% to 10,711, the Nasdaq Composite Index advanced 8.84 points or 0.38% to 2,317. The S&P 500 Index languished below the unchanged line for the better part of the session before recovering in late trading to close at 1,149, up 2.78 points or 0.24%.
Nineteen of the thirty Dow components closed the session higher, with Intel (INTC), IBM (IBM), Merck (MRK), Microsoft (MSFT), JP Morgan Chase (JPM), American Express (AXP), Bank of America (BAC) and Cisco Systems (CSCO) rising notably. On the other hand, AT&T (T), Wal-Mart (WMT) and Alcoa (AA) slid over 1% each.
Among the sector indexes, the KBW Bank Index rose 1.64%. Software, hardware and networking stocks also showed some strength. However, the Dow Jones U.S. Basic Materials Average declined 0.90%.
On the economic front, the Commerce Department's retail sales report for December came as a disappointment, with sales declining 0.3% compared to expectations for a 0.5% increase. Sales, excluding autos, slipped 0.2%, while economists had estimated a 0.3% increase. Stripping off autos and gasoline, retail sales were down 0.3%. Although on the face value, the numbers look weak, when November and December were taken together, sales were in line with expectations due to the upward revisions to the November data.
Meanwhile, initial jobless claims for the week ended January 9th totaled 444,000 compared to a revised reading of 433,000 for the previous week. The four-week average dropped to its lowest level since August 2008 to 441,000, suggesting that firings are slowing, although there was no clear indications of an increase in hirings.
Meanwhile, the Commerce Department's business inventories report showed a 0.4% gain in November compared to the previous month, a tad better than the 0.3% increase expected by economists.
The previous month's gains were revised up to 0.4%. The second straight month of growth following 13 months of declines show that we may have reached the inflection point. At the same time, business sales rose 2%, pushing the business inventories to sales ratio down to 1.28 compared to 1.30 in the previous month.
Commodity, Currency Markets
Crude oil futures are receding $0.61 to $78.78 barrel after retreating $0.26 to $79.39 a barrel on Thursday. In the previous session, the black gold came under selling pressure after the disappointing retail sales and jobs report dampened hopes of a pick up in demand.
According to Commerzbank, demand in developed countries will remain weak, although emerging economies will serve as the main driver of demand growth. The firm is of the view for oil to come under sustained selling pressure, market sentiment will have to deteriorate significantly so that financial investors' influence fades and weak fundamental data regains importance.
Gold futures, which rose $6.20 to $1,143 an ounce in the previous session, are currently slipping $9.20 to $1,133.80 an ounce in the previous session.
Among currencies, the U.S. dollar is trading at 91.124 yen compared to the 91.2098 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is trading at $1.4419.
Asia
The major Asian markets ended Friday's session mostly higher, with the impetus for the upside coming from better than expected results from chipmaker Intel. That said, the underlying tone reflected caution as traders digested the lackluster economic reports from the U.S.
Japan's Nikkei 225 average showed volatility in the morning before moving decisively into positive territory in afternoon trading. The index closed up 74.42 points or 0.68% at 10,982.
Mitsubishi Motor climbed 7.46% and Mizuho Trust & Banking advanced 7.45%, while Sumitomo Mitsui Financial rose over 5%. On the other hand, Japan Airlines continued its see-sawing trend, with the stock retreating over 11% following the rebound yesterday. JFE Holdings, Kawasaki Kisen, Mitsui OSK Lines and JFE Holdings declined sharply.
Hong Kong's Hang Seng ended a volatile session on a negative note, with the index closing down 62.79 points or 0.29% at 21,654. Thirty-nine of the forty-two index components closed lower, with property stocks declining for a second straight session. Financial and China-related stocks also joined the retreat.
Europe
The major European markets trading mixed, with the French CAC 40 Index and the German DAX Index declining 0.52% and 0.70%, respectively, while the UK's FTSE 100 Index is advancing 0.15%.
On the economic front, Eurostat released a duo of economic reports, which showed acceleration in the inflation rate in December, although in line with expectations, and a decline in the trade surplus.
Euro zone's trade surplus narrowed to 4.8 billion euros in November from 6.6 billion euros in October. Economists had forecast a surplus of 7 billion euros. The decline reflected a 0.4% decline in exports and a 0.3% increase in imports. A separate report released by the agency showed a 0.8% increase in the consumer price index in December, up from the 0.5% rate in November.
U.S. Economic Reports
The Labor Department's consumer price inflation report showed a 0.1% month-over-month increase in December, slower than the 0.4% increase in November and the 0.2% increase expected by economists. The core consumer price index also rose at the same 0.1% rate, in line with economists' expectations.
The slowdown was due to the easing in the rate of increase in energy prices to 0.1% from 4.1% in the previous month. However, food price inflation accelerated to 0.2% from 0.1%.
Meanwhile, the New York Fed survey revealed that conditions among manufacturers in the New York region improved for the sixth straight month in January. The headline general business conditions index for January rose 11 points to 15.9, ahead of economists' estimate of 12.
The new orders and shipment indexes also increased and the unfilled orders index rose above zero. The prices paid and received indexes increased notably, with the prices received index rising above 0 for the first time in more than a year. The future indexes also suggested optimism.
The Federal Reserve's industrial production report is due out at 9:15 AM ET. Economists estimate that industrial production rose 0.6% in December, while capacity utilization is expected to come in at 71.8%.
In November, industrial output showed a 0.8% month-over-month increase compared to the 0.5% growth forecast by economists. Capacity utilization rose to 71.3% from the month-ago's 70.6%. The increase in output was helped by a 1.8% surge in production by the motor vehicle/parts sector. Machinery and electronics production as well as mining output improved from the month-ago levels.
The preliminary report of the Reuters/University of Michigan's consumer sentiment survey for January is scheduled to be released at 9.55 AM ET. The consumer sentiment index is expected to rise slightly to 74 from December's 72.5.
Stocks in Focus
JP Morgan (JPM) could move in reaction to its announcement that its fourth quarter earnings rose to 74 cents per share from 6 cents per share in the year-ago period. Analysts had estimated earnings of 61 cents per share for the quarter. Revenues climbed 32% to $25.2 billion but missed the consensus estimate of $26.8 billion.
Intel (INTC) may see buying interest after it reported that its fourth quarter sales rose 29% to $10.6 billion. The company's earnings rose to 40 cents per share from 4 cents per share in the year-ago period, reflecting a surge in its gross margin to 64.7%. The consensus estimates had called for earnings of 30 cents per share on revenues of $10.2 billion. For the first quarter, the company expects revenues of $9.3 billion to $10.1 billion compared to the consensus estimate of $9.3 billion.
Shuffle Master (SHFL) is likely to move to the upside after it reported a profit of 12 cents per share compared to a loss of 28 cents per share in the year-ago period. The year-ago results included a charge of 41 cents per share. Revenues rose 2% year-over-year to $54.6 million. Analysts estimated earnings of 9 cents per share on revenues of $47.21 million.
CDC Software (CDCS) is likely to be in focus after it said it has withdrawn its offer to acquire Chordiant Software (CHRD) following the latter's rejection of the offer. CDC also said it has sold its entire holdings in the company, representing 1.3% of Chordiant's 30.4 million shares outstanding.
Manitowoc (MTW) is expected to see some activity after the company announced that it is planning to refinance a portion of its term loans under its senior secured credit facility with senior unsecured notes to improve the balance and flexibility of its capital structure. The company also said the amount of the offering is tentatively fixed at $400 million. Manitowoc noted that it has surpassed its targeted full year 2009 debt reduction target of $450 million by about $20 million.
Scientific Games (SGMS) may gain ground after it said it has been awarded a contract by Germany's Sachsische LOTTO-GmbH to supply instant tickets and co-operative services. The contract is scheduled to begin in January 2010.
South Financial Group (TSFG) could be in focus after it announced that its subsidiary Carolina First Bank has been approved as a preferred lender under the U.S. Small Business Administration Preferred Lender Program.
Integrated Device Technology (IDTI) may move in reaction to its announcement that it has acquired Mobius Microsystems in an all cash transaction. The company noted that the deal closed on January 14, 2010.
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