The major U.S. index futures are pointing to a lower opening on Friday, with risk aversion likely to drive traders away from risky bets like equities and commodities. The overbought levels of the markets may make traders uneasy and force them to focus on the sovereign debt crisis that is raging through Europe and the unsettled nature of the geopolitical tensions on the Korean peninsula.
The prices of commodities are also retreating sharply in line with the general risk aversion. In the absence of any major catalysts, the truncated session of the day following Thursday's 'Thanksgiving Day' holiday may see some selling despite optimistic expectations for consumer spending in the holiday selling season.
U.S. stocks advanced solidly on Wednesday, capitalizing on a couple of positive data points released domestically. After the Labor Department released a report showing a decline in jobless claims to a 2-year low, the major U.S. averages opened notably higher and consolidated their gains over the course of the session.
The Dow Industrials ended up 150.91 points or 1.37% at 11,187 and the S&P 500 Index added 17.62 points or 1.49% to close at 1,198, while the Nasdaq Composite Index closed 48.17 points or 1.93% higher at 2,543.
Twenty-seven of the thirty Dow components closed higher, with American Express (AXP), Boeing (BA), Caterpillar (CAT), DuPont (DD), Disney (DIS) and United Technologies (UTX) among the notable gainers. On the other hand, Hewlett-Packard (HPQ) slid 1.01%.
Among the sector indexes, the Dow Jones Transportation Average rose 2.77% and the NYSE Arca Airline Index climbed 3.73%. In the resource space, the Dow Jones U.S. Basic Materials Average and the Philadelphia Oil Service Index advanced about 2% each. Retail stocks rallied as, reflected by the 2.57% advance by the S&P Retail Index.
Among technology stocks, the Philadelphia Semiconductor Index jumped 2.69%, the NYSE Arca Disk Drive Index gained 3.06%, the NYSE Arca Internet Index rose 3.41% and the NYSE Arca Networking Index moved up 2.31%.
On the economic front, the Commerce Department reported that durable goods orders fell 3.3% month-over-month in October. Economists had expected a 0.1% increase. As a consolation, the previous month's order growth was upwardly revised to 5% from the previously reported 3.3% increase. Excluding transportation equipment, orders fell 2.7%. The report showed broad based weakness, with almost all categories showing month-over-month declines in orders. The key non-defense capital goods orders, excluding aircrafts, fell 4.5% on a monthly basis.
Meanwhile, jobless claims fell to 407,000 in the week ended November 20th from 441,000 in the previous week, marking the lowest level since July 2008. The four-week average fell to 436,000 from 444,000, while continuing claims declined by 142,000 to 4.182 million in the week ended November 13th.
The Bureau of Economic Analysis reported that personal income rose 0.5% month-over-month in October, while personal spending increased 0.4%. Economists had expected a 0.4% increase in personal income and a 0.5% increase in personal spending. The personal savings rate rose 0.1 percentage points to 5.7%. The Fed's favorite inflation gauge, the core personal consumption expenditure index fell 0.3 percentage points to a record low of 0.9% in October.
In an encouraging sign, the Reuters/University of Michigan's consumer sentiment index was upwardly revised to 71.6 for November from the mid-month reading of 69.3, marking the highest reading since June. In October, the index was at 67.7. The current conditions and the outlook index were both upwardly revised a little more than 2 points.
Meanwhile, the Commerce Department said new home sales slid 8.1% month-over-month in October to a seasonally adjusted annual rate of 283,000, the third lowest level ever on record. Inventories as measured in terms of the number of months of supply rose to 8.6 months from 7.9 months in the previous month. The median price of a new home fell 13.9% month-over-month and declined 10.92% year-over-year to $194,900.
Currency, Commodity Markets
Crude oil futures are currently trading down $0.78 at $83.08 a barrel after advancing $2.61 to $83.86 a barrel on Wednesday. The previous session's advance came amid the increase in risk appetite following the release of some encouraging economic data and the release of the inventory report for the week ended November 19th, which showed that crude oil stockpiles rose by 1 million barrels to 358.6 million barrels. Inventories continued to remain above the average range for this time of the year.
Gasoline inventories increased by 1.9 million barrels, retreating to the upper half of the average range. Meanwhile, distillate fuel inventories edged down by 0.5 million barrels but remained above the upper boundary of the average range. Refinery capacity utilization averaged 85.5% over the four weeks ended November 19th compared to 84% in the previous week.
Gold futures, which fell $4.70 to $1,375 an ounce in the previous session, are currently edging down $16.60 to $1,358.40 an ounce.
Among the currencies, the U.S. dollar is trading at 83.9075 yen compared to the 83.5995 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.3214 compared to yesterday's $1.3360.
Asia
Most of the major Asian markets declined on Friday, with the Australian market alone bucking the downtrend with a modest advance. The re-ignition of the geopolitical tensions on the Korean peninsula created a stir in the markets, accentuating the weakness triggered by the economic uncertainties.
After showing some strength in the morning, Japan's Nikkei 225 average declined steadily throughout the afternoon to close down 40.20 points or 0.40% at 10,040. A majority of stocks declined in the session, with Sojitz, Sumco and Sumitomo Osaka leading the slide. Credit Saison, CSK Corp., Daiwa Securities Group, Isuzu Motors, Matsui Securities, Mitsubishi Paper, Mitsubishi Estate, Mizuho Trust & Banking, Nippon Express, Nomura Holdings, Resona Holdings, Shinsei Bank, Sumitomo Realty and Tokyu Land also saw notable declines.
On the other hand, TDK, Taiheiyo Cement, Nippon Telegraph, Nippon Steel, Mitsui OSK Lines, JX HD and Fujitsu advanced strongly.
On the economic front, a government report showed that Japanese core consumer prices fell for the 20th straight month in October, although the pace of decline moderated sharply due to a hike in the tobacco tax rate.
The Ministry of Internal Affairs and Communications said core consumer prices, which exclude fresh food from the price basket, dropped 0.6% year-over-year, slowing sharply from the 1.1% drop in September. The decline was in line with expectations. However, the slowdown was mainly due to a rise in the tobacco tax, which took effect in October, and is unlikely to ease the concerns of the government about deflation and the strong yen.
Australia's All Ordinaries opened higher and advanced strongly in early trading only to give back most of its gains over the course of the session, although it closed up 6.90 points or 0.15% at 4,690. Energy stocks surged higher, while healthcare and material stocks also found modest buying interest.
Ahead of an investor meeting, Rio Tinto announced that it still expects capital expenditure for the 18 months to December 2011 at around $13 billion. The company expects production to increase by more than 50% over the next five years due to the planned expansion of its iron ore business.
Hong Kong's Hang Seng Index held close to the unchanged line till the afternoon and declined sharply thereafter to close down 174.55 points or 0.76% at 22,880. Forty of the forty-five index components declined in the session.
Europe
The major European markets are declining on Friday, with geopolitical tensions and the sovereign debt crisis weighing on the markets. The French CAC 40 Index and the German DAX Index are moving down 1.49% and 0.98%, respectively, while the U.K.'s FTSE 100 Index is receding 1.05%.
In economic news, French statistical agency INSEE reported that French consumer spending fell 0.7% month-over-month in October following a revised 1.6% increase in the previous month. Economists had expected a more modest 0.5% drop. The decline was spearheaded by a 4.4% monthly drop in spending on automobiles and a 0.4% decline in spending on textiles and leather.
A report released by Germany's Federal Statistical Office showed that German import prices rose 9.2% year-over-year in October, a slowdown from the 9.9% rate in September. Economists had expected a 9.4% increase. On a monthly basis, import prices fell 0.2% following a 0.3% increase in the previous month. At the same time, export prices rose 4.3% year-over-year in October but fell 0.3% from the previous month.
Stocks in Focus
Del Monte Foods (DLM) could see some activity after it announced that an investor group led by funds affiliated with Kohlberg Kravis Roberts, Vestar Capital Partners and Centerview Partners have signed an agreement to buy Del Monte for $19 per share in cash. The total transaction value is about $5.3 billion, including the assumption of $1.3 billion in debt.
New York Times (NYT) is likely to be in focus after it revealed in a filing that Harbinger Capital Partners reduced its 7% stake in New York Times to 3.58%.
CPI International (CPII) could also be in focus after it said it has agreed to be acquired by private equity firm Veritas Capital Fund IV for $19.50 per share in cash. In September, CPI terminated a merger deal with Comtech Telecommunications (CMTL).
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