The major U.S. index futures are pointing to a mixed opening on Thursday, with sentiment deteriorating following the release of the weekly jobless claims report that showed a spike in claims. Although the durable goods orders report of the Commerce Department showed an unexpected decline in orders, the inner details were mostly positive, with core orders as well capital goods orders, excluding aircrafts, showing month-over-month increases.
Earnings news has been mostly encouraging, with companies such as Caterpillar (CAT) and Netflix (NFLX) reporting solid earnings and issuing upbeat forward guidance. However, there were disappointments as well. The market may also closely watch the pending home sales index due to be released shortly after the markets open.
After showing some indecision in early trading, the major averages spiked sharply higher following the release of upbeat housing data. While the Nasdaq and the S&P 500 remained positive throughout the remainder of the session, the Dow briefly pulled back into the red before recovering and ending the day modestly higher.
The Dow Industrials ended up 8.25 points or 0.07% at 11,985, a fresh multi-year closing high, while the Nasdaq Composite Index closed 20.25 points or 0.74% higher at 2,740 and the S&P 500 Index added 5.45 points or 0.42% to close at 1,297.
The market breadth among the Dow components was tilted in favor of the decliners, with 17 stocks ending lower, while the remaining 13 stocks closed in positive territory. Alcoa (AA), DuPont (DD) and Verizon (VZ) were among the notable gainers, while Boeing (BA) slipped over 3% in reaction to its quarterly results and Disney (DIS) fell over 1%.
Among the sector indexes, the Dow Jones U.S. Basic Materials Average rose 2.43%, the NYSE Arca Oil Index moved up 1.31%, the Philadelphia Oil Service Index added 4.60%, the NYSE Arca Gold Bugs Index surged up 3.90% and the NYSE Arca Airline Index gained 2.11%. Additionally, the Philadelphia Housing Sector Index advanced 1.17%, the NYSE Arca Disk Drive Index climbed 2.10% and the NYSE Arca Networking Index rose 1.68%.
On the economic front, the Commerce Department reported that new home sales jumped 17.5% month-over-month in December to a seasonally adjusted annual rate of 329,000, marking the first increase since September. The bulk of the increase was in the West, which saw sales growth of over 70%.
Inventories of new homes in terms of months of supply slid to 6.9 months from 8.4 months, while the median price of a new home rose 12.1% month-over-month and 8.5% year-over-year to $241,500.
The FOMC statement released yesterday did not produce any surprises in that the Fed maintained its commentary on growth and inflation. While repeating its view that the economic recovery is continuing amid a pick up in consumer spending, the Fed also held firm to its view that hiring and the housing market remain weak.
Even as it made a mention of commodity prices rising, the central bank said inflation expectations remained stable and said underlying inflation continues to trend downwards. The Fed also said it is committed to completing the asset purchase program it announced late last year.
This time around there was no dissent and all the voting members unanimously voted for maintaining the Fed funds rate at accommodative levels.
Currency, Commodity Markets
Crude oil futures are moving down $0.27 to $87.06 a barrel after edging up $1.14 to $87.33 a barrel on Wednesday amid the release of the weekly inventory report. The report showed that crude oil stockpiles rose by 4.8 million barrels to 340.6 million barrels in the week ended January 21st. Inventories of crude oil were above the upper limit of the average range.
Gasoline stockpiles increased by 2.4 million barrels, remaining above the upper limit of the average range. Meanwhile, distillate stockpiles edged down 0.1 million barrels but remained above the upper limit of the average range. Refinery capacity utilization averaged 81.8% over the four weeks ended January 21st compared to 83% in the previous week.
Gold futures for February delivery, which rose $0.70 to $1,333 an ounce in the previous session, are currently edging down $0.30 to $1,334.20 an ounce.
On the currency front, the U.S. dollar is trading at 82.855 yen compared to the 82.1705 yen it fetched at the close of New York trading on Thursday. After trading in the low-82 range, the yen began weakening after Standard & Poor's downgraded Japan's sovereign rating to 'AA-' from 'AA' while maintaining the outlook at stable. The rating agency attributed its action to Japan's weal fiscal flexibility due to its rising deficit.
Against the euro, the dollar is valued at $1.3739 compared to yesterday's $1.3712.
Asia
The major Asian markets closed Thursday's session mixed, with the Japanese, Chinese, Indonesian, Malaysian, South Korean and Taiwanese markets closing higher, while the Australian, Hong Kong, Singaporean and New Zealand markets ended in negative territory. The positive close on Wall Street overnight and a rebound by commodity stocks helped stocks to some extent even as uncertainties prevailed.
Japan's Nikkei 225 opened higher and remained above the unchanged line throughout the session, although amid some volatility, to close higher. The index ended up 76.76 points or 0.74% at 10,479.
A majority of stocks advanced in the session, with technology and other export stocks leading from the front. Fanuc, Marubeni and Mitsubishi Heavy were among the notable gainers. Meanwhile, financial, pharma, real estate, utility, marine, paper, telecom and stocks declined.
Australia's All Ordinaries moved back and forth across the unchanged line in the morning before being confined mostly below the unchanged line in the afternoon and closing down 2 points or 0.04% at 4,907. Consumer staple and energy stocks retreated sharply, offsetting strength in the healthcare and material spaces.
Sentiment was to some extent impacted by the government's assessment that flood reconstruction will cost over 5.6 billion Australian dollars.
Hong Kong's Hang Seng Index opened lower, but it recovered and moved into positive territory in early trading and was seen modestly above the unchanged line until late trading. Thereafter, the index retreated to close down 63.62 points or 0.27% at 23,780. Barring telecom and resource stocks, most stocks declined.
In major economic events from the region, New Zealand's central bank kept its benchmark interest rate unchanged at 3% for a fourth consecutive policy meeting. The decision was widely expected by analysts after New Zealand's economy recorded a surprise contraction in the September quarter of 2010.
Announcing the decision, Reserve Bank of New Zealand Governor Alan Bollard suggested that interest rates will remain low for some time yet as the economy struggles to build momentum.
Meanwhile, Japan's Ministry of Finance reported that Japan's trade surplus rose 34.1% year-over-year to 727.7 billion yen in December, marking the first increase in 2 months. Economists had expected a more modest surplus of 465 billion yen. Exports rose 13% year-over-year, while imports were up 10.6%.
Europe
The major European markets are advancing on Thursday, with the French CAC 40 Index and the German DAX Index rising 0.16% and 0.28%, respectively, while the U.K.'s FTSE 100 Index is gaining 0.25%.
In corporate news, Novartis (NVS) reported that its fourth quarter core earnings fell 10% to $1.14 per share even as sales climbed 10% to $14.2 billion. The company's board proposed a 5% increase in its dividend to 2.20 Swiss francs per share. Earlier Alcon, which is being consolidated with Novartis, reported 8.1% growth in adjusted earnings per share to $1.74 and 5.7% sales growth to $1.81 billion.
AstraZeneca (AZN) reported fourth quarter core earning of $1.39 per share, lower than $1.42 per share last year. Revenues fell 4% to $8.62 billion. The company announced an 11% increase in its full year dividend to $2.55 per share. The company's board also proposed a $4 billion share repurchase plan for 2011.
Meanwhile, British Sky Broadcasting reported 40% profit growth and 15% revenue growth for its second quarter, helped by solid subscriber growth.
On the economic front, asking prices for houses in England and Wales fell for the seventh consecutive month in January, a new survey revealed. Property research firm Hometrack reported that average house prices fell 0.5% month-over-month to 153,600 pounds following a 0.4% drop in the previous month.
Meanwhile, French statistical office INSEE said its households confidence index fell 1 point from the previous month to 85, well below its long-term average of 100. The INSEE said it was replacing its former summary indicator of confidence, which carried a consumer sentiment score of -36 in December, to the new normalized one from this month and said the "variations are close to the former indicator."
French shoppers became more downbeat over the prospects for the economy in January, with the corresponding indicator falling to -49 from -47 in the prior month. Assessments of major purchasing intentions for the next 12 months and expectations of future financial situations were also more pessimistic.
U.S. Economic News
With orders for transportation equipment in the U.S. showing another steep drop in the month of December, the Commerce Department released a report showing an unexpected decrease in durable goods orders for the month.
The report showed that durable goods orders fell by 2.5 percent in December following a revised 0.1 percent decrease in November. The decrease came as a surprise to economists, who had expected orders to increase by about 1.5 percent.
Excluding the 12.8 percent drop in orders for transportation equipment, durable goods orders actually rose by 0.5 percent in December compared to a 4.5 percent increase in the previous month. Economists had expected ex-transportation orders to increase by 0.6 percent.
However, shipments and orders of non-defense capital goods, excluding aircrafts, rose 1.7 percent and 1.4 percent, respectively.
After showing a notable decrease in the previous week, first-time claims for unemployment benefits rebounded by much more than expected in the week ended January 22nd, according to a report released by the Labor Department.
The Labor Department said initial jobless claims jumped by 51,000 to 454,000 from the previous week's revised figure of 403,000. Economists had expected jobless claims to edge up to 405,000 from the 404,000 originally reported for the previous week.
Data on Pending Home Sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 AM ET. A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. The index is expected to decline 0.5% in November.
The pending home sales index for October rose 3.5% month-over-month, although it was still down 2.4% year-over-year. The annual drop represented the smallest since the homebuyers' tax credit expired in April.
Stocks in Focus
Earnings
Procter-Gamble (PG) reported second quarter core earnings of $1.13 per share, up 3% year-over-year. Net sales rose 2% to $21.3 billion. Analysts estimated earnings of $1.10 per share on revenues of $21.58 billion. For 2011, the company expects net sales growth of 3%-7% and core earnings of $3.91 to $4.01 per share. The consensus estimates call for earnings of $3.98 per share on 4% sales growth.
Nokia (NOK) reported fourth quarter earnings of 20 euro cents per share compared to 26 euro cents per share last year. Net sales rose to 12.6 billion euros from 11.99 billion euros last year.
AT&T (T) said its fourth quarter adjusted earnings rose to 55 cents per share from 50 cents per share last year. Consolidated revenues rose 2.1% to $31.4 billion. Analysts estimated earnings of 54 cents per share on revenues of $31.47 billion.
Teradyne (TER) reported fourth quarter non-GAAP earnings of 37 cents per share on revenues of $322 million. Analysts estimated earnings of 25 cents per share on revenues of $316.31 million. For the first quarter, the company expects non-GAAP earnings of 33-39 cents per share on revenues of $350 million to $375 million. The consensus estimates call for earnings of 19 cents per share on revenues of $299.99 million.
Murphy Oil (MUR) said its fourth quarter earnings fell to 90 cents per share from $1.65 per share last year, which included several one-time items. Revenues rose to $6.51 billion from $5.83 billion last year. Analysts estimated earnings of $1.01 per share on revenues of $5.62 billion.
Astoria Financial (AF) reported fourth quarter earnings of 25 cents per share compared to 9 cents per share last year, higher than the consensus estimate of 21 cents per share. The company also announced the resignation of its CEO George Engelke, effective July 1st, 2011 and the appointment of its COO Monte Redman as CEO in Engelke's place.
Motorola Mobility (MMI) reported fourth quarter non-GAAP earnings of 37 cents per share compared to a loss of 24 cents per share last year. Revenues rose 21% to $3.4 billion. Analysts estimated earnings of 36 cents per share on revenues of $3.41 billion. For the first quarter, the company expects a net loss of 9-21 cents per share, while analysts had been expecting break-even results.
Netflix (NFLX) reported that its fourth quarter earnings per share rose to 87 cents from 56 cents in the year-ago period, as revenues climbed to $596 million from last year's $445 million. Analysts estimated earnings of 71 cents per share on revenues of $597.49 million. Net subscriber additions rose 166% year-over-year to 3.08 million. For the first quarter, the company expects earnings of 90 cents to $1.13 per share and revenues between $694 million and $717 million. The consensus estimates call for earnings of 87 cents per share on revenues of $673.49 million.
E*Trade (ETFC) reported a fourth quarter loss of 11 cents per share compared to a loss of 36 cents per share last year, as revenues rose to $518 million from the year-ago's $489 million. Analysts estimated a profit of 4 cents per share on revenues of $321.77 million.
Symantec (SYMC) reported third quarter non-GAAP earnings of 35 cents per share on GAAP revenues of $1.60 billion. Analysts estimated earnings of 33 cents per share on revenues of $1.58 billion. For the fourth quarter, the company expects earnings of 35-36 cents per share on revenues of $1.59 billion to $1.61 billion. The consensus estimates call for earnings of 35 cents per share on revenues of $1.58 billion. Separately, the company also announced that its board has authorized a $1 billion stock buyback program.
QUALCOMM (QCOM) said its first quarter non-GAAP earnings rose 32%to 82 cents per share on 25% revenue growth to $3.35 billion. For the second quarter, the company estimates non-GAAP earnings of 77-81 cents per share on revenues of $3.45 billion to $3.75 billion, while the company upwardly revised its full year non-GAAP earnings estimate to $2.91-$3.05 per share and also lifted its revenue estimate to $13.6 billion to $14.2 billion. The results as well as the forward outlook were above the consensus estimates.
Starbucks (SBUX) reported first quarter earnings that rose 41% to 45 cents per share. The company's revenues rose 8% to $3 billion. Analysts estimated earnings of 39 cents per share on revenues of $2.93 billion. The company now expects full year earnings of $1.44-$1.47 per share, while analysts estimate earnings of $1.49 per share.
Novartis (NVS) reported that its fourth quarter core earnings fell 10% to $1.14 per share even as sales climbed 10% to $14.2 billion. The company's board proposed a 5% increase in its dividend to 2.20 Swiss francs per share. Earlier Alcon, which is being consolidated with Novartis, reported 8.1% growth in adjusted earnings per share to $1.74 and 5.7% sales growth to $1.81 billion.
AstraZeneca (AZN) reported fourth quarter core earning of $1.39 per share, lower than $1.42 per share last year. Revenues fell 4% to $8.62 billion. The company announced an 11% increase in its full year dividend to $2.55 per share. The company's board also proposed a $4 billion share repurchase plan for 2011.
Other Corporate News
ProLogis (PLD) and AMB Property (AMB) confirmed reports that they have been engaged in merger talks regarding an all stock at-market transaction.
PotashCorp. (POT) announced that its board has approved a 3-for-1 stock split and also an increase in its quarterly cash dividend to 21 cents per share from 10 cents per share on a pre-split basis. The company also reported fourth quarter earnings of $1.61 per share, higher than 79 cents per share last year.
Abbott (ABT) said a FDA sub-committee voted that the benefits of the company's stent system outweighed the risks for treating carotid artery disease patients at standard surgical risk.
Standard & Poor's said Covidien (COV) will replace McAfee (MFE) in the S&P 500 Index on a date to be announced. McAfee has agreed to be acquired by Intel (INTC).
LDK Solar (LDK) announced that it has filed a shelf-registration statement on Form F-3 with the SEC for a proposed follow-on public offering. The company said it expects to offer 12 million ADSs.
Woodward Governor (WGOV) announced a 17% increase in its dividend to 7 cents per share.
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