The major U.S. index futures are pointing to a higher opening on Monday, with sentiment reversing after European stocks began to advance following a cautious start. Germany was able to sell 12-month bills at much less cost than it paid in October. Additionally, hopes concerning alleviation of the eurozone debt crisis are increasing as the region's financial ministers and leaders are set to deliberate over this week and the next on several nagging issues towards finding the elusive solution for diffusing the crisis.
U.S. stocks advanced for the third straight week in the week ended January 20th, as successful bond auctions by some European nations, positive economic data and better than expected U.S. bank earnings lifted sentiment.
Last Tuesday, the major advanced moderately after Spain successfully conducted bond auctions and a New York region manufacturing reading came in better than expected. Market momentum continued to remain positive on Wednesday, with the major averages notching up solid gains in the session. Successful German and Portuguese bond auctions, Goldman Sachs' solid earnings report and a homebuilder sentiment survey all worked to the advantage of the markets.
Positive bank earnings and encouraging jobless claims report catalyzed another upward move in the markets on Thursday. The major averages scrambled to a mixed close on Friday amid mixed earnings reports and apprehension about the Greek talks with its private sector creditors.
For the week, the Dow Industrials and the S&P 500 Index added 2.40 percent and 2.04 percent, respectively, while the Nasdaq Composite Index gained 2.81 percent.
Among the sector indexes, the NYSE Arca Securities Broker/Dealer Index added 6.55 percent for the week and the Philadelphia Semiconductor Index gained 8.05 percent. The NYSE Arca Airline Index and the Philadelphia Oil Service Index climbed over 4 percent each, while the S&P Retail Index and the NYSE Arca Oil Index moved up over 3 percent each, while the NYSE Arca Gold Bugs Index slipped 3.43 percent.
Commodity, Currency Markets
In the first trading session as the front month contract, crude oil futures for March delivery are rising $0.61 to $98.94 a barrel. The February futures expired at $98.46 a barrel on Friday, down $0.24 or 0.24 percent for the week.
Oil climbed by over $2 a barrel last Tuesday as a general increase in risk appetite and the weakness of the euro led to buying of the commodity. The commodity slipped modestly on Wednesday and declined modestly yet again on Thursday amid the release of the weekly oil inventory report.
The weakness lingered on Friday, as oil fell over $1.90 a barrel on Friday amid the uncertainties surrounding the Greek debt talks and developments in the Middle East before closing modestly lower for the week.
Gold futures, which rose $33.20 or 2.04 percent to $1,664 an ounce in the previous week, are currently adding $7.50 to $1,671.50 an ounce.
Among currencies, the U.S. dollar suffered in the week ended January 20th due to an increase in risk appetite in response to several positive catalysts witnessed in the week. The buck fell 2.08 percent against the euro to $1.2931. Meanwhile, the dollar ended the week at 77.0105 yen, up 0.30 percent for the week.
The U.S. dollar is currently trading at 76.94 yen and is valued at $1.3021 versus the euro.
Asia
The major Asian markets closed on a nervous note, although most markets in the region remained closed on account of Lunar New Year holidays. Japan's Nikkei 225 average ended down 0.46 points or 0.01 percent at 8,766, as traders took profits after 4 sessions of gains.
Australia's All Ordinaries ended 15.40 points or 0.36 percent lower at 4,288, while India's Sensex closed unchanged at 16,751.
Europe
In Europe, sentiment turned positive after a mixed start, with German DAX Index trading 0.4 percent higher, while France's CAC 40 Index and the U.K.'s FTSE 100 Index are rising around 0.47 percent and 0.66 percent, respectively.
A report released by French statistical agency INSEE showed that French business confidence slid to a 2-year low, with the corresponding indicator slipping to 91 in January from 94 in December. Economists had expected a small increase to 95.
In corporate news, German steel maker Thyssenkupp confirmed reports that it is in talks with Finland's Outokumpu to merge its Inoxum stainless unit with the latter.
U.S. Economic Reports
The FOMC meeting is likely to headline the economic events of the unfolding week, although there are several other global events that have the potential to move the markets. Among the domestic economic reports, traders may focus on the National Association of Realtors' pending home sales index for December, the new home sales report for December, the weekly jobless claims, the Commerce Department's durable goods orders report for December and the advance fourth quarter GDP report.
The final consumer sentiment report based on the Reuters and the University of Michigan's survey for January, the results of a couple of regional manufacturing surveys, the Conference Board's leading economic indicators index for December and the results of the Treasury auction of 2-year, 5-year and 7-year notes round up the economic events of the week.
Globally, the Eurogroup financial ministers are meeting later today in Brussels, where they are expected to discuss Greece and the fiscal compact. The week will also witness bond auctions by Germany, France, Italy and Spain.
The first FOMC meeting of the year assumes significance due to the fact that the Federal Reserve will be treading unchartered territory. The central bank will start publishing interest rate forecast from all 17 policymakers. Each policymaker will specify the period when he/she expects rates to rise as well as the outlook for the central bank's balance sheet.
BMO Capital Market sees an opportunity for monetary policy easing there, as a modal forecast suggesting that rate increases will commence much later than market expectations, then longer-term interest rates will decline. The Fed is unlikely to announce further bond buying programs.
Durable goods orders may have got a shot in the arm from a surge in aircraft orders reported by Boeing. Additionally, the recent expired full-expensing allowance could have offered some support to capital equipment orders.
The fourth quarter is likely to have experienced GDP expansion at a 3 percentage plus pace, suggesting the fastest rate of growth in 1-1/2 years. BMO Capital Markets expects all sectors, with the exception of government, to have offered support to growth.
Stocks in Focus
Earnings
Haliburton (HAL) reported fourth quarter adjusted income from continuing operations of $1 per share compared to 68 cents per share in the year-ago period. Revenues rose to $7.1 billion from the year-ago's $6.5 billion. The results exceeded estimates.
Albermale (ALB), Crane (CR), CSX (CSX), J&J Snack Foods (JJSF), Kansas City Southern (KSU), Packaging Corp. of America (PKG), Polycom (PLCM), Texas Instruments (TXN), Tuesday Morning Corp. (TUES), Vmware (VMW), Volterra Semiconductor (VLTR) and Western Digital (WDC) and Zions Bancorp. (ZION) are among the companies due to release their results after the markets close.
Other Corporate News
Research In Motion (RIMM) announced the appointment of Thorsten Heins as its president and CEO. The company also said its co-CEOs Jim Balsillie and Mike Lazaridis have stepped down from the position.
Apache (APA) announced a deal to buy privately held Cordillera Energy Partners III for $2.85 billion. The target company has substantial operations, including about 254,000 net acres in Western Oklahoma and Texas Panhandle. It has an estimated reserve of 71.5 million barrels of oil equivalent and current net production of 18,000 barrels of oil equivalent per day.
Meredith (MDP) announced the completion of its acquisition of FamilyFun from Disney Publishing Worldwide.
Home Depot (HD) said it has acquired online home services platform Redbeacon.
Watts Water Technology (WTS) said it has signed an agreement to acquire temkar Control Systems in a share repurchase transaction. The company expects the deal to close by the end of January 2012.
Thor Industries (THO) said it has entered into a repurchase agreement to buy 1 million shares of its common stock at a price of $28.50 per share in a private transaction.
For comments and feedback: editorial@rttnews.com