The major U.S. index futures are pointing to a higher opening on Friday. The buoyancy in the financial space may be sustained, as Citigroup (C) announced a loss that was narrower than most analysts had expected. Government sponsored-mortgage lender Freddie Mac's (FRE) announcement that it has enough capital to remain above the mandatory 20% surplus could also appease the Street. Nevertheless, the gains of the past two sessions, lackluster results from some bellwether technology companies and resumption in the climb of oil prices could lead to some profit taking by traders.
U.S. stocks advanced significantly on Thursday, as positive earnings and a decline in oil prices helped the markets extend their uptrend. The Dow Industrials rose 207.38 points or 1.85% to 11,447 and the S&P 500 Index gained 14.96 points or 1.20% to 1,260, while the Nasdaq Composite Index rose 27.45 points or 1.20% to 2,312.
Financial stocks continued to sparkle, with AIG (AIG) (up 7.04%), American Express (AXP) (up 5.34%), Bank of America (BAC) (up 16.89%), Citigroup (C) (up 9.11%) and JP Morgan (JPM) (up 13.52%) extending their scintillating rally. Most other Dow components, with the exception of Chevron (CVX), Exxon Mobil (XOM), Johnson & Johnson (JNJ) and Coca-Cola (KO), advanced in the session.
Among the sectors, the Amex Securities Broker/Dealer Index rose 6.57% compared to a 9.41% advance by the KBW Bank Index. The Dow Jones Transportation and Amex Airline Index gained 1% and 8.60%, respectively. Biotechnology, retail, housing, semiconductor, hardware, software and networking stocks also saw some buying interest. On the other hand, the Dow Jones Utility Average slid 1.60%. The Amex Gold Bugs Index receded 1.94% compared to a 0.98% slippage by the Amex Oil Index. The Philadelphia Oil Service Sector Index receded 1.01%.
The Dow Industrials has staged a nice comeback in the past couple of sessions, mainly deriving support from the financial space, which recovered after the bruise it suffered in the aftermath of the credit market crisis. On Thursday, the Dow challenged an upward trending channel and closed near the highs of the session. Sustenance of the trend may take the index towards its next overhead resistances around 11,600, 11,722 and 12,100. On the downside, the index has support around 10,925.
Currency, Commodity Markets
Crude oil futures for August delivery are trading up $0.52 at $129.81 a barrel after the commodity declined $5.31 to $129.29 a barrel. A report from the IMF that said global growth is holding up well against the underlying economic weakness could serve to be bullish on prices. Gold futures are currently receding $18.10 to $952.60 an ounce. On Thursday, the precious metal rose $8 to $970.70 an ounce.
Among the currencies, the U.S. dollar is trading at 106.590 yen compared to the 106.2750 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is at $1.5842.
Asia
Stock markets across the Asia-Pacific region closed mixed on Friday on the back of disappointing earnings reported by Merrill Lynch, Microsoft and Google after the U.S. market closed on Thursday and caution ahead of Citigroup's earnings announcement in the U.S. today. A media report that the struggling mortgage giant Freddie Mac was considering a major stock sale added to the weak sentiment.
The Japanese stock market closed lower, paring early gains and reversing a two-day winning streak. The benchmark Nikkei 225 index closed down 84.25 points or 0.7% at 12,804.
On the economic front, the minutes of the Bank of Japan's June meeting noted policy makers as saying that slowing growth is more of a concern than the accelerating inflation. Japanese bonds rose for the first time in three days following the release of the minutes.
Stocks were sold across the board with commodity-related issues leading the decline, while financial stocks trimmed or erased early gains. Among exporters, Sony plunged 1.8% and Canon and Toyota Motor dropped 0.6% each, while Honda Motor gained 0.6% and Komatsu climbed 0.7%. In the tech space, NEC lost 0.7%, Fanuc fell 1.4%, Fujitsu plunged 2.2%, Tokyo Electron eased 1.8% and Advantest gave away 1.7%.
The South Korean market closed lower, with the benchmark Korea Composite Stock Price Index or KOSPI losing 15.57 points or 1.02% to end at 1,509.99, reversing Thursday's gains.
Among losers, steel maker POSCO plunged 4.3%, Hyundai Steel tumbled 4.5%, shipbuilder Hyundai Heavy Industries slumped 4.8%, Samsung Heavy plummeted 3.9% and automaker Hyundai Motor fell 0.4% as its union held its fourth walkout this month, demanding higher wages.
Bucking the trend, Korea Exchange Bank jumped 4.3% on speculation that the bank will find a new owner soon. The bank's largest shareholder, Lone Star, said on Thursday that it still plans to sell control of the bank to HSBC, while Kookmin Bank, the nation's top lender, is widely expected to bid for KEB.
The Chinese market closed sharply higher, led by financial stocks and oil refiners, amid rumors that the government would announce market-friendly measures during the weekend. The benchmark Shanghai Composite Index closed up 93.59 points or 3.49% at 2,778.37. However, for the week the index has lost 2.74%.
The Hong Kong market closed higher led by HSBC, airlines and select blue chips. The benchmark Hang Seng index closed up 139.47 points or 0.6% at 21,874. For the week, the index is down 310 points or 1.39%.
HSBC advanced 3.0%, Cathay Pacific gained more than 3.0%, Hong Kong Exchange & Clearing rose 2.3% after Citigroup reiterated a 'buy' call on the exchange operator.
The Australian stock market closed lower, ending a two-day winning streak. The All Ordinaries index lost 62.1 points or 1.2% to finish at 4,915.3.
Banks closed weaker after Merrill Lynch reported wider than expected quarterly loss. In the resources sector, BHP Billiton fell 2.4% and Rio Tinto lost 2.1%. Gold miner Lihir Gold plummeted 4.4% and New Mont Mining plunged 3.5%. Newcrest Mining edged up 0.03%. Gold prices edged lower in Sydney.
Energy stocks closed sharply lower after crude oil prices fell for a third day on Thursday. Qantas closed unchanged. The company said that it would axe 1500 jobs while scrapping plans to hire 1200 more staff and cut capacity while retiring old jets.
Europe
After showing weakness for most of the morning session, the major European markets have moved back into positive territory. The French CAC 40 Index and the German DAX Index are advancing 1.02% and 1.67%, respectively, while the U.K.'s FTSE 100 Index is gaining 1.10%.
The Eurostat reported today that the euro zone's trade balance showed a deficit of 4.6 billion euros in May compared to a deficit of 1.4 billion euros in May last year. In April 2008, the trade deficit was 2.5 billion euros. On a monthly basis, exports fell a seasonally adjusted 3.4% in May compared to a 1.3% drop in imports.
Stocks in Focus
Merrill Lynch (MER) is expected to see some weakness after it reported a second quarter loss of $4.97 per share compared to the year-ago profit of $2.24 per share. Analysts expected a loss of $1.91 per share. The company reported negative revenues of $2.11 billion compared to revenues of $9.46 billion last year. The company also announced that it is selling its stake in Bloomberg for $4.4 billion and Financial Data Services for $3.5 billion.
Google (GOOG) may see some weakness after it reported that its second quarter earnings rose to $3.92 per share from $2.93 per share in the year-ago period. On an adjusted basis, the company reported earnings of $4.63 per share, missing the consensus estimate of $4.74 per share. Net revenues adjusted for traffic acquisition costs rose 39% to $5.37 billion, beating the consensus estimate of $5.37 billion.
Advanced Micro Devices (AMD) reported a second quarter non-GAAP loss of $366 million or 60 cents per share, which is narrower than the non-GAAP loss of $469 million or 85 cents per share in the second quarter of 2007. Analysts had expected the company to report a loss of 52 cents per share for the quarter. AMD reported revenues from continuing operations of $1.35 billion, 3% growth from $1.309 billion in the year-ago period. Separately, the company announced the election of its President and COO, Dirk Meyer as its CEO, replacing Hector Ruiz in the position.
IBM (IBM) is likely to see some buying interest after it reported second quarter earnings of $1.98 per share compared to $1.55 per share. Sales rose 13% to $26.8 billion. Analysts, on average, estimated earnings of $1.95 per share on revenues of $26.07 billion.
Citigroup (C) could also be in focus after it reported a loss of 54 cents per share compared to a profit of $1.24 per share last year. The recent quarter's results included write downs of $7.2 billion. Analysts expected a loss of 66 cents per share.
Microsoft (MSFT) may see weakness after it reported fourth quarter profits of 46 cents per share as revenues rose 18% to $15.8 billion. Analysts expected earnings of 49 cents per share on revenues of $15.04 billion. For the first quarter, the company estimates earnings of 47-48 cents per share, shy of the mean analysts' estimate of 50 cents per share. Revenues are estimated at $14.7 billion to $14.9 billion compared to the consensus estimate of $15.04 billion.
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