The major U.S. index futures are pointing to a lower opening on Thursday. A bigger-than-expected increase in consumer prices should trigger anxieties over inflation stifling the already feeble growth. The resumption in the climb in oil prices could aggravate inflation fears and keep buying interest muted. However, there are some bright spots as well. Discount retailer Wal-Mart (WMT) reported forecast-beating bottom-line results and also raised its earnings outlook for the year. The direction of oil prices is likely to be the wild card, helping to determine the market movement in today's session.
U.S. stocks went about another lackluster session on Wednesday, as traders continued to express apprehension over the outlook for a turnaround in economic and credit market conditions. The Dow Industrials languished below the unchanged line throughout the session before closing down 109.51 points or 0.94% at 11,533. The S&P 500 and Nasdaq Composite Indexes fared relatively better, ending with modest losses.
The technology-weighted Nasdaq Composite Index ended down 1.99 points or 0.08% at 2,429, while the S&P 500 Index receded 3.76 points or 0.29% to 1,286.
A majority of the Dow components declined in the session, with financial stocks once again leading the slide. Bank of America (BAC) declined 7.29% in the session, while peers American Express (AXP), Citigroup (C) and JP Morgan Chase (JPM) also posting significant losses. General Motors (GM) slid 7.57%.
The Amex Airline Index fell 6.08%, as traders locked in profits from airline stocks following their recent gains. The Amex Securities Broker/Dealer Index and the KBW Bank Index slipped 1.42% and 4.11%, respectively. Housing, retail and housing stocks also came under selling pressure. However, the Dow Jones Utility Average gained close to a percentage point. While the Amex Gold Bugs Index jumped 5.46%, the Amex Oil Index and the Philadelphia Oil Service Sector Index rose 2.36% and 4.05%, respectively.
On the economic front, the Commerce Department reported a 0.1% decline in the retail sales for July, with the decline spearheaded by a 2.4% drop in motor vehicle sales. Sales excluding autos rose 0.4%, partly benefiting from higher gasoline sales. The core retail sales, which exclude autos gasoline and building materials, rose 0.3%. Meanwhile, import prices rose at a staggering 21.6% year-over-year rate in July, marking the biggest increase since 1980. Another report released by the Commerce Department showed that business inventories rose 0.7% month-over-month in June. However, retail inventories fell 0.1%, mainly due to a reduction in stocks by auto dealers.
Currency, Commodity Markets
Crude oil futures are currently climbing $0.37 to $116.37 a barrel after advancing $2.99 to $116 a barrel on Wednesday. Yesterday's strength was premised on a weekly petroleum inventory report that showed a 0.4 million barrel-drop in crude oil inventories in the week ended August 8th to 296.5 million barrels. Crude oil stockpiles are now in the lower half of the average range for this time of the year. Gasoline inventories and distillate inventories also declined by 6.4 million barrels and 1.7 million barrels, respectively. Refinery capacity utilization averaged 86.8% over the four weeks ended August 8th compared to 87.7% in the previous week.
Gold futures, which rose $16.90 to 831.50 an ounce on Wednesday, are currently gaining an incremental $4.60 to $836.10 an ounce.
Among the currencies, the U.S. dollar is trading at 109.465 yen compared to the 109.53 yen it was worth at the close of trading on Wednesday. Currently, the dollar is valued at $1.4903 versus the dollar.
Asia
Stock markets in the Asia-Pacific region closed mixed on Thursday amid volatile trading. The Japanese and New Zealand markets closed lower, while the South Korean and Australian markets ended in positive territory. Resource stocks gained on the back of higher commodity prices, while banking stocks closed lower on renewed economic concerns.
The Japanese market closed half a percent lower on Thursday, dragged down by property stocks following the collapse of Urban Corp. Financial stocks also declined on renewed fears over the U.S. financial sector. Investors turned cautious ahead of the release of key economic data overseas, including the US consumer inflation data and economic growth numbers from the euro zone region. The benchmark Nikkei 225 Index closed down 66.25 points or 0.51% to 12,957.
The South Korean market closed marginally higher, led by steel and shipyard stocks that rebounded after their recent losses. The benchmark KOSPI Index gained 9.47 points or 0.61% to close at 1572. Among steel makers, Posco rose 3.22% and Hyundai Steel gained 3.7%. Shipbuilder Hyundai heavy Industries climbed 2.04%, Samsung Heavy Industries rose 2.4% and Daewoo Shipbuilding & marine Engineering jumped 4.38%.
The Australian stock market closed in positive territory, led by resource stocks on the back of stronger commodity prices. However, banking stocks closed lower. The All Ordinaries Index advanced 43.1 points or 0.86% to settle at 5,039.
Europe
The major European markets are trading on a mixed note on Thursday. The French CAC 40 Index and the German DAX Index are receding 0.29% and 0.37%, respectively, while the U.K.'s FTSE 100 Index is gaining 0.27%.
On the economic front, the German Federal Statistical Office reported that the German economy contracted by 0.5% in the second quarter compared to the previous quarter. In the first quarter, GDP growth was 1.3%. On a year-over-year basis, economic growth was 3.1%. Meanwhile, another report released by the agency showed that the German consumer price index rose 3.3% in July compared to the year-ago period. The inflation rate was the highest in about 15 years. On a monthly basis, the consumer price inflation rate was 0.6%.
The French National Institute of Statistics and Economic Studies released its second quarter GDP report, which showed a 0.3% decline in growth. The contraction reflected a 1.5% decline in total gross fixed capital formation and a 2% drop in exports.
Eurostat's second quarter GDP report showed that the euro area's economy contracted by 0.2% in the second quarter compared to 0.7% growth in the first quarter. On a year-over-year basis, the euro area's GDP grew 1.5%. A consumer price inflation report released by Eurostat showed that the euro area's annual inflation rate was 4% in July compared to the previous month. However, inflation declined 0.2% in July.
U.S. Economic Reports
Among the economic reports released earlier in the day, the Labor Department's consumer price inflation report showed that U.S. consumer prices rose 0.8% in July compared to a 1.1% increase in the previous month. Core consumer prices rose 0.3%, the same pace as in the previous month. The consensus estimates had called for a 0.4% increase in the headline consumer price index and a 0.2% rise in the core consumer price index that excludes food and energy.
Food prices rose 0.9% in July compared to a 0.7% increase in the previous month, while apparel prices climbed 1.2%, adding to the 0.1% gain in June. Transportation prices rose 1.7% in July compared to a 3.8% increase in June. The growth in the prices of housing was 0.6% in July, faster than the 0.5% growth in the previous month.
Meanwhile, the Labor Department also said the number of individuals claiming unemployment benefits declined 10,000 in the week ended August 9th to 450,000 from the previous week's revised average of 460,000. Economists had expected claims to have eased to 436,000 from the originally reported 455,000 for the previous week.
The four-week average that removes volatility rose 19,500 in the recent week to 440,500 from the previous week's revised average of 421,000. Continuing claims, which is calculated with a week's lag, rose 31,000 in the week ended August 2nd to 3.417 million.
Earnings
Wal-Mart (WMT) reported second quarter earnings of 87 cents per share, higher than 72 cents per share in the year-ago period. The company's earnings from continuing operations were 86 cents per share compared to 75 cents per share last year. Net sales rose 10.4% to $101.6 billion, shy of the consensus estimate of $101.93 billion. The company said it expects third quarter earnings from continuing operations of 73-76 cents per share, while it raised its full year earnings from continuing operations guidance to $3.43 to $3.50 per share. Analysts expect third quarter earnings of 76 cents per share and full year earnings of $3.49 per share.
Urban Outfitters (URBN) said its second quarter earnings rose to 33 cents per share from 19 cents per share in the year-ago period, as revenues climbed 30% to $454.3 million. Analysts, on average, expected earnings of 30 cents per share on revenues of $450.5 million.
Stocks in Focus
NetApp (NTAP) is expected to recede after it reported that its second quarter earnings rose to 11 cents per share from 9 cents per share in the year-ago quarter. On an adjusted basis, earnings were 22 cents per share, as revenues rose 26% to $868.8 million. Analysts, on average, estimated earnings of 22 cents per share on revenues of $861.6 million. The company's board also announced a $1 billion stock repurchase program.
CACI International (CAI) may react to its announcement that its fourth quarter earnings climbed to 77 cents per share from 67 cents per share in the year-ago period. Revenues climbed 26% to $655 million. The consensus estimates had called for earnings of 77 cents per share on revenues of $2.4 billion. The company reaffirmed its 2009 earnings per share estimate of $2.90-$3.10 per share on revenues of $2.55 billion to $2.65 billion.
Diamond Foods (DMND) may react to its announcement that it has agreed to buy the popcorn business of General Mills (GIS) for $190 million in cash. Skechers (SKX) is likely to react to its announcement that it has offered to buy Heelys (HLYS) for $143 billion or $5.25 per share.
NetEase (NTES) could be in focus after it reported that its second quarter revenues rose to $104.4 million compared to $81.3 million in the year-ago period. The company's net profit rose to 53 cents per share from 34 cents per share in the year-ago period.
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