The major U.S. index futures are pointing to a lower opening on Wednesday. Several negative catalysts are looming large, as the markets head into today's session following a rebound in the previous session. Blackberry maker Research In Motion (RIMM) become the latest major tech company to warn, spreading anxiety over how the companies would weather the downturn. Additionally, a private sector job report released earlier in the day showed worse-than-expected job losses and may particularly be a cause of concern, when the National Bureau of Economic Research had declared a recession on the grounds of a rapidly deteriorating job market.
U.S. stocks opened Monday's session modestly higher and advanced sharply in early trading. Although a fresh wave of selling in late afternoon trading dragged the major averages well of their highs, they rallied again in late trading to end with solid gains.
The Dow Industrials rose 270 points or 3.31% to 8,419 and the S&P 500 Index gained 32.60 points or 3.99% to 849, while the Nasdaq Composite Index advanced 51.73 points or 3.70% to 1,450.
Twenty-eight of the thirty Dow components ended the session higher, with Coca-Cola (KO) and 3M Co. (MMM) the only decliners in the session. Bank of America (BAC) (up 11.83%), Citigroup (C) (up 11.94%), General Electric (GE) (up 13.61%) and JP Morgan Chase (JPM) (up 9.23%) led the gainers.
The Dow Industrials have been trending sideways since early October, although the index has not broken the downward trend that has been in place since late 2007. The sideward movement conceals the kind of volatility the index has been experiencing in recent months. The index could be locked in the 7,442-9,625 trading range until we see any meaningful sings of a recovery, which many see occurring only by the second quarter of 2009. The Dow could face near-term resistance around the 8,835 level and support around the 8,139 level.
Among the sector indexes, the Amex Securities Broker/Dealer Index rose 5.41% and the KBW Bank Index climbed 7.84%. The S&P Retail Index was up 3.79% compared to a 6.49% advance by the Philadelphia Housing Market Index.
The Dow Jones Transportation Index and the Amex Airline Index gained 3.72% and 6.89%, respectively. Despite a retreat in oil prices, the Amex Oil Index rose 4.10%. The Amex Gold Bugs Index ended up 6.58%. Networking, hardware, software and Internet stocks also advanced notably.
Philadelphia Fed President Charles Plosser said in a public appearance yesterday that he expects growth to be weak over the next several quarters before improving in the latter part of 2009. Plosser said the Fed can purchase longer-term securities and that Fed officials are still studying alternative policies.
Currency, Commodity Markets
Crude oil futures for January delivery are currently trading up $0.06 at $47.02 a barrel. On Tuesday, the commodity fell $2.32 to $46.96 a barrel.
Gold futures are slipping $13.80 to $769.50 an ounce after rising $6.50 to $783.30 an ounce in the previous session.
On the currency front, the U.S. dollar is trading at 92.74 yen, stronger than the 93.17 yen it fetched at the close of New York trading on Tuesday. The dollar is currently valued at $1.2624 versus the euro.
Asia
The major Asian markets closed mostly higher on Wednesday, as they derived strength from Wall Street's resounding performance on Tuesday. While the Chinese market posted standout gains, most of the remaining markets ended modestly higher amid trepidation over the economic prospects. Meanwhile, the South Korean market edged down in the session and the Taiwanese market declined sharply.
Japan's Nikkei 225 average opened higher and held above the unchanged line throughout the session, although it showed some volatility. At the close of trading, the index was up 140.41 points or 1.79% at 8,004.
Financial stocks advanced, with Chiba Bank, Credit Saison and Mizuho Financial rising in the session. Fast Retailing surged up 10.22% compared to a 7.12% advance by J Front Retailing. Paper makers rallied strongly, with Hokuetsu Paper climbing 9.87%, Nippon Paper gaining 8.47%, Oji Paper surging up 5.66% and Mitsubishi Paper rising 4.76%. Seven & I Holding rallied 11.95% and Citizen Holdings gained 8.31%.
Electronics exporters also saw some strength. On the other hand, auto stocks were mostly lower, with the exception of Mazda, Mitsubishi and Nissan. Resource stocks showed a lackluster performance.
Hong Kong's Hang Seng Index opened higher and moved sideways for the rest of the session before closing up 182.81 points or 1.36% at 13,589. Financial and commodity stocks advanced, while property stocks came under selling pressure. The utility space saw mixed sentiment.
Index heavyweight HSBC Holdings rose 1.71% and most other financial stocks posted solid gains. Retailers also saw significant buying interest. China Unicom (up 5.04%), Chalco (up 5.80%), China Shenhua (up 5.22%) and Tencent (UP 4.65%) were among the notable gainers. However, Shopping Property, Shopping Property, Hang Lung Property and Citic Pacific declined sharply.
South Korea's Kospi showed volatility, moving back and forth across the unchanged line before ending marginally lower. The index closed at 1,023, representing a decline of 0.53 points or 0.05%.
Electronic giants Samsung Electronics and LG Electronics fell 2.9% and 3.4%, respectively. Auto stocks also came under selling pressure, while financial stocks showed some strength.
Australia's All Ordinaries opened higher and moved up further in early trading. The index reversed course immediately, momentarily dipping below the unchanged line in early afternoon trading, only to recover and remain above the unchanged line for the rest of the session. The index closed off its highs at 3,477, representing a gain of merely 3.10 points or 0.09%.
The material space showed buoyancy, while IT, industrial and consumer stocks also advanced moderately. However, huge losses by energy and healthcare limited the upside for the markets.
Europe
The major European markets are trading lower on Wednesday, reversing the buoyancy witnessed in recent sessions. The French CAC 40 Index is trading down 2.59% compared to a 1.63% decline by the German DAX Index, while the U.K.'s FTSE 100 Index is trending down 0.95%.
In corporate news, Infineon Technologies (IFX) reported a loss of 763 million euros for the September quarter compared to a loss of 280 million euros in the year-ago period. Revenues climbed 12% to 1.15 billion euros. The company also said it expects an operating loss and at least a 15% drop in revenues for 2009.
On the economic front, Eurostat reported that retail sales in the euro area fell by 0.8% in October compared to the previous month. On an annual basis, retail sales declined 2.1% in the euro area. Meanwhile, a report released by the Nationwide Building Society showed that consumer confidence in the U.S. slid 6 points to 50, marking the lowest reading since the survey began.
U.S. Economic Reports
The ADP National Employment report, which sheds light on non-farm private employment, showed that the private sector in the U.S. lost 250,000 jobs in November, while economists expected a loss of 200,000 jobs. ADP noted that the estimated change in employment from September to October was revised down from a decline of 157,000 to a decline of 179,000.
The report also noted that the November numbers did not reflect the strike of some 27,000 machinists, who returned to work following the resolution in late October of a strike in the aerospace industry. The goods producing sector lost 158,000 jobs in November, while the manufacturing sector lost 118,000 jobs.
Meanwhile, non-farm productivity for the third quarter rose 1.3% compared with the previous quarter, according to a revised report released by the U.S. Labor Department. The increase was faster than the expected increase of 0.7%. Productivity of the business sector rose 1.5%. However, manufacturing sector's productivity dipped 2.7%, dragged down by a 10.2% slump in the productivity of the non-durable goods manufacturing sector.
Unit labor costs of the non-farm business sector rose by 2.6%, while those of the durable goods manufacturing sector and non-durable goods manufacturing sector climbing at an annualized quarterly pace of 3.1% and 14.3%, respectively.
The ISM is scheduled to release the results of its non-manufacturing survey at 10 AM ET on Wednesday. The non-manufacturing index is likely to show a reading of 42 for November.
In October, services activity contracted, with the non-manufacturing purchasing managers' index dipping 5.8 points to 44.4. The indexes of business activity, new orders, employment, inventories and backlog of orders showed contraction, although the index of inventories improved from the month-ago levels. The index of new export orders remained almost unchanged at 50, while the prices paid index continued to fall, declining 16.6 points to 53.4.
The Energy Information Administration is also due to release its weekly oil inventory report at 10:30 AM ET on Wednesday.
The weekly oil inventory report for the week ended November 21st showed a 7.3 million barrel increase in crude oil inventories to 320.8 million barrels. Crude oil stockpiles were in the upper bound of the average range for this time of the year.
Gasoline inventories increased by 1.9 million barrels and were near the lower boundary of the average range. However, distillate inventories eased 0.2 million barrels and were near the lower boundary of the average range. Refinery capacity utilization averaged 85.2% over the four weeks ended November 21st compared to 85% in the previous week.
Richmond Federal Reserve Bank President Jeffrey Lacker is scheduled to speak about U.S. financial conditions and the economic outlook in Charlotte, North Carolina at 1 PM ET.
The Federal Reserve is due to release its Beige Book, which is a compilation of anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts, at 2 PM ET on the same day. The report is normally released about two weeks before the monetary policy meeting is held.
Stocks in Focus
Marvell Technology Group (MRVL) could gain ground after it reported third quarter net income of 11 cents per share compared to a net loss of 1 cent per share in the year-ago period. On an adjusted basis, the company reported a profit of 23 cents per share, ahead of the 21 cents per share consensus estimate. Revenues were up 4.3% to $791 million, missing the mean analysts' estimate of $793 million.
Constellation Energy (CEG) is likely to be in focus after it said French utility EDF has agreed to acquire 50% of Constellation's nuclear generation and operation business for $4.5 billion. EDF is to make an upfront $1 billion cash investment in the U.S. company to be credited against the purchase price for EDF's interest in the nuclear generation and operations business.
Bed Bath & Beyond (BBBY) may see weakness after it lowered its third quarter earnings guidance to 31-35 cents per share from its earlier estimate of 41-47 cents per share. Net sales for the quarter edged down 0.7%. The consensus estimates call for earnings of 40 cents on sales of $1.84 billion.
Research In Motion (RIMM) is also expected to trade lower after it lowered its third quarter adjusted earnings guidance to 81-83 cents per share from its previous guidance of 89-97 cents per share. The company also lowered its revenue guidance to $2.75-$2.78 billion. The Street had expected earnings of 91 cents per share on revenues of $2.96 billion. The company attributed the lowered expectations to the timing of a product launch, anunfavorable foreign currency impact and bleak economic conditions.
Flower Foods (FLO) could react to its announcement that it is maintaining its 2008 and 2009 guidance. Speaking at an analysts' meeting, the company's CFO said it expects earnings of $1.22-$1.26 per share on revenues of $2.42-$2.43 billion for 2009. Analysts expect earnings of $1.24 per share on revenues of $609.68 million for the year.
Motorola (MOT) is expected to pullback in reaction to an announcement from rating agency Moody's that it has placed Motorola's investment grade 'Baa2' rating under review for a possible downgrade. The rating agency suggested that the action was based on a deterioration in the performance of the company's handset business at least in the near term.
Post Properties (PPS) is likely to move to the downside after it announced that it is reducing its quarterly dividend by 55% to 20 cents per share, as the company tries to preserve cash and improve its competitive position through the current business cycle. United Steel (X) could react to its announcement that it will temporarily idle some of its facilities, which in turn is expected to result in the lay-off of 3,500 employees.
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