Market Analysis

The major U.S. index futures are pointing to a lower opening on Wednesday, with sentiment hit by a report showing smaller than expected additions to private sector payrolls. Earlier in the day, a report showed that the eurozone’s manufacturing sector contracted at a steeper than initially estimated rate. A separate report showed that eurozone’s unemployment rate rose to a record high. These data points are expected to cloud the economic outlook and render the mood cautious.

U.S. stocks advanced on Tuesday after economic data allayed some of the economic uncertainties.

The major averages opened on a nervous note but picked up momentum after the recent release of upbeat manufacturing data. After climbing sharply in the morning, the major averages moved sideways before pulling back going into the close.

The Dow Industrials closed up 65.69 points or 0.50 points at 13,279 and the S&P 500 Index added 7.91 points or 0.57 percent before closing at 1,406, while the Nasdaq Composite Index ended at 3,050, up 4.08 points or 0.13 percent.

Twenty-two of the thirty Dow components closed higher, with Alcoa (AA), Bank of America (BAC), Intel (INTC) and JP Morgan Chase (JPM) advancing strongly in the session.

Transportation, oil, housing and banking stocks were among the best performers of the session.

On the economic front, the results of the Institute for Supply Management’s national survey showed that its manufacturing purchasing managers’ index rose 1.4 points to 54.8 in April. The new orders index rose by 3.7 points to 54.8 and the production index climbed by 2.7 points to 61. The employment index also improved, rising by 1.2 points to 57.3. Meanwhile, the order backlogs index fell 3 points to 49.5.

U.S. construction spending edged up 0.1 percent month-over-month in March. Private construction spending climbed 0.7 percent, offsetting a 1.1 percent decline in public construction spending. Among private construction, residential construction spending by 0.7 percent.

Currency, Commodity Markets

Crude oil futures are receding $0.29 to $105.87 a barrel after advancing $1.29 to $106.16 a barrel on Tuesday. An ounce of gold is currently fetching $1,659.40, down $3 from the previous session’s close of $1,662.40. On Tuesday, gold fell $1.80.

Among currencies, the U.S. dollar is trading at 80.15 yen compared to 80. 09 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $ 1.3134 compared to yesterday’s $1.3235.

Asia

The Asian markets advanced notably, with the Taiwanese Weighted Average advancing 2.33 percent and leading the gains of the region.

After data suggested that the U.S. manufacturing sector is still vibrant, a report released by HSBC and Markit Economics showed that the pace of contraction in the Chinese manufacturing sector slowed. The purchasing managers’ index rose 1 point to 49.3 in April.

The Japanese market received support from the U.S. manufacturing data as well as a weaker yen. Japan’s Nikkei 225 average opened higher on the positive Wall Street lead but pulled back below the unchanged line by the mid-session before advancing yet again. The index closed up 29.30 points or 0.31 percent at 9,380.

Australia’s All Ordinaries experienced volatility in the morning before moving decisively higher by the afternoon. The index ended 7.50 points or 0.17 percent higher at 4,505. Energy, healthcare and material stocks showed some buying interest, while the utility space experienced weakness. Hong Kong’s Hang Seng Index ended at 21,309, up 214.87 points or 1.02 percent.

Europe

The major European markets are trading on a mixed note. The German and French market, which remained closed yesterday, played catch up to yesterday’s gains in early trading. Subsequently, they have turned mixed. The U.K. market is trading with a moderate loss.

In corporate news, investment bank UBS (UBS) reported a 54 percent drop in its first quarter profits, as loss at its investment banking business served as a drag. That said, the company reported a strong increase in the net new money flow into its wealth management business. At the same time, Standard Chartered reported an increase in its first quarter operating profit.

BskyB reported that its pre-tax profit for the first nine months of its fiscal year rose to 899 million pounds from 705 million pounds last year.

A report released by the German Federal Labor Agency showed that the unemployment rate remained stable at 6.8 percent in April even as the number of unemployed rose by 19,000 to 2.875 million. Economists expected the number of unemployed persons to have fallen by 10,000. Meanwhile, the unemployment rate in the eurozone rose to a record high of 10.9 percent in March, according to estimates by Eurostat.

A revised report released by Markit Economics showed that the eurozone’s manufacturing sector contracted by more than initially estimated in April. The manufacturing purchasing managers’ index fell to 45.9 in April from 47.7 in March. The index for April was initially estimated at 46.

U.S. Economic Reports

Private sector employment in the U.S. increased by less than expected in the month of April, according to a report released by payroll processor Automatic Data Processing, with the data likely to add to recent concerns about the labor market.



ADP said that private sector employment increased by 119,000 jobs in April following a downwardly revised increase of 201,000 jobs in March. Economists had expected an increase of about 183,000 jobs compared to the addition of 209,000 jobs originally reported for the previous month.

The Commerce Department is due to release its report on factory goods orders for March at 10 am ET. Economists estimate a 1.6 percent drop in orders for factory goods.



In February, factory orders rose by 1.3 percent month-over-month, with transportation orders providing a boost to the headline number. Shipments were up 0.1 percent and unfilled orders rose 1.3 percent.

Meanwhile, durable goods orders, which make up the bulk of factory orders, fell 4.2 percent month-over-month in March, with transportation orders serving as a drag. Even after transportation orders were excluded, overall orders dipped 1.1 percent. Non-defense capital goods orders, excluding aircrafts, considered a proxy for capital spending, declined 0.8 percent, while shipments of this category rose 2 percent.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended April 27th at 10:30 am ET.



Crude oil stockpiles rose by 4 million barrels to 373 million barrels in the week ended April 20th but remained in the upper limit of the average range.

Gasoline inventories fell by 2.2 million barrels and remained in the upper limit of the average range. Distillate stockpiles also declined, dropping by 3.1 million barrels. Inventories of distillate fuels were in the middle of the average range. Refinery capacity utilization averaged 84.7 percent over the four weeks ended April 20th, flat with the previous four weeks.

Richmond Federal Reserve Bank President Jeffrey Lacker is scheduled to speak to the Economics Club of Hampton Roads Economic Conference sponsored by Old Dominion University's College of Business and Public Administration on the "Economic Outlook, at 12:30 pm ET.

Stocks in Focus

Microchip Technology (MHCP) reported fourth quarter adjusted earnings that beat estimates, while its revenues trailed expectations. The company’s first quarter guidance surrounded the consensus estimates. The company also agreed to acquire Standard Microsystems (SMSC) for $37.00 per share in cash, which represents a total equity value of about $939 million.

Broadcom (BRCM) reported better than expected first quarter results, while its second quarter revenue guidance surrounded the consensus estimate.

Peet’s Coffee (PEET) reported first quarter earnings and revenues that missed estimates. However, the company reaffirmed its 2012 earnings guidance, which surrounded the consensus estimate.

TripAdvisor’s (TRIP) first quarter results were ahead of estimates. Media giant CBS (CBS) also reported better than expected first quarter results.

CVS Caremark (CVS) reported higher first quarter earnings and revenues and also raised its guidance for the full year.

Time Warner (TWX) reported lower first quarter profit, which however was above the consensus estimate. Revenues rose and beat expectations.

Comcast’s (CMCSA) first quarter profit and revenue increased from the year-ago quarter and also were above Wall Street view.

Dreamworks Animation (DWA), Expeditors International (EXPD), Extreme Networks (EXTR), Green Mountain Coffee (GMCR), Lincoln Financial (LNC), Murphy Oil (MUR), Pioneer Natural Resources (PXD), Prudential (PRU), RealNetworks (RNWK), Symantec (SYMC) and Visa (V) are among the companies due to release their quarterly results after the markets close.