The major U.S. index futures are pointing to a higher opening on Thursday. With no clear signals emerging about the course of the economy, the markets, which remained locked in a lackluster phase in the past week, experienced two straight sessions of pullback earlier in the week. It would require solid evidence on the strength of the economy to convince traders to come back to buying ways. A U.S. Labor Department showed that continuing claims declined in the recent reporting week, suggesting that labor market conditions may be inching towards a bottom.
The markets may also stay focused on the results of the Philadelphia Fed's manufacturing survey and the Conference Board's leading indicators index for May. Although the price of oil is showing slight weakness, it is holding above the $70-a-barrel level.
U.S. stocks, which showed some degree of uncertainty in morning trading on Wednesday amid the release of reports that showed a smaller-than-expected increase in consumer prices for May and a drop in mortgage applications for the recent reporting week and bleak guidance from FedEx (FDX), advanced solidly in the afternoon. However, the major averages showed divergence in late trading before closing in a mixed fashion.
The Dow Industrials ended down 7.49 points or 0.09% at 8,497 and the S&P 500 Index moved down 1.26 points or 0.14% to 911, while the Nasdaq Composite rose 11.88 points or 0.66% to close at 1,808.
Thirteen of the thirty Dow components ended the session lower, with Alcoa (AA) (down 3.76%), American Express (AXP) (down 3%), Bank of America (BAC) (down 3.38%), Caterpillar (CAT) (down 2.14%), General Electric (GE) (down 4.15%) and JP Morgan Chase (JPM) (down 2.30%) leading the declines. Home Depot (HD), Intel (INTC), Pfizer (PFE), Merck (MRK), Johnson & Johnson (JNJ) and Hewlett-Packard (HPQ) were among the major gainers.
Financials acted as drags after S&P downgraded 22 U.S. banks. The KBW Bank Index fell 3.29% and the NYSE Arca Securities Broker/Dealer Index moved down 1.90%. Notwithstanding an increase in oil prices, the NYSE Arca Oil Index fell 1.76% and the Philadelphia Oil Service Index declined 2.79%. The Dow Jones U.S. Basic Materials Index ended down 1.64%.
While the S&P Retail Index gained a little over 1%, the Philadelphia Housing Sector Index receded 1.44%. The NYSE Arca Airline Index advanced 2.51%, while the Philadelphia Semiconductor Index and the NYSE Arca Software Index gained about 1% each.
Currency, Commodity Markets
Crude oil futures are declining $0.29 to $70.74 a barrel after advancing $0.56 to $71.03 a barrel on Wednesday, when the commodity reacted to the weekly inventory report, which showed that crude oil stockpiles declined 3.9 million barrels to 357.7 million barrels in the week ended June 12th. Despite the declins, crude oil inventories remained above the upper limit of the average range.
Gasoline inventories increased by 3.4 million barrels, but stockpiles were still below the lower limit of the average range. Distillate inventories rose by 0.8 million barrels and were above the upper limit of the average range. Refinery capacity utilization averaged 85.8% over the four weeks ended June 12th compared to 84.8% in the previous week.
Gold is trading at $938.40 an ounce, up $2.40 from its New York session close of $936 an ounce yesterday, when it gained $3.80.
Among currencies, the U.S. dollar is weaker at 96.04 yen compared to the 95.7475 yen it fetched at the close of New York trading on Wednesday. The greenback is currently valued at $1.3945 versus the euro compared to yesterday's $1.2943.
Asia
The markets across the Asia-pacific region drifted lower on Thursday amid concerns about valuation and the pace and magnitude of global recovery. On the other hand, China's Shanghai Composite Index managed to buck the trend and end in positive territory after the World Bank revised its growth forecast for the country.
Japan's Nikkei 225 Average opened sharply lower at 9,778 compared to its previous close of 9,840 and continued to drift lower in negative territory, pressured by the yen's strength and uncertainty about growth. The index finally closed at 9,704, representing a loss of 137.13 points or 1.39%. The broader Topix Index of all first section issues ended at 911, down 11.82 points or 1.13%.
Profit-taking in trading houses, steel and oil companies dragged the market lower. Nippon Steel declined 4.20% after Japan Iron and Steel Federation revealed that production declined more than third during May. Kobe Steel slumped 5.29%. Sumitomo Metal Industries plunged 6.69%. Mitsui & Co fell 3.64%, Mitsubishi Corp. declined 4.22% and Sumitomo Corp. lost 3.07%. Australia's All Ordinaries Index opened unchanged from its previous close at 3,904. Weak cues from Wall Street and concerns about a global recovery dragged the indices below the unchanged line. The index remained below the unchanged line for the bulk of the session before closing at 3,887, representing a loss of 16.80 points, or 0.43%. The benchmark S&P/ASX 200 Index followed a similar trend and ended lower at 3,892, a loss of 12.00 points or 0.30%.
Resource stocks dragged the market lower on weak commodity prices. BHP Billiton, the world's largest mining company, declined 2.69%. Rio Tinto, which has been trading ex-dividend from Wednesday, slumped 8.95%. Nickel producer Mincor Resources fell 3.61%, and Oz Minerals fell 4.15%. Gold stocks ended lower on lower gold prices. Lihir Gold declined 1.04%, Sino Gold lost 2.43%, and Newcrest Mining fell 1.16%.
Financial stocks advanced after a report released by the Reserve Bank of Australia revealed that net interest margin, the key measure of bank's performance, has improved in the first half of fiscal 2010 and is presently higher than the margins that prevailed before the start of the global financial crisis. Commonwealth Bank added 0.98%, National Australia Bank gained 1.47% and Westpac Banking Corp advanced 1.58%. However, ANZ Bank bucked the trend and ended lower by 0.61%.
Hong Kong's Hang Seng Index opened sharply lower at 17,956 compared to its previous close of 18,085 and continued to trade in negative territory on increasing concerns about a global recovery and lower commodity prices. The market ended with a loss of 308 points, or 1.70%, at 17,777.
Thirty-seven of the forty-two ended in negative territory. Among financial stocks, Bank of China fell 2.85%, Bank of Communications lost 2.50%, ICBC slumped 3.57% and China Commercial Bank declined 2.64%.
Property and resource stocks also ended in negative territory. Among resource stocks, Aluminum Corp. of China, or CHALCO, fell 2.90% on lower commodity prices. PetroChina lost 2.31% and CNOOC, the largest offshore oil company in China, declined 1.24%.
Among the other major markets in the region, China's Shanghai Composite Index managed to end in positive territory with a gain of 43.78 points or 1.56% at 2,854 after the World Bank revised up its growth forecast for the country.
However, Strait Times Index in Singapore fell 34.25 points or 1.51% to close at 2,237, Taiwan's Weighted Index lost 0.83% or 51.38 points to close at 6,145, and Indonesia's Jakarta Composite Index, slumped 3.65% or 73.98 points to close at 1,951.
Europe
The major European markets are trading on a mixed note, after declining in each of the past four sessions. The French CAC 40 Index is edging up 0.08%, while the German DAX Index is receding 0.18% and the U.K.'s FTSE 100 Index is declining 0.64%.
In corporate news, Cadbury (CBY) said in its trading update that progress has continued into the second quarter and has improved in April and May. Therefore, the company said it continues to see full year revenue growth around the low end of its 4%-6% target and it expects to make good progress towards its goal of mid-teens margins by 2011. Swiss drug maker Novartis (NVS) said the U.S. FDA has approved llaris for the treatment of children and adults with cryopyrin-associated periodic syndrome.
On the economic front, a report from the Office for National Statistics showed that the U.K.'s retail sales volume decreased 0.6%, while economists were looking for a 0.3% increase. This was the first decline in three months. Textiles, clothing and footwear store sales dropped 1.9% in May.
U.S. Economic Reports
The Labor Department said initial jobless claims rose 3,000 to 608,000 in the week ended June 13th from an upwardly revised figure of 605,000 for the previous week. Economists expect a small increase in claims to 602,000 from the initially estimated figure 601,000 for the previous week.
The 4-week moving average for initial claims, a statistic that flattens out week-to-week fluctuations in the data, dipped 7,000 to 615,750. Continuing claims, which measures people receiving ongoing unemployment help, declined 148,000 in the week ended June 6th to 6.687 million.
The results of the Philadelphia Federal Reserve's manufacturing survey are due out at 10 AM ET. Economists expect the diffusion index of current activity to show a reading of -17 for June.
In May, the index of business activity rose 1.8 points to -22.6. However, the increase was less than what analysts had expected. Nonetheless, May marked the third straight month of slowdowns in the pace of contraction.
The new orders index fell to -25.9 from -24.3 in April, while the backlog of orders index rose slightly to its highest level since September. The shipment index climbed to -19 in May from -35.7 in April, signaling a sharp improvement. Moreover, the future general business activity index rose to 47.5 from 36.2 in the previous month, marking the highest level since November 2004.
The Conference Board is scheduled to release a report on the U.S. leading index for May at 10 AM ET. The consensus estimate calls for a 1% increase in the leading indicators index for the month.
In April, the leading indicators index rose 1% following a 0.2% decline in March, marking the first increase in seven months. Stock prices, the interest rate spread, consumer expectations, initial unemployment claims, the average workweek and supplier deliveries all contributed positively to the index, while real money supply and housing starts acted as drags. Meanwhile, the coincident economic index fell 0.2% compared to a 0.5% drop in the lagging economic index.
Earnings
J.M. Smucker (SJM) said its fourth quarter net sales rose 81% to $1.07 billion. Excluding the impact of acquisitions and foreign exchange, net sales rose 3%. On an adjusted basis, the company reported non-GAAP earnings of $1.01 per share, higher than 73 cents per share last year. Analysts estimated earnings of 63 cents per share on revenues of $997.11 million. For 2010, the company expects net sales growth of 20% to $4.5 billion and adjusted earnings of $3.65-$3.80 per share.
Progress Software's (PRGS) second quarter revenues declined 8% to $118 million, while GAAP revenues fell 9% to $117 million. On a non-GAAP basis, earnings declined 17% to 39 cents per share. Analysts estimated earnings of 38 cents per share on revenues of $119 million. For this fiscal year ending November 30, 2009, the company expects GAAP revenues of $492 million to $502 million and non-GAAP earnings of $1.72-$1.81 per share. The consensus estimates call for earnings of $1.74 per share on revenues of $499.60 million.
Pier 1 Imports (PIR) reported first quarter net income of 32 cents per share compared to a loss of 37 cents per share last year. Sales fell to $281 million from $310 million last year. Analysts estimated a loss of 36 cents per share on revenues of $276.21 million.
Stocks in Focus
State Street (STT) receded in Wednesday's after hours session after it reported that it has repaid the full amount of the government's $2 billion investment in the company under the TARP.
Google (GOOG), Yahoo (YHOO) and Microsoft (MSFT) are likely to react to the results of the latest Comscore survey, which showed that Google still led the U.S. core search market with a 65% share in May compared to Yahoo's 20.1%, Microsoft's 8%, Ask Network's 3.9% and AOL's 3.1%.
Among stocks that could react to offerings, Liz Claiborne (LIZ) said it intends to offer $75 million worth of principal amount of convertible senior notes due 2014. The company said it intends to use the net proceeds to temporarily pay down a portion of the outstanding borrowings under its amended credit facility. Quicksilver Resources (KWK) said it intends to offer $425 million aggregate principal amount of senior notes due 2016. Hospitality Properties Trust (HPT) said it has commenced a public offering of 15 million shares.
Sallie Mae (SLM) is likely to gain ground after it said the U.S. Department of Education has selected it for its Federal Student Aid Title IV Student Loan Management/Servicing procurement.
AutoZone (AZO) is likely to see buying interest after it announced that its board has authorized the buyback of an additional $500 million worth of stock. Including the latest authorization, the total authorization since 1998 stands at $7.9 billion. Oracle (ORCL) may also react to its announcement that it has acquired the intellectual property assets of California Software.
Pacific Sunwear (PSUN) may be in focus after it announced the appointment of Gary Schoenfeld as its president and chief executive officer, effective June 29th, 2009. FMC Technologies (FTI) could gain ground after it said it has received an award from Eni for the manufacture and supply of subsea equipment for its Kitan field development. The contract is valued at approximately $60 million.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.