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The major U.S. index futures are pointing to a higher opening on Thursday, with sentiment firmer, as the markets reassess their risk perception. Following the steep sell-off in recent sessions, which has pushed the markets into oversold territory, traders have begun to refocus on the economic fundamentals. Among the duo of economic reports released earlier in the day, jobless claims edged down in line with expectations, while second quarter GDP was growth was unexpectedly revised upwards. Crude oil prices have begun pulling back as supply concerns ease. With the Syrian crisis still unresolved, caution is likely to be the watchword for the markets.
U.S. stocks rebounded on Wednesday, as buying emerged as traders went bargain hunting. The major averages opened on a nervous note but began to advance steadily in late morning trading. After advancing until late afternoon trading, the indexes moved roughly sideways before closing higher.
The Dow Industrials ended up 48.38 points or 0.33 percent at 14,825 and the S&P 500 Index added 4.48 points or 0.27 percent before closing at 1,635, while the Nasdaq Composite Index closed at 3,593, up 14.83 points or 0.33 percent.
Twenty of the thirty Dow components closed higher, while the remaining ten stocks declined. Chevron, Home Depot, Hewlett-Packard, McDonald’s, and Exxon Mobil were among the biggest gainers of the session. On the other hand, Procter & Gamble and Verizon declined sharply.
Energy, biotechnology and semiconductor stocks advanced notably, while gold stocks came under selling pressure.
On the economic front, the National Association of Realtors reported that pending home sales fell 1.3 percent month-over-month in July. Pending home sales declined in three of the four regions, while the South saw a 2.6 percent increase in pending home sales. On a year-over-year basis, pending home sales climbed 8.6 percent.
The Dow Industrials stumbled at a near term resistance and settled Wednesday’s session off the highs of the day. If the markets succumb to monetary policy and geopolitical worries, the index may retreat, although it is expected to find support around the 14,766 and 14,661 levels.
The shorter-term 21-MA currently at 15,245 is on the verge of breaking below the longer-term 50-day MA currently at 15,243 and such a scenario is considered a precursor to further weakness. Meanwhile, if the index succeeds in sustaining the momentum, it could attempt to break above key resistances around 14,913 and 14,963.
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| US Economic Reports | ||||||||||||
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The Labor Department reported that jobless claims fell modestly in the week ended August 24th. First time claims for unemployment benefits edged down 6,000 to 331,000 in the week ended August 24th.
The modest drop came roughly in line with estimates, which pitched claims for the recent reporting week at 330,000 compared to the 336,000 reported originally for the previous week.
Reflecting revisions to imports and exports, the Commerce Department released a report on showing that the U.S. economy grew by more than previously estimated in the second quarter.
The Commerce Department said GDP increased by 2.5 percent in the second quarter, reflecting an upward revision from the advance estimate of 1.7 percent growth. Economists had been anticipating a somewhat more modest upward revision to the pace of GDP growth to about 2.2 percent.
The Treasury is set to announce the results of the auction of 7-year notes at 1 pm ET.
Richmond Federal Reserve Bank President Jeffrey Lacker is scheduled to speak on the history of the Fed in Newport News, Virginia at 2 pm ET. St. Louis Federal Reserve Bank President James Bullard will speak on the economy and monetary policy in Tupelo, Mississippi at 7:45 pm ET.
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| Stocks in Focus | ||||||||||||
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Guess, Inc. reported second quarter adjusted earnings of 52 cents per share, up from 49 cents per share last year. Revenues rose 1 percent to $639 million. The company said it expects third quarter earnings of 34-38 cents per share on revenues of $610 million to $620 million, while it updated its full year adjusted earnings guidance to $1.78-$1.92 per share. The results exceeded estimates but the guidance was lukewarm.
Williams-Sonoma reported second quarter earnings of 49 cents per share on revenues of $982.2 million, up 12.3 percent year-over-year. The company raised its full year guidance and now expects adjusted earnings of $2.69-$2.79 per share on revenues of $4.26 billion to $4.34 billion. The earnings guidance trailed estimates, while the revenue guidance was in line.
Northrop Grumman announced that its Australian subsidiary has announced an agreement to acquire Qantas Defence Services from Qantas Airways. The companies did not reveal the terms of the deal.
Altera said its board has increased its share repurchase authorization by an additional 30 million shares.
bebe Stores, Krispy Kreme, News Corp. , Pacific Sunwear, Salesforce.com, Shoe Carnival and WMS Industries are among the companies due to release their quarterly results after the close of trading.
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| European Market | ||||||||||||
European stocks opened higher and are seen holding onto their gains as Fed stimulus fears ease.
In corporate news, French brewer Pernod Ricard reported higher full year profits and revenues. The company also raised its dividend. French retailer Carrefour reported higher first half profits, as it executes on its cost saving program.
U.K. ad firm WPP reported 7 percent growth in its first half sales. Profit for the period also rose from the same period last year. Media and telecom company Vivendi said its second quarter sales and profits declined, hurt by a weak performance by its SFR telecom unit.
Vodafone confirmed that it is in talks with Verizon to sell its stake in their Verizon Wireless joint venture to Verizon. Earlier, reports suggested that both parties may be close to clinching a $130 billion deal.
On the economic front, the results of a survey by statistical office INSEE showed that confidence among French businesses improved in August. The industrial confidence index rose 3 points to 98 in August. Economists had expected the index to have remained unchanged in the month.
The German Federal Statistical Office reported that the number of unemployed people in Germany fell by 40,000 or 1.7 percent month-over-month to 2.28 million in July. Annually, the number of unemployed individuals was down 130,000. The unemployment rate fell 0.1 points to 5.3 percent in July.
A separate report released by the German Federal Labor Agency showed that the jobless rate held steady at 6.8 percent in August. The number of unemployed people fell by 7,000 from the previous month, more than the 5,000 drop expected by economists.
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| Asian Markets | ||||||||||||
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The Asian markets advanced across the board, as traders sought bargains following the steep losses in the previous two sessions. The buying was also supported by the positive sentiment generated by the higher close on Wall Street overnight.
Japan’s Nikkei 225 average hovered above the unchanged line throughout session before closing up 121.25 points or 0.91 percent at 13,460. The yen gave back some of its gains, as risk aversion mitigated.
Export and energy stocks led the advance, with NGK Insulators, Inpex, Isuzu Motors, Kawasaki Kisen Kaisha and GS Yuasa leading the gains. On the other hand, electric utility, pharma, construction and some banking stocks moved to the downside.
Australia’s All Ordinaries opened higher but declined immediately after. After languishing in the red until late trading, the index reverses course and moved above the unchanged line. The index ended up 5.10 points or 0.10 percent at 5,083.
Energy, consumer staple and material stocks gained ground, while financial and healthcare stocks came under selling pressure.
Hong Kong’s Hang Seng closed at 21,705, up 180.13 points or 0.84 percent, while China’s Shanghai Composite Index closed 4.07 points or 0.19 percent lower at 2,097.
India’s Sensex rebounded after the rupee recovered from record lows in reaction to an announcement from the Reserve Bank of India that it would sell dollars directly to oil exporters.
On the economic front, a report released by Japan’s Ministry of Economy, Trade and Industry showed that retail sales edged down 0.3 percent year-over-year in July compared to expectations for a 0.1 percent increase. Sales at large retailers declined 1.6 percent, exceeding expectations for a 0.5 percent drop.
The Australian Bureau of Statistics reported that capital spending by Australian firms rose 4 percent sequentially in the June quarter, reversing the 4.1 percent drop in the March quarter. The consensus expectation was for an unchanged reading. This marked the first increase in capital spending since the September quarter of 2012.
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| Currency and Commodities Markets | ||||||||||||
Commodities
Crude oil futures are slipping $0.77 to $109.33 a barrel after rising $1.09 to $110.10 a barrel on Wednesday.
The previous session’s rally came amid the buying triggered by supply concerns and the release of the inventory report, which showed that crude oil stockpiles rose by 3 million barrels to 362 million barrels in the week ended August 23rd. Inventories remained near the upper limit of the average range for this time of the year.
Meanwhile, gasoline stockpiles declined by 0.6 million barrels and yet were in the upper half of the average range. Distillate inventories edged down by 0.3 million barrels and were near the lower limit of the average range. Refinery capacity utilization averaged 90.6 percent over the four weeks ended August 23rd compared to 90.6 percent over the four weeks ended August 16th.
Gold futures, which fell $1.40 to $1,418.80 an ounce in the previous session, are currently declining $4.90 to $1,413.90 an ounce.
Currency
Among currencies, the U.S. dollar is trading at 98.37 yen compared to the 97.64 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.3247 compared to yesterday’s $1.3340.
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