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The major U.S. index futures are pointing to a mixed opening on Friday, with sentiment reflecting the nervousness of traders amid the surrounding uncertainties. Economic data has been alternating between being positive and being lukewarm, failing to offer clarity on the economic outlook. A case in point is the personal income and spending report released earlier in the day, which showed soft personal income and spending growth.
The uncertainty has made traders dread the prospect of the Fed prematurely withdrawing stimulus. The recent geopolitical tensions surrounding Syrian has also added to market worries. With the U.K. failing to back up, the U.S. is currently considering unilateral actions on Syria in protest against its use of military weapons on civilians. Against this backdrop, the markets may most likely to be confined to recent trading ranges.
U.S. stocks moved mostly higher on Thursday, as traders continued to pick up bargains amid the release of some fairly positive economic readings on GDP and jobless claims. The major averages opened lower but reversed course immediately after and advanced till late morning. While the S&P 500 and the Nasdaq Composite Indexes moved sideways thereafter, the Dow Industrials gave back much of its gains over the remainder of the session before closing up 16.44 points or 0.11 percent at 14,841.
The S&P 500 Index closed 3.21 points or 0.20 percent higher at 1,638, and the Nasdaq Composite Index closed at 3,620, up 26.95 points or 0.75 percent.
Twenty of the thirty Dow components closed higher, while the remaining ten stocks declined. Verizon led the Dow’s advance, while UnitedHealth, Microsoft and Boeing also saw significant gains. On the other hand, Exxon Mobil, Chevron and Intel declined notably.
On the economic front, the revised second quarter GDP report showed that the U.S. economy expanded at an upwardly revised rate of 2.5 percent compared to the 1.7 percent growth estimated initially. Upward revisions to trade and inventories contributed to the upside to the advance estimates. Import growth was downwardly revised to 7 percent from 9.5 percent, while export growth was upwardly revised to 8.6 percent from 5.4 percent, resulting in net trade becoming neutral to growth compared to the earlier estimate of a 0.81 percentage point deduction to growth. Consumption growth was left unrevised at 1.8 percent.
The Labor Department reported that jobless claims fell by 6,000 to 331,000 in the week ended August 24th. At the same time, the four-week average rose to 331,250 from 330,500. Meanwhile, continuing claims calculated with a week’s lag fell by 14,000 to 2.989 million in the week ended August 17th.
The markets managed to hold onto the Wednesday’s upward momentum, and consequently, the Dow Industrials carved out a modest gain, although it underperformed the other major averages. The index received ample support from Verizon, which rallied on the news of a possible of buyout of Vodafone’s stake in their wireless joint venture.
The Dow is trading just above the neckline of a double top formation, which in itself is an indicator that the index could be in for a correction. Marring the technical picture further is the move of the shorter-term 21-day MA currently at 15,214 below the longer-term 50-day MA currently at 15,238. Immediate resistance levels for the Dow are 14,867, 14,913 and 14,973, while support lies around the 14,803 and 14,867 levels
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| US Economic Reports | ||||||||||||
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Personal spending increased by 0.5 percent in June after edging up by 0.2 percent in May. The increase in spending exceeded economist estimates for a 0.4 percent increase.
Additionally, the Commerce Department said personal income rose by 0.3 percent in June following a 0.4 percent increase in May. Economists had expected income to increase by 0.4 percent. With spending rising at a faster rate than income, personal saving as a percentage of disposable personal income dropped to 4.4 percent in June from 4.6 percent in May.
St. Louis Federal Reserve Bank President James Bullard is scheduled to speak on the economy and monetary policy in Memphis at 9 am ET.
The MNI Indicators is due to release the results of its manufacturing survey for August at 9:45 am ET. The consensus estimates call for a small increase by the Chicago business barometer to 53 in August from 52.3 in July.
The Chicago business barometer rose to 52.3 in July from 51.6 in June. The order backlogs index rose but remained in contraction territory. On the other hand, the new orders and production indexes declined.
Reuters and the University of Michigan are scheduled to release the final reading on their consumer sentiment index for August at 9:55 am ET. Economists expect the index to come in at 80, unchanged from the preliminary reading.
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| Stocks in Focus | ||||||||||||
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Salesforce.com reported second quarter non-GAAP earnings of 9 cents per share on revenues of $957 million, up 31 percent year-over-year. The results were better than expected. For the third quarter, the company expects non-GAAP earnings of 8-9 cents per share on revenues of $1.050 billion to $1.055 billion. The company expects full year non-GAAP earnings of 32-34 cents per share on revenues of $4 billion to $4.025 billion. The guidance was positive.
Pacific Sunwear reported second quarter non-GAAP income from continuing operations of 2 cents per share compared to a loss from continuing operations of 10 cents per share last year. Net sales from continuing operations rose to $215.2 million from $197.3 million last year. The earnings were ahead of estimates, while the revenues were slightly shy of estimates. For the third quarter, the company expects a loss from continuing operations of 4-9 cents per share on revenues of $202 million to $209 million. The guidance was weak.
Bebe Stores reported a fourth quarter net loss of 14 cents per share on net sales of $119.2 million. The loss was in line with estimates. For the first quarter, the company expects a loss in the low to mid-teens per share and comparable store sales in the negative low to mid-single digit range. The guidance was weak.
Shoe Carnival reported second quarter earnings of 29 cents per share on net sales of $216.4 million. The earnings were in line, while the net sales were shy of estimates. For the third quarter, the company expects earnings of 51-55 cents per share on net sales of $236 million to $240 million. The guidance was disappointing.
Apache announced that it has signed a strategic partnership agreement with Sinopec to pursue joint upstream oil and gas projects. Under the agreement, Apache will sell Sinopec a 33 percent minority stake in its Egyptian oil and gas business for $3.1 billion.
Cliff Natural announced that the United Steelworkers Union local membership has ratified a 3-year labor contract agreement for its Bloom Mine in Fermont, Quebec.
Big Lots reported second quarter earnings that declined from the previous year period but topped Street view. Revenues were in line. The company yet again lowered its earnings per share outlook for fiscal 2013.
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After seeing some volatility in early trading, European stocks are currently-trading lower, as traders digest weak German retail sales data.
A report released by the German Federal Statistical Office showed that German retail sales fell 1.4 percent month-over-month in July, defying expectations for a 0.6 percent increase. However, annually, retail sales were up 2.3 percent, faster than the 1.8 percent increase expected by economists.
Meanwhile, confidence among U.K. consumers rose in August, according to the results of a survey by the GfK/NOP. The consumer confidence index for the U.K. compiled by the organization rose to –13 in August from –16 in July, marking the highest reading since October 2009.
Nationwide reported that house prices in the U.K. rose 3.5 percent year-over-year in August following the 3.9 percent growth in July. Economists had expected a more modest 3.3 percent increase.
Flash inflation estimate released by Eurostat showed that eurozone inflation measured based on harmonized methodology eased to 1.3 percent from 1.6 percent in July. A separate report showed that jobless rate in the region remained at a record high of 12.1 percent. The results of a survey by the European Commission showed that economic confidence in the eurozone improved more than expected in August. Consumer confidence also improved.
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Most major Asian markets advanced, with the return of risk appetite supporting sentiment, although the Japanese market retreated on the yen’s strength.
Japan’s Nikkei 225 average opened higher and remained above the unchanged line until late morning trading. However, the index retreated and languished below the unchanged line for the rest of the session before closing down 70.85 points or 0.53 percent at 13,389.
Most export stocks retreated, responding to the yen’s strength, with TDK, Sumitomo Metal Mining, Asahi Group, Shizuoka Bank, Seven & I Holdings, Nippon Paper Industries, SKY Perfect JSAT and Shinsei Bank leading the declines.
After seeing some apprehension in early trading, Australia’s All Ordinaries advanced over the rest of the session before closing up 42.20 points or 0.83 percent at 5,125. The market witnessed broad based strength, with energy, consumer staple and healthcare stocks seeing notable buying interest.
Hong Kong’s Hang Seng Index closed at 21,731, up 26.59 points or 0.12 percent, while China’s Shanghai Composite Index closed 1.15 points or 0.06 percent higher at 2,098.
A slew of economic data released from Japan showed that the nation’s economic recovery is gathering momentum.
A Ministry of Internal Affairs and Communications report showed that core consumer prices in Japan rose at an annual rate of 0.7 percent in June compared to expectations for a 0.6 percent increase. The annual core inflation rate for the Tokyo region, considered an indicator of the nationwide trend, was at 0.4 percent in August.
Industrial production in Japan climbed 3.2 percent month-over-month in July, according to a report released by the Ministry of Economy, Trade and Industry. Economists expected a steeper 3.6 percent increase. The annual rate of growth of 1.6 percent also missed forecasts for a 1.8 percent gain. The Ministry of Land, Infrastructure, Transport and Tourism reported that housing starts rose at a faster than expected rate of 19.4 percent year-over-year in July.
A separate report showed that average household spending in Japan edged up 0.1 percent year-over-year in July, while economists expected 0.3 percent growth. The ministry also reported that the unemployment rate in Japan eased 0.1 percentage points to 3.8 percent in July.
Meanwhile, data released by the Reserve Bank of Australia showed that private sector credit in Australia rose 0.4 percent month-over-month in July, the same pace as in the previous month. On a year-over-year basis, private sector credit was up 3.2 percent.
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| Currency and Commodities Markets | ||||||||||||
Commodity
Crude oil futures are slipping $0.86 to $107.94 a barrel after declining $1.30 to $108.80 a barrel on Thursday. Gold futures are currently declining $17.70 to $1,395.20 an ounce. In the previous session, gold dipped $5.90 to $1,412.90 an ounce.
Currency
Among currencies, the U.S. dollar is trading at 98.17 yen compared to the 98.35 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3223 compared to yesterday’s $1.3241.
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