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| US Market | ||||||||||||
The
major U.S. index futures are pointing to a higher opening on Thursday,
with sentiment remaining modestly positive, as the major averages strive
to break free off their recent lackluster phase. Asian stocks had a nervous outing, while the European markets
are also showing tentativeness. Among the due of economic reports
released short while, jobless claims unexpectedly declined in the recent
reporting week, while the U.S. second quarter economic growth estimate
was left unrevised. The markets may also react to the pending home sales
data and a Fed speech due after the markets open. All said and done,
the underlying mood is likely to be cautious, as the specter of a
government shutdown looms.
U.S. stocks closed lower yet again on Wednesday, with uncertainty surrounding the U.S. fiscal woes keeping sentiment subdued. The major averages opened little changed and retreated in early trading only to stage a recovery by early afternoon trading. After seeing some strength in the mid-session, the indexes retreated once again in late afternoon trading and languished below the unchanged line thereafter. The indexes closed modestly lower. The Dow Industrials ended down 61.33 points or 0.40 percent at 15,273 and the S&P 500 Index closed 4.65 points or 0.27 percent lower at 1,693, while the Nasdaq Composite Index closed at 3,761, down 7.16 points or 0.19 percent. Twenty-three of the thirty Dow components closed lower and one stock ended unchanged, while the remaining six stocks advanced. Johnson & Johnson, Procter & Gamble, Visa, and Wal-Mart were among the biggest gainers on the session. On the other hand, JP Morgan Chase and Cisco Systems rose 2.74 percent and 1.20 percent, respectively. Despite the weakness in the broader markets, computer hardware and gold stocks advanced strongly in the session. On the economic front, durable goods orders rebounded by a marginal 0.1 percent in August from the previous month. Excluding transportation, orders fell 0.1 percent. Non-defense capital goods orders, excluding aircraft and parts, climbed 1.5 percent following a 3.3 percent drop in July. Shipments of this category of goods, which are directly plugged into GDP calculations, rose 1.3 percent. Computers and electronics and electrical equipment orders declined, while machinery orders climbed. The Commerce Department reported that new home sales came in at a seasonally adjusted annual rate of 421,000 in August, up 7.9 percent from a downwardly revised reading of 390,000 in July. Inventories measured in terms of months of supply fell to 5 months from 5.2 months in July. The median price of a new home was up a mere 0.5 percent year-over-year to $254,600, the smallest increase since January. The lean patch continued and the Dow Industrials violated its 50-day MA currently at 15,297 to the downside. Even if sentiment reverses, the index is likely to face resistance around this level. Outside of this level, the Dow also has resistance around the 15,332, 15,389 and 15,458 levels. On the downside, the index’s 100-day MA currently at 15,226 and 21-day MA currently at 15,187 are likely to serve as supports. | ||||||||||||
| US Economic Reports | ||||||||||||
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First-time
claims for U.S. unemployment benefits unexpectedly decreased in the
week ended September 21st, according to a report released by the Labor
Department. The report said initial jobless claims fell to 305,000, a
decrease of 5,000 from the previous week's revised figure of 310,000.
The modest decrease came as a surprise to economists, who had expected jobless claims to climb to 325,000 from the 309,000 originally reported for the previous week. Economic activity in the U.S. increased at an unrevised rate in the second quarter, according to the Commerce Department's final estimate on gross domestic product in the quarter. The Commerce Department said GDP increased by 2.5 percent in the second quarter, unchanged from the previous estimate. Economists had expected the pace of growth to be upwardly revised to 2.6 percent.The pace of GDP growth in the second quarter still represents a notable acceleration from the 1.1 percent growth reported for the first quarter. The National Association of Realtors will release its pending home sales report for August at 10 am ET. The consensus estimates call for a 1 percent month-over-month drop in the pending home sales index for the month. 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. On a year-over-year basis, pending home sales climbed 8.6 percent. Federal Reserve Governor Jeremy Stein is scheduled to speak on yield-oriented investors at a symposium in Frankfurt, Germany at 10:10 am ET. The Kansas City Federal Reserve is scheduled to release the results of its manufacturing survey at 11 am ET. Economists expect the manufacturing index based on the survey to increase to 9 in September from 8 in August. | ||||||||||||
| Stocks in Focus | ||||||||||||
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Jabil Circuit reported
fourth quarter core earnings of 56 cents per share, higher than 54
cents per share last year. Net revenues rose to $4.8 billion from $4.3
billion in the year-ago period. For the first quarter, the company
expects core earnings of 50-60 cents per share on net revenues of $4.35
billion to $4.65 billion. The results exceeded estimates, while the
guidance was weak.
Bed Bath & Beyond reported second quarter net earnings of $1.16 per share, up from 98 cents per share last year. Net sales climbed 8.9 percent to $2.824 billion. The results exceeded estimates. Comparable store sales rose 3.7 percent year-over-year compared to the 3.5 percent increase in the year-ago quarter. For 2013, the company expects earnings of $4.88-$5.01 per share. Analysts’ estimate is at the upper end of the company’s guidance range. Progress Software reported third quarter non-GAAP earnings from continuing operations of 27 cents per share compared to 19 cents per share last year. Total revenues rose 4 percent to $77.58 million. The results exceeded estimates. For the fourth quarter, the company expects revenue growth of 4-6 percent. Worthington reported first quarter earnings of 76 cents per share, including a gain of 18 cents per share, compared to 49 cents per share in the year-ago quarter. Net sales also increased to $692.3 million from the year-ago quarter’s $666 million. The results were roughly in line with estimates. Compuware announced the pricing of the initial public offering of 6.4 million shares of its wholly-owned subsidiary Covisint Corp. at a price of $10 per share. The company noted that the shares will begin trading on the Nasdaq on September 26th under the symbol COVS. Allergan and Medytox announced that they have entered into a license agreement that provides for Medytox granting Allergan exclusive rights worldwide outside of Korea to develop and commercialize certain neurotoxin product candidates for an upfront payment of $65 million. Additionally, Allergan has also agreed to pay up to $116.5 million upon achievement of certain development milestones, upto an aggregate of $180.5 million upon achieving certain commercialization milestones and royalties on product sales. H.B. Fuller reported third quarter adjusted earnings from continuing operations of 74 cents per share, up 40 percent year-over-year. Net revenues rose 2.8 percent to $514.6 million. The results exceeded estimates. The company narrowed its 2013 earnings guidance to $2.60-$2.65 per share, while for the fourth quarter, the company expects earnings of 70-75 cents per share. The guidance was positive. Campbell announced that its board approved a 7.6 percent increase in its dividend to 312 cents per share. Western Digital announced the resignation of its CFO Wolfgang Nicki, effective November 17th, 2013. Nicki will take up the role of CFO at ASML Holdings in the Netherlands. Accenture, Comtech Telecom, Nike and Thor Industries are among the companies due to release their quarterly results after the close of trading. Knight Transportation, Inc. has proposed to acquire all of the outstanding shares of USA Truck for $9 per share in cash. Including the approximate $147 million of USA Truck's debt, the deal is valued at about $242 million. Hertz Global Holdings lowered its adjusted earnings and revenue guidance for the full-year 2013, citing weaker-than-anticipated volume in Hertz brand in the U.S. airport car rental market. Eli Lilly announced that the Phase III study of ramucirumab in women with locally recurrent or metastatic breast cancer, ROSE, did not meet its primary endpoint of progression-free survival. The company also stated that RAINBOW trial, a Phase III study of ramucirumab in combination with paclitaxel in patients with advanced gastric cancer met both primary and secondary endpoints. | ||||||||||||
| European Market | ||||||||||||
European stocks opened higher but have given back their gains since then and are currently-trading mixed amid concerns about the U.S. fiscal crisis and mixed domestic corporate news. In corporate news, TUI Travels raised its underlying operating profit forecast for the year ending September 30th to grow at least 11 percent on a constant currency basis. Caterer Compass said it expects revenue growth of 4.5 percent for the full year and operating margin to be over 7 percent for the first time. At its Capital Markets Day, life and material science company Royal DSM said it is firmly on track to achieve the strategic objectives set out in 2010 and said it would continue to focus on increasing profitability. Swedish retailer, H&M reported second quarter net income that increased to 4.43 billion Kronor, ahead of estimates by most analysts. On the economic front, a report released by statistical office INSEE showed that French consumer confidence rose a point to 85 in September, with the reading coming in line with expectations. Separately, Eurostat reported that the broad monetary aggregate M3 in the euro area rose 2.3 percent year-over-year in August following a 2.2 percent increase in July. The growth was in line with expectations. | ||||||||||||
| Asian Markets | ||||||||||||
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The major Asian markets
closed mixed, with the Chinese, Hong Kong, Malaysian and Taiwanese
markets closing lower, while the rest of the major markets in the region
advanced. The indecisive mood continued as the U.S. budgetary crisis
remains unresolved.
Japan’s Nikkei 225 average benefited from the yen’s weakness, as the domestic currency moved lower on speculation that the government will introduce more corporate tax reforms. The index opened lower and languished below the unchanged line till the mid-session. However, the Nikkei staged a recovery and advanced steadily in the afternoon before closing up 178.59 points or 1.22 percent at 14,799. Export, resource, and insurance stocks gained ground in the session, while pharma, chemical, financial and utility stocks ended mostly lower. Australia’s All Ordinaries opened little changed but declined sharply in early trading. The index reversed course thereafter and moved steadily higher for the rest of the session, closing up 18.10 points or 0.34 percent at 5,288. Most sectors saw modest buying interest, although real estate and healthcare stocks came under selling pressure. Hong Kong’s Hang Seng Index closed at 23,125, down 84.60 points or 0.36 percent and China’s Shanghai Composite Index slumped 42.71 points or 1.94 percent before closing at 2,156. | ||||||||||||
| Currency and Commodities Markets | ||||||||||||
Crude oil futures are climbing $0.41 to $103.07 a barrel after falling $0.47 to $102.66 a barrel on Wednesday.
The previous session’s retreat came amid the increase in risk aversion and the release of the Energy Information Administration’s petroleum inventory report, which showed that crude oil stockpiles rose by 2.6 million barrels to 358.3 million barrels in the week ended September 20th. Inventories moved toward the upper range for this time of the year. Gasoline inventories edged up by 0.2 million barrels and were in the upper half of the average range. On the other hand, distillate stockpiles fell by 0.2 million barrels and remained near the lower limit of the average range for this time of the year. Refinery capacity utilization averaged 91.7 percent over the four weeks ended September 20th compared to 92 percent over the four weeks ended September 13th. Gold futures, which rose $19.90 to $1,336.20 an ounce in the previous session, are slipping $3.10 to $1,333.10 an ounce. Among currencies, the U.S. dollar is trading at 98.94 yen compared to the 98.43 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.3502 compared to yesterday’s $1.3526. | ||||||||||||
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