The major U.S. index futures are pointing to a higher opening on Monday, with sentiment seeing a lift from better than expected durable goods orders data and the continuing inflow of fairly positive earnings. Despite the fragile global economy recovery facing multiple threats from several economic and fiscal risks, the domestic economy is chugging along. The optimism concerning the economy could encourage traders to stay invested in stocks, although the overbought levels may render the mood cautious. On that count, the pending home sales data could also provide trading cues and help determine the market direction of the day.
U.S. stocks advanced yet again in the week ended January 25th, as earnings and solid economic data provided the already stretched markets additional strength. The Dow Industrials and the S&P 500 Index closed at fresh 5-year highs.
Last Tuesday, when the markets opened after Monday’s public holiday, the major averages advanced moderately despite the release of a report showing an unexpected drop in existing home sales. Earnings news continued to positively impact the markets on Wednesday, sending stocks higher again. With positive jobless claims data allaying some of the negativity triggered by Apple’s (AAPL) revenue miss, stocks closed mixed on Thursday.
Notwithstanding a decline in new home sales, the major averages rose moderately on Friday, as traders focused on some positive blue chip earnings from companies such as Procter & Gamble (PG).
For the week ended January 25th, the Dow Industrials added 1.80 percent and the S&P 500 Index closed 1.14 percent higher. The Nasdaq Composite Index was up a more modest 0.48 percent.
The Dow Jones Transportation Average rose 3.07 percent for the week, while the NYSE Arca Oil Index, the Philadelphia Oil Service Index and the Philadelphia Housing Sector Index all gained over 2 percent. Additionally, the NYSE Arca Airline Index, the Dow Jones Utility Average and the NYSE Arca Broker/Dealer Index moved up by over 1.5 percent each, while the NYSE Arca Gold Bugs Index fell 7.17 percent.
Currency, Commodity Markets
Crude oil futures are rising $0.41 to $96.29 a barrel after advancing $0.32 or 0.34 percent to $95.88 a barrel in the week ended January 25th.
Last Tuesday, crude oil extended its gain, rising moderately amid the increase in risk appetite. However, oil fell by close to $1.50-a-barrel on Wednesday on profit taking.
The commodity reversed course and rose moderately on Thursday only to slip modestly on Friday but still end the week higher.
Gold futures, which fell $26.90 or 1.60 percent to $1,656.60 an ounce last week, are currently slipping $4.80 to $1,651.70 an ounce.
Among currencies, the U.S. dollar declined against most currencies in the week ended January 25th, as risk appetite improved in reaction to the positive U.S. corporate earnings and some positive economic data. The greenback fell 1.13 percent against the euro before ending the week at $1.3464.
Meanwhile, amid the benevolence of the Bank of Japan and the Japanese government, the yen continued to slide, declining 1.46 percent against the dollar to 90.91 yen.
Early last week, the Bank of Japan announced open ended bond purchase program, although the purchases are not set to begin until January 2014.
The minutes of the central bank’s December monetary policy meeting released last Friday revealed that the board is in favor of lowering short term interest rates further to accelerate the yen’s slide.
The U.S. dollar is currently trading at 91 yen and is valued at $1.3460 against the euro.
Asia
The Asian markets turned in a mixed performance, as traders digested some mixed domestic economic data and expressed caution concerning tech earnings after disappointing results reported by some of their U.S. peers. The Australian market remained closed for a public holiday.
After seeing some strength in early trading and breaking above the 11,000 level, Japan’s Nikkei 225 average retreated and languished below the unchanged line for the bulk of the remainder of the session, as profit taking kicked in. The index closed down 102.34 points or 0.94 percent at 10,824.
Export stocks declined sharply, led by FANUC and Advantest. On the other hand, Sony rallied over 9 percent. Citizen Holdings and Toyobo also rose strongly. Resource, financial and retail stocks also found buying interest.
Hong Kong’s Hang Seng Index closed at 23,672, up 91.45 points or 0.39 percent.
Meanwhile, the Indonesian and South Korean markets retreated and the Malaysian market ended unchanged.
On the economic front, the Japanese government raised its growth forecast for the economy, banking on the benefits expected from aggressive monetary policy easing and stimulus support. The country expects 2.5 percent growth for the fiscal year 2013 beginning in April compared to its earlier estimate of 1.7 percent.
A report released by the Bank of Japan showed that the corporate service price index fell 0.4 percent year-over-year in December, while economists expected a 0.5 percent drop.
South Korean consumer sentiment improved to the highest level in eight months in January, according to a report released by the Bank of Korea. The consumer sentiment index rose 3 points to 102.
Meanwhile, a report released by China’s National Bureau of Statistics showed that profits at Chinese industrial firms rose 17.3 percent year-over-year in December, rising for the fourth straight month.
Europe
European stocks have shown a lack of direction over the course of the session and are currently turning in a mixed performance.
Irish budget carrier Ryanair reported higher earnings and revenues for the third quarter and also raised its guidance for the full year ending March 2013. Meanwhile, rival easyJet announced that its Chairman Sir Mike Rake is stepping down.
On the economic front, a survey by Hometrack showed that the average asking price of a house in the U.K. was flat in January compared to the previous month. This follows a 0.1 percent drop in December.
U.S. Economic Reports
The 2-day FOMC meeting and the Labor Department’s monthly jobs data for January are likely to dictate proceedings on Wall Street in the unfolding week. Along with these two events, traders may also focus on the durable goods orders report for December, the National Association of Realtors’ pending home sales for December, the results of the consumer confidence surveys by the Conference Board as well as Reuters and the University of Michigan, ADP’s private sector payrolls report for January, jobless claims data and the results of the Institute for Supply Management’s manufacturing survey for January.
Advance GDP estimates for the fourth quarter, monthly auto sales for January, the Commerce Department’s personal income and spending report for December and the results of the ISM-Chicago’s manufacturing survey for January could also impact market sentiment. The S&P Case-Shiller house price index for November, the Labor Department’s employment cost index for the fourth quarter, the construction spending report for January and the results of Treasury auctions of 2-year, 5-year and 7-year notes round up the economic events of the week.
With orders for transportation equipment showing a substantial increase, the Commerce Department released a report showing that orders for U.S. manufactured durable goods rose by much more than expected in the month of December.
The report showed that durable goods orders surged up by 4.6 percent in December following a 0.7 percent increase in November. Economists had been expecting orders to increase by about 1.6 percent.
Excluding an 11.9 percent jump in orders for transportation equipment, durable goods orders increased by a more modest 1.3 percent in December compared to a 1.2 percent increase in November. Ex-transportation orders had been expected to edge up by 0.4 percent.
The National Association of Realtors is due to release its pending home sales report for December at 10 am ET. Pending home sales are expected to have declined 0.3 percent compared to 1.7 percent growth in November.
Pending home sales rose for the third straight month in November, reaching the highest level in about 2-1/2 years. The pending home sales index rose 1.7 percent month-over-month, while sales were up 9.8 percent annually. Pending home sales rose in the Northeast, Midwest and West, while sales remained unchanged in the South.
The results of the Dallas Federal Reserve’s manufacturing survey for January are due at 10:30 am ET. Economists expect the business activity index based on the survey to drop to 4 in January from 6.8 in December.
Stocks in Focus
Caterpillar’s (CAT) fourth quarter adjusted earnings that beat estimates. Sales and revenues were below the consensus estimate.
JoS.A. Bank Clothiers (JOSB) pre-announced that it expects full year net income to be 20 percent lower than in 2011, with the company attributing the predicament to higher marketing expenses and lower gross margin.
Baker Hughes (BHI) announced the retirement of Chad Deaton from the position of the Chairman of the company on April 25th, 2013. Subsequently, the company’s president and CEO Martin Craighead will don the role of the Chairman as well.
J.M. Smucker (SJM) said its board increased its share repurchase program by five million shares. CenterPoint Energy (CNP) announced a 2.5 percent increase in its quarterly dividend to 20.75 cents per share.
PPG (PPG) announced that the final exchange ratio for its exchange offer for PPG common stock has been set at 3.2562 shares of Eagle Spinco for each share of PPG common stock. PPG agreed in July 2012 to separate its commodity chemicals business and merge it with Georgia Gulf (GGC).
Sanofi’s (SNY) Genzyme said the FDA has accepted for review its sBLA for LEMTRADA, a treatment of relapsing multiple sclerosis.
Amgen (AMGN) said the phase III trail of its metastatic colorectal cancer treatment Neulasta met the primary end point of significantly reducing the incidence of febrile neutropenia.
Crane (CR), BMC Software (BMC), Illumina (ILMN), International Rectifier (IRF), J&J Snack Food (JJSF), Rent-A-Center (RCII), Sanmina (SANM), Seagate technology (STX), Steel Dynamics (STLD), Vmware (WMW) and Yahoo! (YHOO) are among the companies due to release their quarterly results after the close of trading.
by RTT Staff Writer
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