The Day Ahead: Rally Momentum Fizzles

 | Jan 04, 2012 | 8:28 AM EST  | Comments
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In the Headlines

The bullish tone of Tuesday's trade was not carrying over into Wednesday, with NYSE and Nasdaq futures pointing to a lower open.

U.S. futures have frequently followed the path of European indices in recent months, and Europe was showing losses before Wall Street's open Wednesday. Financials dropped sharply, as Italy's UniCredit, which needs to raise capital, sold new shares at a big discount.

Germany held its first bond auction of 2012, with demand for 10-year notes coming in at healthy levels.

Asian stocks finished with mixed results. Japan trade got under way after a holiday break with a gain of 1.24%. The Shanghai Composite, which has struggled lately, ended with a loss of 1.36%.

Economic Docket

Today's U.S. economic data included news from the Mortgage Bankers Association that new loan requests fell 4.1% last week. The group noted that it does not see mortgage demand bouncing back in the near future -- this news is not likely to shock anyone who has followed the housing market even casually.

At 10 a.m. EST, the Commerce Department is set to release data on factory orders, with analysts expecting a 2.1% increase in November, following October's decline of 0.4%.

Throughout the day, auto makers release their vehicle sales for December and the full year. Economists expect a yearly sales gain of 10%, to 12.7 million. December's year-over-year increase is pegged at 7.5%, to 1.2 million vehicles.

Commodities Corner

Oil prices, which have been rising due to threats from Iran, as well as optimistic economic data from China and the U.S., eased slightly early Wednesday. West Texas Intermediate crude fell $0.64 per barrel, to $102.32 in electronic trade.

Gold was also showing a decline, slipping $0.20 per ounce to $1,600.30 ahead of Wall Street's open.

Earnings News

On today's earnings calendar, fertilizer maker Mosaic (MOS) is set to report its second-quarter earnings results after the bell. Analysts are eyeing per-share income of $1.30 on revenue of $2.54 billion. That would mark a year-over-year increase on the bottom line, but a decrease on the top line.

Early Movers

A premarket decliner Wednesday was Yahoo! (YHOO), shedding $0.285, or 1.75%, to $16 on news that the company may name a new CEO today. According to reports, PayPal president Scott Thompson may be taking the top job at Yahoo!

The news was not greeted enthusiastically, because the hiring of a new CEO suggests the board may not be interested in selling the company, something many investors had anticipated.

DJIA component and S&P 500 heavyweight Exxon Mobil (XOM) shed a nickel in early trade, a fractional decline, to $85.95. The company is in discussions to sell its 50% stake in a Japan-based refining venture. Its Japanese partner is the potential buyer. The deal's potential value is believed to be around $5 billion.

Fellow blue chip AT&T (T) rose $0.02, a fractional gain, to $30.40 in the premarket. The telecom will pay TiVo (TIVO) $215 million to settle a patent infringement dispute. TiVo shares bolted in after-hours trading Tuesday on the news, advancing $1.25, 14.01%, to $10.17.

Data equipment maker Acme Packet (APKT) was a big premarket decliner, tumbling $6.19, or 19.46%, to $25.62. Late Tuesday, the company warned that its fourth-quarter earnings would come in well below analysts' views. Wedbush, Credit Suisse and Deutsche Bank downgraded the stock this morning.

Analyst Actions

Deutsche Bank initiated coverage with a Buy rating on nutritional supplement retailer GNC Holdings (GNC), which is up 77% since its IPO in April. The company is scheduled to report its fourth-quarter earnings results next month, with analysts expecting income of $0.30 per share, a 67% gain over the year-ago quarter.

Columnist Conversations

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