The Day Ahead: Earnings Season

 | Jan 09, 2012 | 8:17 AM EST  | Comments
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In the Headlines

Ready or not, earnings season is here, with Dow component Alcoa (AA) set to report after the bell.

Wall Street futures were showing gains Monday.

As usual, developments in Europe are affecting global trade. German Chancellor Angela Merkel and French President Nicolas Sarkozy are meeting in Berlin today to discuss next steps for ensuring the future of the euro. They are slated to hold a press conference later today.

European stocks were trading moderately lower before that event. The euro was showing gains early Monday, after sinking to an 11-month low vs. the dollar.

Elsewhere, Asian stocks finished mixed, with Shanghai and Hong Kong notching big gains on optimism that China would boost bank lending to small companies. The move would follow last year's tightening to curb inflation. There was no trade in Japan Monday because of a holiday.

Economic Docket

In the U.S., the only major econ release due out today is the Federal Reserve's report on consumer credit for November, a release that doesn't typically get much attention from the equities market. Economists expect an increase of $7 billion.

Gold was up $0.80 per ounce, to $1,617.60 per ounce in early Comex action Monday. Crude oil fell $0.59 per barrel, to $100.97 in electronic trade.

Energy researcher Lundberg Survey said U.S. gasoline prices rose in the past three weeks, to an average of $3.36 per gallon. It was the first increase since mid-October.

Earnings

On the earnings front, Alcoa kicks off earnings season as it reports its fourth quarter after today's close. Analysts see a loss of $0.02 per share on revenue of $5.74 billion. The company said last week it would slash capacity. Shares have struggled since April and are trading below key moving averages.

Alcoa shares were trading $0.08 higher before Monday's open, a gain of 0.87%, to $9.24.

Merger Monday

In deal news, Bristol-Myers Squibb (BMY) said it would acquire Inhibitex (INHX), a small-cap maker of Hepatitis C treatments. The deal is valued at about $2.5 billion, or $26 per share.

Inhibitex shares bolted $15.01, 152.08%, to $24.88 in early trade.

Company News

In other pharma news, AstraZeneca (AZN) reaffirmed its 2011 earnings guidance. The company mistakenly sent outdated planning information to analysts. That information, it said, does not affect expectations for 2011's results. The U.K.-based company reports 2011's fourth-quarter results on Feb. 2.

AstraZeneca shares fell $0.28 in the premarket, 0.60%, to $46.69.

Market Movers

The pharmaceutical industry generated still more news early Monday, as GlaxoSmithKline (GSK) said it was applying for FDA approval of its Relovair lung treatment drug. It has partnered with Theravance (THRX) to develop the drug.

GlaxoSmithKline's stock fell $1.27, 2.75%, to $44.91 in early trade.

Turning to another industry, yoga clothing retailer Lululemon Athletica (LULU), whose shares have been consolidating since July's all-time high of $64.49, were under pressure in early trade. Shares fell $1.12, 2.09%, to $52.56 on Friday's news that company founder Dennis J. Wilson would step down from his role as chief innovation and branding officer. He will remain chairman.

Analyst Actions

Internet content optimizer Akamai (AKAM) was the subject of dueling analyst actions Monday. Jefferies boosted the stock to Hold from Underperform, while Citigroup downgraded the stock to Sell from Neutral. Jefferies cited growth in mobile applications and online video as factors contributing to the upgrade.

Akamai shares fell $0.70, 2.14%, to $32.06 in early trade.

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