The Day Ahead: Futures Look Lower

 | Jan 11, 2012 | 8:30 AM EST
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In the Headlines

Futures pointed to a lower open Wednesday, following Tuesday's heavy-volume rally in the major indices. Nasdaq volume came in above average on Tuesday, while NYSE volume was below its 50-day line.

After also gaining ground on Tuesday, European stocks were showing losses before Wall Street's open. Germany's GDP retreated in the fourth quarter, which could signal a slowdown elsewhere in the eurozone. The yield on Italian 10-years edged lower ahead of a debt auction later this week.

The European Commission issued a statement critical of Hungary for not making enough progress in reducing its deficit. The EC raised the possibility of sanctions against the nation.

In Asia, most major indices ended higher, although the much-watched Shanghai Composite took a breather after three days in a row of gains.

Economic Docket

Today's economic data included the Mortgage Bankers Association's weekly report on loan applications. The number of people requesting mortgages last week grew by 4.5%.

At 10:30 a.m. EST, the Energy Department is set to report its weekly count of crude oil reserves. Economists expect an increase of 1.1 million barrels last week. Gasoline supplies are expected to rise by 2.1 million barrels. Though economists track these data closely, the numbers don't generally move equity markets.

At 2 p.m., the Federal Reserve is scheduled to release its January Beige Book, a compilation of anecdotal economic activity from the Fed's 12 regions. It's released eight times a year. Though there are no consensus forecasts, the data occasionally affect stock trading.

Commodities Corner

Crude oil slipped $0.74 early Wednesday, to $101.50 per barrel.

Gold, which has been rebounding from its December low, gained $5.30 in early Comex trade, to $1,636.80 per ounce.

Earnings News

On the earnings front, homebuilder Lennar (LEN) said fourth-quarter earnings were $0.16 per share, a penny below views, while revenue of $952.7 million topped views of $913.95 million. The homebuilders have been trending higher lately, but Lennar dropped on today's news, shedding $0.21, or 1.01%, to $20.55 in the premarket.

Grocer SuperValu (SVU) is also set to report before the bell. The operator of chains including Albertsons, Jewel-Osco, Lucky and Acme is expected to earn $0.24 a share on sales of $8.42 billion. That would be flat on the bottom line, and a decline on the bottom line. The company is in a notoriously competitive business, and it has been unable to notch year-over-year earnings and sales in the past two years.

After the bell yesterday, NYSE Euronext (NYX) shares fell $0.12, or 0.43%, to $27.67 after European antitrust regulators recommended nixing its merger with Frankfurt's Deutsche Boerse.

Early Movers

Turning to premarket movers, Urban Outfitters (URBN) shares tumbled $5.41, 18.40%, to $24. CEO Glen Senk resigned Tuesday. Company founder Richard Hayne, who already serves as chairman, will step into the CEO role.

RW Baird downgraded the stock to Neutral from Outperform, saying the resignation may delay a turnaround at the company, where both earnings and share price have been slumping. eBay (EBAY) jumped $0.40, or 1.28%, to $31.60 after the company said its PayPal unit handled $4 billion in mobile transactions, better than its own forecast of $3.5 billion.

Analyst Actions

In addition to the Baird downgrade of Urban Outfitters, today's analysts' moves included a Goldman Sachs downgrade of MasterCard (MA) to Neutral from Buy. Goldman cited the company's exposure to European risk, as well as litigation risk.

A few days after Goldman upgraded Ralph Lauren (RL), Wells Fargo demoted the stock to Market Perform from Outperform. The bank cited valuation, Tiffany's (TIF) poor performance in the holiday season and tougher comparisons ahead.

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