The Day Ahead: A Bright Start to the Short Week

 | Jan 17, 2012 | 8:12 AM EST  | Comments
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In the Headlines

Optimism about China's economy helped buoy U.S. equities Tuesday, with investors shrugging off a Standard & Poor's downgrade of the eurozone bailout fund.

NYSE and Nasdaq stocks were positioned for a higher open following the long weekend, as earnings season gets into full swing this week. European markets, which were open as usual on Monday, followed up on yesterday's gains with more upside trade before Wall Street trade got under way.

Better-than-expected GDP data from China and economic sentiment numbers from Germany lifted European stocks. A Spanish Treasury bill auction, the first major debt offering since S&P's Friday's S&P downgrade of nine European countries, was met with solid demand.

The round of good news overshadowed S&P's downgrade Monday of the eurozone rescue fund by one notch, to AA+.

Asian stocks vaulted higher Tuesday on the China GDP numbers, with the Shanghai Composite leading the way, gaining 4.18%.

Economic Docket

On the U.S. econ front, the New York Fed releases the Empire manufacturing index at 8:30 a.m. EST. Economists expect a reading of 10 for January, following last month's 9.5. Unexpectedly large gains or declines on the manufacturing data can affect equities.

Crude oil rose $1.24 to $100.93 per barrel in electronic trade. Futures were under buying pressure after Saudi Arabia, the world's largest oil exporter, said prices should be maintained around the $100 level.

Gold rose $21.30 per ounce, to $1,664.80, before Wall Street opened on Tuesday. The yellow metal has posted gains in the past two weeks.

Earnings

Citigroup (C) reported fourth-quarter earnings of $0.38 per share on revenue of $17.2 billion, short of analysts' consensus of $0.49 per share and $18.54 billion. The company beat earnings views in the past three quarters.

Another before-the-bell reporter is Wells Fargo (WFC), which posted fourth-quarter income of $0.73, outpacing views for $0.72 a share, on revenue of $20.61 billion, ahead of $20.08 billion consensus. Earnings growth has remained solid in recent quarters, although the pace of year-over-sales has been lackluster.

As always with the big banks, analysts will dissect the numbers further this morning, and will likely have numerous questions for management on the conference calls.

It's a busy week for earnings reports from the financial sector. In addition to some big money-center banks, many regionals are also due out with results in the next several days.

Market Movers

An early gainer Tuesday was Bank of America (BAC), which pulled back on Thursday and Friday but resumed its rally before the open. The stock gained $0.20, 3.03%, to $6.81 ahead of the bell.

A big premarket decliner was Carnival Cruises (CCL), dropping $5.64, 16.45%, to $28.64. The company owns Costa Cruises, whose ship was wrecked off the Italian coast over the weekend. Twenty-nine people are still missing. As a result of the accident, Carnival expects to lose nearly $100 million this year.

Analyst Actions

Wynn Resorts (WYNN) jumped $2.09, 1.94%, to $109.94 ahead of the bell. Susquehanna upgraded the stock to Positive from Neutral. Wynn shares have struggled since retreating from July's high of $165.50.

Potash (POT) was upgraded to Sector Outperformer from Sector Performer at CIBC. The analyst cited valuation, and lowered the price target to $60 from $65. Shares of the fertilizer maker rose $1.01, 2.26%, to $45.75 in the premarket.

Medical-gear maker Medtronic (MDT) was upgraded to Outperform from Market Perform at Wells Fargo, which cited market share gains from the company's line of products to manage cardiac rhythm disorders.

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