The Day Ahead: Awaiting the Fed's Forecast

 | Jan 25, 2012 | 8:30 AM EST  | Comments
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In the Headlines

U.S. stock futures were trading mixed Wednesday, ahead of today's interest-rate announcement from the Federal Reserve, and a press conference from Fed chief Ben Bernanke.

The Nasdaq was poised for a higher open -- given a boost by Apple (AAPL) -- while NYSE stocks were set to start trading with modest declines.

Overseas, European indices were trading moderately lower, following this morning's successful auction of 30-year bonds in Germany. The euro moved lower against the dollar.

In Asia, exchanges in Hong Kong, Shanghai and elsewhere remained dark for a holiday. Japan's Nikkei advanced 1.12% on the heels of Apple's earnings report and data showing stronger-than-anticipated private sector business activity in Europe.

Economic Docket

The highlight of today's U.S. economic calendar is the Federal Open Market Committee's interest-rate announcement at 12:30 p.m. EST.

At 2:15 p.m. EST, Ben Bernanke is scheduled to step up the podium with some first-time announcements. Today, the Fed will begin issuing forecasts of short-term rates, and a potential timeline for future rate increases. 

Other economic releases today include the National Association of Realtors' pending home sales data for December. That number is expected to decline by 3%, following a jump of 7.3% in November.

In other real estate news, the Mortgage Bankers Association said loan applications fell 5% last week.

Commodities Corner

Crude oil fell $0.82 to $98.13 per barrel in early Nymex trade.

Gold shed $9.40 per ounce, to $1,655.10 before Wall Street opened for business.

Earnings News

Before the open, managed care provider WellPoint (WLP) said fourth-quarter earnings were $0.99 a share, below views of $1.12. Revenue also fell short, coming in at $15.23 billion, below expectations of $15.41 billion. The shares slumped $5.10 in early trade, a loss of 7.35%, to $64.30.

DJIA component United Technologies (UTX) reported fourth-quarter income of $1.47 a share, beating views by a penny. Revenue of $14.96 billion was below expectations of $15.07 billion.

Boeing (BA) flew in with fourth-quarter earnings of $1.84 per share, topping views of $1.01. Revenue of $19.60 billion also beat estimates, which called for $19.37 billion. It issued full-year guidance below analysts' views, attributing the difference to pension expenses. Boeing shares slipped $0.66, 0.88%, to $74.70 ahead of the bell.

Boeing shares have been attempting to rally out of an eight-month price consolidation.

After the bell, closely watched S&P 500 component Netflix (NFLX) reports its fourth quarter. It's seen earning $0.55 per share on revenue of $857.89 million. Analysts will be eyeing the company's ability to rebuild its subscription service after customers bailed on last year's news of price increases and service changes. The shares rebounded in December, and are up for this month, following four months of steep losses.

Also due out later today is flash memory maker SanDisk (SNDK), expected to earn $1.26 per share on revenue of $1.57 billion. That would mark a slight bottom-line decrease, but an increase on the top line. SanDisk shares have been forming a potentially bullish price consolidation near their 10-week moving average. 

Early Movers

Price movers Wednesday morning included, predictably, Apple, bolting $32.59, 7.75%, to $453 in the premarket. In the company's much-better-than expected earnings report late Tuesday, it announced sales of more than 37 million iPhones in the quarter, along with 15.43 million iPads. Apple is set to overtake Exxon Mobil (XOM) as the largest company in the S&P 500, by market cap.

A downside mover in Wednesday's premarket was graphics chip maker Nvidia (NVDA). The company slashed fourth-quarter revenue guidance Tuesday, saying a disk drive shortage caused by Thailand floods had a worse-than-anticipated impact. The shares skidded $0.56, 3.75%, to $14.38 ahead of the bell.

After yesterday's earnings report, McDonald's (MCD) was downgraded by Oppenheimer and CLSA. Oppenheimer demoted the stock to Perform from Outperform, citing valuation and limited possibility of upward earnings estimate revisions.

The analyst said Starbucks (SBUX) was a preferred choice over Mickey D's. Oppenheimer upgraded Starbucks to Perform from Outperform.

Meanwhile, CLSA downgraded McDonald's to Outperform from Buy. McDonald's shares fell $0.69, 0.70%, to $98.06 in early trade. Starbucks perked up by $0.50, 1.05%, to $48.15 in the premarket.

IPO News

In IPO news, Guidewire Software, which specializes in enterprise products for the insurance industry, raised $115 million by offering 8.85 million shares priced at $13 apiece, above the proposed range of $10 to $12. The shares begin NYSE trade today under the symbol GWRE.

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