The Day Ahead: Prepare for an Earnings Deluge

 | Jan 26, 2012 | 8:30 AM EST
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In the Headlines

U.S. stock futures pointed higher Thursday. The upside action followed some early earnings news, as well as yesterday's intraday rally as the Federal Reserve said it would postpone a benchmark rate increase until late 2014. The Fed also suggested inflation would be muted, and did not dismiss the possibility of further money printing.

Yields on the five-year and 10-year Treasuries were dropping early Thursday.

The news about more free money not only boosted U.S. equities, but global stocks, as well. European indices also showed gains as Greece's creditors said they would accept a lower interest rate on new bonds.

The euro was trading at its best levels in weeks, ahead of Thursday's open on Wall Street.

In Asia, Hong Kong traded higher as it reopened after a three-session holiday. Japan's Nikkei erased earlier gains, finishing with a loss of 0.41%. Other indices in the Asia-Pacific region remained shuttered for various holidays. 

Economic Docket

Today's economic news includes the Labor Department's weekly jobless claims report. Economists are eyeing 370,000 new claims, up from last week's tally of 352,000.

Also at 8:30 a.m. EST, the Commerce Department will release its December durable goods report. Analysts expect see the headline number rising 1.8%, following November's gain of 3.8%.

At 10 a.m., Commerce is back, this time with numbers on December new home sales. The consensus estimate calls for an increase to 320,000 units, a small increase over November.

Think tank The Conference Board issues its leading indicators index at 10 a.m. This compilation of economic data points is seen rising 0.7% in December, up from November's gain of 0.5%.   

Commodities Corner

Turning to commodities, gold looked shinier after yesterday's Fed announcements. The yellow metal bounced $15.90, and was trading back above the $1,700 per ounce level, perched at $17.16 in electronic trade. 

Crude oil was also trading higher, moving back above $100. Early Thursday, West Texas Intermediate crude was up $0.75 per barrel, to $100.15.

Earnings News

There's another earnings deluge today. High-profile companies reporting include AT&T (T), which earned $0.42 per share, excluding items, missing views by a penny. Revenue was slightly ahead of expectations, coming in at $32.5 billion. Analysts had anticipated $32 billion. The company said mobile broadband revenue was strong in the quarter. In premarket trading, the shares slipped $0.01, a fractional decline, to $30.20 on the news.

Also from the blue chip column, 3M (MMM) reported this morning. It earned $1.35 per share on revenue of $7.1 billion, beating top- and bottom-line views. The shares have been attempting to rally out of a six-month consolidation.

Another DJIA component, Caterpillar (CAT), trounced earnings views. The heavy equipment maker brought in $2.32 per share in the fourth-quarter, significantly better than the $1.73 that had been expected. Revenue was also well ahead of estimates, coming in at $17.24 billion vs. expectations of $16.05 billion. The company cited strong demand from outside the U.S. Caterpillar was racing, not crawling, on the news, advancing $3.26, 2.99%, to $112.31 in early trade.

Bristol-Myers Squibb (BMY) reported per-share income of $0.53, two cents shy of expectations. The drug maker's revenue of $5.5 billion was in line with views. The stock was a strong price performer in 2011, but has retreated below its 10-week line this month. Shares rose by $0.01, a fractional gain, to $32.71 in early trade.

After today's close, Starbucks (SBUX) serves up its fiscal first-quarter results. Analysts expect income of $0.49 a share on sales of $3.29 billion. The stock has rallied to multi-year highs in recent months.

Early Movers

An early price mover Thursday was S&P 500 component Netflix (NFLX) , vaulting $19.43, or 20.44%, to $114.47 after beating views late Thursday. The company surprised the market with better-than-expected customer additions. The stock was upgraded to Buy from Neutral at Citigroup.

Analyst Actions

Dr Pepper Snapple (DPS) got some fizz early Thursday, as Goldman Sachs upgraded the stock to Neutral from Sell. Goldman said valuation was a factor behind the move, but also the company should see some relief from lower commodity costs.

Columnist Conversations

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