The Day Ahead: GDP Report on Tap

 | Jan 27, 2012 | 8:28 AM EST  | Comments
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In the Headlines

Wall Street traders were ready to open Friday's session with some buying, sending futures moderately higher. Today's GDP report has potential to affect stocks, and the week wraps up with another round of earnings from widely-held companies.

Some European indices got a boost on a successful auction of six-month debt. Yields dropped to their lowest levels since May of last year.

Speaking from the World Economic Forum in Davos, Switzerland, Germany's finance minister said he did not expect a Greek debt default. Meanwhile, a European Union official said Greece and its creditors are getting closer to a debt agreement.

The euro continued trading above its lows from earlier this month, and was gaining vs. the dollar early Friday.

In Asia, most indices finished with moderate gains, with traders treading water ahead of today's U.S. economic data. Japan's Nikkei showed a small decline after some earnings disappointments, while exchanges in China and Taiwan remained closed for a holiday.

Economic Docket

That eagerly awaited fourth-quarter GDP report from the Commerce Department is due out at 8:30 a.m. EST. Economists anticipate a growth rate of 3%, a sizeable gain from the 1.8% increase in the third quarter.

Another report that tends to get a lot of attention is the University of Michigan's consumer sentiment index, which is slated for a 9:55 a.m. release. Analysts expect a reading of 74.5, up slightly from the prior level of 74.

Commodities Corner

Crude oil climbed $0.44 per barrel, to $100.14. Gold remained above the $1,700 per-ounce level, but slipped $4.00, to $1,722.70.

A New Deal

In deal news, Eastman Chemical (EMN), which had the good fortune of being spun off from Eastman Kodak (EKDKQ.PK) in 1994, said it would acquire specialty chemical maker Solutia (SOA) in a $4.7 billion cash, stock and debt deal. The Kingsport, Tenn.-based company said the move would boost its presence in the Asia-Pacific region. Eastman Chemical shares bolted $3.88 in the premarket, up 8.23%, to $51.

Earnings News

Ford (F) was not exactly in acceleration mode this morning, reporting fourth-quarter earnings per share of $0.20, missing views by a nickel. The company said its profit margins slipped in 2011 vs. 2010. It said commodity costs put pressure on margins. Ford's revenue beat expectations, though, coming in at $34.6 billion, vs. views of $32.09 billion. Ford shares were down $0.54, 4.24%, to $12.20 ahead of the open.

DJIA component Procter & Gamble (PG) fared better on the bottom line, earning $1.10 a share, topping views by $0.02. Revenue was a bit light in the fiscal second quarter, coming in at $22.1 billion. Analysts had expected something closer to $22.2 billion.

The company said it expects some easing of commodity prices in the coming year. P&G shares fell $0.85, or 1.31%, to $63.95 in early trade.

Cigarette maker Altria (MO) beat fourth-quarter estimates by a penny, reporting earnings of $0.50 per share, excluding items. Revenue was $6.13 billion, smoking past views of $4.23 billion. The shares were up $0.28, or 0.98%, to $28.94 in early trade.

DJIA component Chevron (CVX) is also sue to post results this morning and the company is expected to have earned $2.84 a share on revenue of $70.96 billion. Despite being boasting huge institutional ownership that is typical of blue chips, Chevron has shown volatile trade in the past year. The stock has a beta of 1.04. The shares are currently holding above key moving averages.

Early Movers

Premarket movers Friday included Starbucks (SBUX), shedding $0.59, or 1.22%, to $47.75, a retreat from Thursday's all-time high. The company's quarterly results, reported after the bell Thursday, beat views on strong business in the U.S. and Asia. However, its full-year outlook was a bit shy of analysts' views.

Another decliner ahead of the open was Juniper Networks (JNPR), plunging $1.87, or 8.36%, to $20.50. Late yesterday, the company missed fourth-quarter revenue views, and said the near-term business climate "remains challenging."

Analyst Actions

JCPenney (JCP), which has gotten a lot of attention in recent months after CEO Ron Johnson joined the company from Apple (AAPL), was upgraded to Overweight from Neutral at Piper Jaffray.

The analyst cited good expectations for earnings and share price growth. JCP was up $0.63 in the premarket, a gain of 1.55%, to $41.35.

IPO News

On the IPO front, biotech Verastem sold 5.5 shares at $10 each, the midpoint of its planned range. The stock begins Nasdaq trade today under ticker VSTM.

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