The Day Ahead: Futures Pointing Higher

 | Aug 03, 2011 | 8:41 AM EDT  | Comments
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In the Headlines

With the S&P 500 in negative territory for the year, investors put on their rally caps Wednesday in an attempt to regain some ground lost in Tuesday's widespread market selloff. Futures pointed to a higher open following declines of more than 2% on Tuesday in heavy volume on the major indices.

As the U.S. debt ceiling debates fade in the rearview mirror, focus has returned to European debt worries and the global economy. Asian indices closed lower, with most posting sharp declines following Wall Street's bloodbath, spurred by poor economic data. Another factor hurting the markets was the widening spread between yields on Spanish and Italian sovereign bonds vs. German bonds. That renewed worldwide fears of eurozone debt contagion.

In European trade, stocks were reversing higher from early-session lows before Wall Street's open. Banks in Italy were trading in positive territory after opening lower, as some analysts are speculating that there may be some European Union aid coming for that nation's banks. The Swiss franc has been on the rise, as investors have flocked to the currency as a safe haven in the face of U.S. and European debt concerns.

Commodities News and Economic Data

As equities around the world decline, commodity prices reflect investor sentiment. Gold rocketed higher, gaining $24.50 to $1,669 per ounce. Oil prices fell, reflecting expectation of decreasing demand in a slower global economy. The per-barrel price dropped $0.62 to $93.17.

Investors will also be keeping an eye on economic data due out today. Challenger, Gray & Christmas released its July job cuts report, which showed losses of 66,414 jobs. That was a steep increase over June's figures, and the largest number of cuts in 16 months. Large downsizing announcements from Cisco (CSCO), Merck (MRK) and Borders (BRG) contributed to the number. Another eagerly anticipated report this morning will be ADP's employment survey. It's often viewed as a precursor to the Labor Department's nonfarm payrolls report, due out Friday, even though the numbers frequently show sizeable divergence. The ADP report is due out at 8:15 a.m. EDT. Economists see an increase of 100,000 new jobs for July.

At 10 a.m., the Commerce Department will issue its data on factory orders for June. Analysts are expecting a decline of 0.8%. That would mark the second drop in the past three months. Also at 10, the Institute for Supply Management will release its non-manufacturing index, which is a reading of the services sector of the economy that is far larger than the manufacturing sector in the U.S. Economists see a small uptick to 53.5 in July from June's reading of 53.3. At 10:30 a.m., the Energy Department is set to release its weekly data on crude oil stockpiles. Analysts expect a decline of 1.7 million barrels.

Earnings to Watch

Ahead of Wednesday's opening bell, Clorox (CLX) is set to report its fourth-quarter results. The company has been in the spotlight because private equity investor Carl Icahn made an acquisition bid, which was rejected. For the quarter, analysts are eyeing earnings per share of $1.19 and sales of $1.47 billion. Clorox shares advanced 6.2% last month on the Icahn bid. However, much of that gain came on July 15 on news of the offer, with shares pulling back in recent weeks. MasterCard (MA) is also due out with earnings before Wednesday's open. The company is expected to deliver per-share profit of $4.22 and revenue of $1.55 billion in the second quarter. Last week, rival Visa (V) reported better-than-expected results on healthy consumer credit-card spending. The stock has been pulling back with the general market lately, although ahead of Wednesday's open, the stock was getting support at its 10-week average. The stock is still holding onto a healthy year-to-date gain of 33.19%. After the close on Wednesday, video game maker Activision Blizzard (ATVI) is expected to report second-quarter earnings of a nickel a share on revenue of $599.32 million. Analysts will be looking for continued sales of units from Activision's core "Black Ops" franchise. Growth of mobile gaming is also on the radar.

Market Movers

Premarket price movers included Juniper Networks (JNPR), which has declined for the past five months, including a drop of nearly 26% in July. Ahead of Wednesday's open, the stock, now viewed by some as a bargain, climbed $0.84, 3.69%, to $23.60.

Wynn Resorts (WYNN)bounced $1.93, 1.31%, to $148.76 in early trade. Like just about everything else, the stock has been retreating along with the general market. Wynn shares got support at their 50-day moving average Tuesday. That, combined with today's early upside trade, indicates that institutional investors continue to have confidence in the stock.

Analyst Activity

Analyst actions ahead of the bell included a JP Morgan downgrade of American Airlines parent AMR (AMR) to Neutral from Overweight. JPMorgan cited increased loss projections in the downgrade.

Another transport, Union Pacific (UNP), was upgraded to Outperform from Market Perform at BMO Capital. Last month, the company said it expected strong results in the second half of this year.

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