The Day Ahead: Slouching Into the Weekend

 | Aug 19, 2011 | 8:11 AM EDT  | Comments
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In the Headlines

Global markets sold off Friday on recession worries. U.S. equity futures indicated a sharply lower open, following steep downside trade in Asia and Europe.

Once again, European banks were some of the bourses' biggest losers prior to Wall Street's open. Traders are concerned that the region's big banks are losing access to U.S. money market funds. German industrials were also showing sharp declines on economic fears.

The euro was trading higher vs. the dollar early Friday.

The news wasn't any better from Asia, with most indices ending significantly lower. South Korea's Kospi showed its worst one-session loss since November 2008. Concerns over the strong yen kicked exporters lower yet again in Japan. Throughout the region, energy and commodities-related stocks fell as traders fretted about reduced demand along with a slowing economy.

The yield on the 10-year note was perched at the low level of 2.08% before Friday's open.

After yesterday's downpour of bad U.S. economic data, investors get a break today. There are no significant government reports on the docket.

Commodities

In early Nymex trade, West Texas Intermediate crude also fell on expectation of lower global demand. The price dropped $2.23 per barrel, to $80.15.

Gold continued rallying to record highs, gaining $53.40 to $1,875.40 per ounce.

Earnings

It's also a fairly light day for corporate earnings news, although there are some well-known retailers reporting before the bell. Ann Taylor (ANN) is expected to show second-quarter income of $0.45 and sales of $550.22 million.

Heading into Friday, shares have plunged nearly 26% this month, and are down 29.65% on a year-to-date basis.

Hibbett Sports (HIBB) is also due out with second-quarter results this morning. Analysts see the Birmingham, Ala.-based company to report profit of $0.19 a share on sales of $151.61 million.

This is another stock whose share price has plummeted this month, shedding 16%. Shares are trading below their 40-week moving average. Downside trading volume has been heavier than normal in the past three weeks.

Market Movers

Early price movers Friday included Hewlett-Packard (HPQ), which said Thursday that it may spin off its PC business. The company also said it would buy British software maker Autonomy for nearly $12 billion, and slashed its full-year outlook.

HPQ shares fell $3.02, 10.23%, to $26.49 ahead of Friday's opening bell.

UBS downgraded the stock to Neutral from Buy.

Premarket gainers were few and far between, but one bright spot was oil-and-gas field services company Schlumberger (SLB). The stock advanced $0.15, 0.20%, to $74.56 in early trade.

Shares are showing a year-to-date loss of 11.89%.

Also bucking the bear was business software maker Salesforce.com (CRM), which climbed $2.84, 2.49%, to $116.90 before the open. On Thursday, the company beat second-quarter views and gave an upbeat forecast for the current quarter.

Railroad CSX (CSX) went off the track, tumbling $2.88, 13.60%, to $18.30 in the premarket. Transports are among stocks getting hit on worries about a new recession. On Thursday, the Association of American Railroads said carloads moved in the U.S. across all rail carriers dropped 1.2% from the same week year ago.

Analyst Actions

In addition to UBS' downgrade of Hewlett-Packard, analyst actions ahead of the bell included a couple of dueling calls on Dell (DELL). Ticonderoga initiated the company with a rating of sell.

Meanwhile, Needham upgraded the stock to Buy from Hold. Earlier this week, Dell beat second-quarter views but issued a tepid outlook for the third quarter.

KeyBanc took action on a couple of growth names from the retail sector. Coach (COH) was upgraded to Buy from Hold, while Lululemon Athletica (LULU) was demoted to Underweight.

KeyBanc analysts are recommending that their clients buy Coach and sell Lululemon. The bank said Coach's conservative guidance is appropriate for the current economic environment.

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