The Day Ahead: Sticky to the Upside

 | Aug 23, 2011 | 8:10 AM EDT
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In the Headlines

Worldwide stocks showed gains early Tuesday, amid a slew of global and domestic news. U.S. equity futures indicated a significantly higher open, following strong upside trade in Europe and Asia.

Expectation is growing that the Fed will take action to bolster the economy, another factor contributing to Wall Street optimism ahead of Tuesday's open.

European stocks notched strong advances, helped by better-than-expected manufacturing data. The eurozone purchasing managers index came in flat for August, giving the regional currency a boost vs. the dollar.

Chinese economic data also provided some encouragement for traders. European bank HSBC released its purchasing managers' survey of the nation, which edged slightly higher. As in Europe, a weaker reading had been expected. Indices throughout Asia closed with healthy gains Tuesday.

Stateside, Federal Reserve governor James Bullard, in an interview with Japanese media, hinted that the central bank could resume a bond-buying program, if it deems such a move necessary.

Bullard suggested that more purchases could be done on a meeting-by-meeting basis, rather than the Fed committing to a longer-term program.

Also in the news mix Tuesday was Libya, where a son of Moammar Gadhafi appeared in public, on-camera, rallying support for his father's regime. Media had previously announced that the son had been captured.

The renewed show of strength from the Gadhafi family and their loyalists helped send oil prices higher, though rebels are expected to topple the regime in the not-so-distant future.

The better-than-expected manufacturing data from China and Europe also contributed to a boost in crude prices, as traders anticipated higher demand than they had earlier forecast.

West Texas Intermediate crude advanced $1.29 to $85.71 per barrel.

Meanwhile, gold, which crossed the $1,900 threshold Monday, retreated in early Comex trade this morning. It fell $9.90 to $1,882 per ounce.

Heading into Tuesday, the yield on the 10-year Treasury rose to 2.14%.

Economic Docket

In economic data due out today, the Commerce Department releases numbers on July new-home sales. Analysts see a small increase, but nothing to get particularly excited about, especially given bleak data for June. The report is slated for release at 10 a.m. EDT.


In earnings news, ketchup maker Heinz (HNZ) reported first-quarter earnings of $0.78 per share, ex-items, topping views by $0.02. Sales were $2.85 billion, ahead of expectations, which called for $2.78 billion.

The company cited strength from emerging markets, but also noted higher commodity costs.

Also reporting before the bell was medical-gear maker Medtronic (MDT). Like Heinz, it's an S&P 500 component.

The Minneapolis-based company missed first-quarter views, with income of $0.77 per share. Wall Street had expected $0.79. Revenue of $4.05 billion topped analysts' consensus view of $3.98 billion.

Medtronic reaffirmed its 2012 earnings guidance of $3.43 to $3.50 per share.

Medtronic shed $0.14, 0.45%, to $31.04 in premarket trade.

Market Movers

Other early price movers included Switzerland-based bank UBS (UBS), which gained $0.57, 4.32%, to $13.76. The company said it would slash 3,500 jobs, mostly from its investment banking unit.

Another financial showing gains ahead of the open was Goldman Sachs (GS). The stock tumbled in the final minutes of Monday's session on news that CEO Lloyd Blankfein had hired his own attorney in the wake of investigations into the bank's role in the 2007-2009 financial crisis.

Goldman Sachs rebounded $3.49 in premarket trade, a gain of 3.28%, to $110.

Analyst Actions

A number of analysts began covering recent IPO Oiltanking Partners (OILT), which began NYSE trade in July.

Barclays started the Houston-based oil-and-gas pipeline operator with a rating of Overweight. Morgan Stanley analysts started the company with an Equal Weight designation. Meanwhile, Stifel Nicolaus' initial rating was Hold.

Oiltanking Partners' shares went public at $22, and closed Monday at $23.30.

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