The Day Ahead: Global Economic News in Spotlight

 | Aug 24, 2011 | 8:23 AM EDT
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In the Headlines

Bulls and bears slugged it out Wednesday, with U.S. stock futures heading south following Tuesday's enormous, heavy-volume gains. 

Once again, global economic news was having an effect on markets.

A Moody's downgrade of Japan sent Asian indices lower. With reasoning that sounds rather familiar, Moody's blamed a buildup of debt and ineffectual political leadership for the move. Separately, Japan's finance minister said Tokyo may still take measures to tame the yen.

Asian indices across the board finished lower Wednesday.

In Europe, a German business sentiment indicator dropped, as did eurozone industrial orders, but indices hung onto gains, trading modestly higher before Wall Street's open.  Financials and techs were among the best performing sectors.

Elsewhere, Libyan rebels secured oil infrastructure facilities near Tripoli, raising hopes that production may resume in the coming months. However, analysts do not expect big moves in the price of oil as a result.

West Texas Intermediate crude slipped $0.07 ahead of Wall Street's open, to $85.37 per barrel.

Gold was trading lower early Wednesday, pulling back after reaching a fresh intraday high in yesterday's session. The price dropped $17.30 early Wednesday, to $1,844 per ounce.

Economic Docket

The most eagerly awaited economic news in the U.S. comes Friday, as Fed chief Ben Bernanke speaks from Jackson Hole, Wyo. The market is prepping itself for some kind of announcement about further quantitative easing.

Today brought the Mortgage Bankers Association's report on new loan applications.  Lately, activity has been driven by refinancings as interest rates remain low. The group said requests for mortgages fell 2.4% last week.

At 8:30 a.m. EDT is the Commerce Department's report on durable goods orders for July. Economists expect an increase of 2% in the headline number, spurred by increases in civilian aircraft and autos. A decline of 0.5% is seen with the transportation orders taken out.

Many investors are aware that these numbers can be quite volatile, so market reaction to the report varies.

At 10:30 a.m. is the Energy Department's regular Wednesday report on crude inventories. This time around, the tally is expected to show an increase of 2 million barrels.

The Treasury Department auctions off 5-year notes at 1 p.m. today. Analysts expect to see healthy demand.


Turning to corporate earnings, American Eagle Outfitters (AEO) is due out with its second-quarter report before the open. The clothing retailer is seen earning $0.11 per share on sales of $650.78 million. Shares have been suffering, showing a year-to-date loss of 20.6%. Year-over-year sales declined in the past two quarters. If the company meets or misses revenue views, it would mark another quarterly decline.

Chip-equipment maker Applied Materials (AMAT) reports its third quarter after today's close. Wall Street is eyeing earnings of $0.33 a share and revenue of $2.68 billion. This is another stock showing dismal price performance lately, with a decline of more than 18% so far in 2011. It's working on its fourth month in a row of downside trade, with shares trading below key moving averages. Applied Materials' sales and earnings growth have slowed in the past few quarters.

Market Movers

Price movers ahead of Wednesday's open include gold miner Newmont (NEM), gaining $0.24 to $61.49. Shares are up 10% for the month, but are still off their all-time high of $65.50, reached last September. The stock was upgraded to Sector Perform from Underperform at RBC.

A big S&P 500 decliner was Starbucks (SBUX), shedding $1.67, or 4.6%, to $35.06 in premarket trade. The company said Tuesday that it would discontinue its line of Doubleshot canned espresso drinks in Canada to make room for better-selling products.

Analyst Actions

In addition to the RBC upgrade of Newmont, analyst moves Wednesday included a Morgan Keegan downgrade of Abbott Labs (ABT). It demoted the pharmaceutical and medical products maker to Market Perform from Outperform. The analyst cited market uncertainty as its reason for the move. Abbott shares slipped $0.50 ahead of the bell, a loss of 1%, to $50.01.

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