The Day Ahead: Seeing Some Upside

 | Sep 14, 2011 | 8:30 AM EDT
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In the Headlines

Despite continued European worries, U.S. futures indicated a higher open on Wednesday. Following a number of developments, European stocks were in positive territory early Wednesday. As had been anticipated, Moody's downgraded two French banks, Credit Agricole and Societe Generale, on concerns about Greek debt exposure.

Meanwhile, the French and German presidents have a conference call with Greece's prime minister today. Representatives of the IMF, ECB and EU are back in Athens to talk bailout terms, and China has said it is prepared to invest in European debt, but it wants World Trade Organization full economic status in exchange.

Asian stocks finished mixed on Wednesday. Dragged down by European concerns, financials in the region were among the biggest decliners.

Economic Docket

There are some U.S. economic reports likely to get some investor mindshare today. It's Wednesday, so that means the Mortgage Bankers Association released its weekly mortgage application figures. Loan applications rose 6.3% last week. Both refinancings and new purchases showed a bounce from the prior week.

At 8:30 a.m. EDT, the Commerce Department is scheduled to release the retail sales report. Economists are eyeing a gain of 0.2% for August. Excluding autos, that number is expected to come in 0.3% higher.

Also at 8:30, the Labor Department will issue data on producer prices for August, which are expected to show a decline of 0.1%. Minus volatile food and energy prices, the core PPI number is seen showing a gain of 0.2%.

At 10 a.m., the Commerce Department is set to release business inventories data for July. As is often the case with reports having a long lag time, this one generally doesn't get much market attention. Total inventories are expected to rise 0.5%. Accumulation of inventories is the result of lower sales.

At 10:30, the energy department will report its weekly tally of crude oil reserves. Analysts expect a decline of 3 million barrels, as Gulf of Mexico production was curtailed because of Tropical Storm Lee.

Commodities and Treasuries

Crude oil fell $0.55 to $89.66 per barrel in early Nymex trade. Gold, which has been meandering within a range lately, advanced $4.30 to $1,834.40 per ounce.

The Treasury Department will auction off $13 billion in 30-year bonds today. Going into Wednesday's session, yields on the 30-year stood at 3.32%.

Earnings on Tap

Earnings reports today include a first-quarter report from filtration-system maker Pall (PLL), due after the bell. The S&P 500 component is expected to deliver earnings per share of $0.71 on revenue of $659.20. The rate of earnings growth has slowed in recent quarters, though if the company meets or beats views, that trend would be reversed. The stock is showing a 13.35% year-to-date loss, and is trading well below key moving averages.

Early Movers

Early price movers included chipmaker Micron (MU), advancing by a dime, or 1.46%, to $6.96. The stock has traded higher in the past six sessions, notching better-than-average volume in the past four.

DJIA component General Electric (GE) gained $0.15, 0.97%, to $15.56 in the premarket. On Tuesday, the company said it made an offer to repurchase shares that were sold to Warren Buffett in October 2008 during the financial crisis. GE is offering to pay Buffett $3.3 billion. He bought the shares for $3 billion.

Yahoo! (YHOO) gained $0.325 in early trade, up 2.28% to $14.58. The company's board is meeting today in Silicon Valley to discuss plans to hire a new CEO, as well as strategic alternatives for turning the company around.

FBR Capital initiated coverage on a couple of payday loan chains. First Cash (FCFS) got started with a rating of Outperform. Last week, the shares climbed to an all-time high of $49.13, and have been trading in a fairly tight range above their 10-day average since then.

Meanwhile, FBR started EZCORP (EZPW) with a rating of Market Perform. The stock continues to consolidate after retreating from its July high of $38.66.

Susquehanna upgraded Oracle (ORCL) to Positive from Neutral. The stock is working on its fifth month in a row of losses, and has posted a year-to-date decline of 11.44%. Following the upgrade, Oracle shares rose $0.34, or 1.23%, to $28.06 in premarket trading.

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