The Day Ahead: Fears Spark Global Selloff

 | Sep 22, 2011 | 8:30 AM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

utx

,

gr

,

fdx

,

nke

,

aa

,

hpq

,

clf

,

athn

In the Headlines
Global markets sold off Thursday on fears of a slowing economy, with U.S. stock futures trading sharply lower.

The early downside trade on Wall Street follows yesterday's heavy-volume declines that came after the Federal Reserve warned of significant downside risk to the economy. The Fed also, as expected, implemented Operation Twist, buying longer-term Treasuries and selling shorter-dated instruments.

Not helping the bulls' cause Thursday morning were disappointing data from a Chinese survey of purchasing managers, which showed weaker-than-expected manufacturing activity. China's manufacturing sector has significant exposure to the U.S. and Europe. Indices throughout Asia closed sharply lower Thursday.

European markets were also showing steep declines before the start of U.S. trade. Purchasing managers' surveys in the eurozone also showed a slowdown in growth. Resources-related stocks in the region were among the biggest losers, along with financials. A stronger dollar was another factor kicking commodities-related names early Thursday.

Economic Docket

Economic data are due out in the U.S. today, too. The Labor Department is set to release its regular Thursday report on jobless claims at 8:30 a.m. EDT. Last week showed a big increase in the number of new claims, to 428,000. Economists are eyeing the 425,000 level this week, with even a small drop not being a signal of real improvement.

At 10 a.m., the Federal Housing Finance Agency will post its housing price index for July. There are no forecasts for this report, and it's typically not a market mover.

Also at 10 is another piece of data that generally doesn't move the needle on stocks: The Conference Board's report on leading indicators. With September winding down, this report covers August. As the lag time suggests, it's a compendium of previously released data and some estimates. Economists don't expect much change from July, as the economy continues to muddle along.

Commodities Corner

Metals prices were declining early Thursday. Copper, an industrial metal, continued its plunge following the poor manufacturing data from China. It was down $0.22 to $3.54 in electronic trade.

Gold, the traditional safe-haven play, was also falling. It shed $56.90 to $1,751.20 per ounce.

Crude oil dropped $3.86 per barrel to $82.06 in anticipation of lower global demand.

Merger News

In merger news, DJIA component United Technologies (UTX) confirmed late Wednesday that it would acquire aerospace gear maker Goodrich (GR) for $127.50 per share, or $16.5 billion.

The deal had been rumored for days, with Goodrich shares popping 10.3% last week and 17.9% this week, heading into Thursday's session. Goodrich jumped $11.06 in premarket trade, a gain of 10.10%, to $120.55.

United shares fell $2.86, or 3.82%, to $72.01 before the open. Analysts were beginning to question whether the price offered for Goodrich was perhaps too good and too rich.

Earnings on Tap

There are some key corporate earnings reports expected today. FedEx (FDX), viewed as a barometer of business activity, met first-quarter earnings views, with per-share income of $1.46. Revenue of $10.5 billion came in ahead of expectations, which called for $10.32 billion. The company said its full-year EPS view was a range of $6.25 to $6.75 per share. Wall Street is expecting $6.36. FedEx shares rose $0.50, or 0.69%, to $73 following the announcement.

After the bell is a first-quarter report from Nike (NKE), an indicator of global consumer spending. The shoe and apparel maker is expected to report first-quarter earnings of $1.21 per share on sales of $5.75 billion. Nike shares have been trying to work their way out of a two-month price consolidation, and closed Wednesday slightly above their 10-week moving average. If the company meets or beats estimates, it would mark year-over-year revenue and profit increases.

Early Movers

Premarket movers included DJIA component Alcoa (AA), which dropped $0.29, or 2.68%, to $10.55. On Wednesday the company said it would reorganize its Global Rolled Products business unit to better capture opportunities in emerging markets.

Share of Hewlett-Packard (HPQ) fell $0.52, or 2.17%, to $23.46 amid reports of a squabbling board and the possibility that CEO Leo Apotheker could be ousted.

As resources stocks slumped worldwide, iron ore producer Cliffs Natural Resources (CLF) tumbled $3.94, 6.4%, to $57.61. Going into Thursday's session, the stock was already down 21% for the week, and ended Wednesday at the bottom of its weekly trading range.

Analyst Actions

Medical software maker Athenahealth (ATHN), which rallied to an all-time high earlier this week before retreating, was downgraded to Underweight from Neutral at JPMorgan. The analyst cited valuation for the move. Athenahealth's shares dropped by $2, or 3.04%, to $63.88 ahead of the open.

Columnist Conversations

If this market has taught us one thing over the past 5 years, it has been to not be dogmatic in our views. Th...
Is this the biotech revolution or the biotech bust? View Small Cap Biotechs Like Never Before: Transparency is...
Market recovers a bit from early losses after European Bourses close at 11:30am EST. Upwardly revised Q2 GDP ...
When I do an article on a stock I do my best to define the risk on the trade. Sometimes I get to follow up an...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.