The Day Ahead: Pessimism Persists

 | Sep 23, 2011 | 8:30 AM EDT  | Comments
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In the Headlines

Stocks continued to struggle Friday morning, with Wall Street futures pointing sharply lower after an earlier bounce.

Many technical traders are eyeing Aug. 9 intraday lows. They're watching to see whether support will hold above those levels on major indices, or whether capitulation, with even lower lows, is still ahead. The CBOE Volatility Index, better known as the VIX or the "fear index," jumped 10.8% Thursday, to $41.35.

European indices retreated into negative territory after earlier gains. The Group of 20 major economies issued a statement late Thursday saying the nations would work together to find a solution to Europe's financial crisis. But the words clearly didn't appease investors. A growing number of economic analysts are talking about the "when" not the "if" of Greek debt default.

A French bank regulator said this morning that 15 and 20 European banks need to be recapitalized, although none were in France. Yesterday, a European Union (EU) official also commented that several banks in the region will need additional funding in the near future. The euro traded lower vs. the dollar early Friday.

Asian stocks took their cue from Wall Street's free fall, closing Friday with losses. However, indices rallied during the session to finish above previous lows. Japan's Nikkei was closed for a holiday. As in Europe, resources-related stocks were among the big decliners on pessimism about the global economy and demand for materials.

Commodities Corner

Those doubts were also in evidence in early Nymex electronic trade. Copper fell $0.2075 to $3.28 per pound. The industrial metal closed just pennies above its intraday low Thursday.

Gold, which also plunged Thursday, continued its decline. The precious metal dropped $30.70 to $1,711 per ounce.

Silver, too, was on the losing side early Friday, falling $3.678 to $32.90 an ounce.

Crude oil, whose prices are also sensitive to the global economic outlook, dropped $1.60 per barrel to $78.91.

Company News and Earnings

There are no major U.S. economic reports to potentially distract investors today.

A company story that remains in the headlines comes from DJIA component Hewlett-Packard (HPQ). As expected, H-P's board ousted CEO Leo Apotheker after Wall Street's close on Thursday, and said former eBay (EBAY) CEO Meg Whitman would take the post. The stock advanced $0.07, or 0.31%, to $22.87 in premarket trading.

Friday typically brings fewer earnings reports than the middle of the week. This morning, battered homebuilder KB Home (KBH) is expected to report a third-quarter loss of $0.19 per share on revenue of $380.34 million. Those results would show a deterioration from the year-earlier quarter, as the housing market bounces along the bottom, showing no improvement.

Early Movers

Premarket price movers Friday included DJIA component Kraft (KFT), which has shed $0.28, or 0.83%, to $33.43. The stock gapped down Thursday in market carnage, but found support near its 200-day line and rebounded to end at the high of its session range.

Tumbling commodities prices put pressure on copper and gold miner Freeport-McMoRan (FCX). The stock dropped $0.84, 2.61%, to $31.30 in early trade. After notching a big rally in the second half of last year, Freeport-McMoRan has tumbled more than 46% this year. Going into Friday's session, the stock was down 22.7% for the week, on enormous volume.

Data storage maker EMC (EMC) was a premarket gainer, advancing $0.35, or 1.71%, to $20.86. The S&P 500 component is getting a bounce after Thursday's 3.9% gap down on heavier-than-normal volume. The stock has plunged in recent months, and is treading below key moving averages.

Analyst Actions

In analyst moves, UBS resumed coverage on a number of clothing retailers. Urban Outfitters (URBN), Talbots (TLB), Gap (GPS), Coldwater Creek (CWTR), Chicos FAS (CHS), Aeropostale (ARO), American Eagle Outfitters (AEO) and Abercrombie & Fitch (ANF) were started with ratings of Neutral.

Meanwhile, UBS awarded Buy ratings to Ross Stores (ROST), Limited (LTD), Express (EXPR) and Ann Taylor (ANN).

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