The Day Ahead: Rally Caps On

 | Sep 27, 2011 | 8:30 AM EDT
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In the Headlines

U.S. stock futures headed significantly higher Tuesday, building on yesterday's gains.

Monday's rally brought big percentage gains to NYSE and Nasdaq stocks, but it occurred in below-average trading volume. Price gains were spurred largely by news that European financial officials were working out a plan to strengthen the European Financial Stability Facility (ESFS) bailout fund.

Speculation is also growing that the European Central Bank (ECB), which raised interest rates while the U.S. was lowering them, will begin reversing that policy in the not-so-distant future.

European stocks opened sharply higher Tuesday on sustained optimism that Europe may be taking steps toward stemming the debt crisis. Today, the Greek prime minister meets with the German chancellor to discuss Greece's plans for austerity and debt payment. The euro was trading higher against the dollar before the start of Wall Street trade.

Asian stocks also bolted higher Tuesday on the ESFS news. As with markets elsewhere, the move was a bounce following steep declines. Many traders took the opportunity to grab shares at what they viewed as bargain prices.

Economic Docket

In the U.S., there are a couple of economic reports likely to get some notice today. At 9 a.m. EDT is the Case-Shiller 20-city home-price index for July. Economists see prices declining 4.5% from a year ago.

An hour later is September's consumer confidence report from the Conference Board. Economists see an increase to 46.6 from the previous reading of 44.5. Those are not particularly strong numbers, but it's worth noting: While this report gets a good deal of attention, what consumers tell surveyors does not always correlate with their actual buying behaviors.

Commodities Corner

Gold was staging a big comeback in early trade, advancing $77.50, $1,672.30 per ounce.

West Texas Intermediate crude advanced $2.26 to $82.50 per barrel in electronic trade.

Earnings News

In earnings news, S&P 500 component Walgreen (WAG) said fourth-quarter earnings were $0.57 per share, ex-items. The Illinois-based pharmacy and retail chain notched sales of $18 billion.

Both the top- and bottom-line numbers were ahead of views. Analysts had expected income of $0.55 on sales of $17.88 billion. Walgreen shares advanced $1.47 ahead of the open, a gain of 4.08%, to $37.50.

After the bell is a fourth-quarter report from Jabil Circuit (JBL). The contract manufacturer of electronics components for the aerospace, automotive and other industries is expected to deliver profit of $0.56 per share on revenue of $4.19 billion.

Those would mark year-over-year increases. The stock has been consolidating since a May rally attempt fizzled. Its 10-week moving average is below the longer-term 40-week line, a bearish signal. However, shares recently regained their 10-week line and are hovering in the vicinity.

Also due out late today is a first-quarter report from payroll outsourcer Paychex (PAYX). The mid-cap is expected to earn $0.38 a share with revenue coming in at $554.11 million.

Earnings and sales have been growing at single-digit rates in recent quarters. Wall Street sees profit up 6% in fiscal 2012, to $1.50 per share.

Early Movers

Premarket movers included Starbucks (SBUX), perking up $2.01, 5.09%, to $41.50. Shares have been showing better-than-average technical strength lately, trending above key moving averages.

Also moving in the premarket was copper and gold miner Freeport-McMoRan (FCX), climbing $1.33, 3.94%, to $35.10. The move comes as copper snapped back Monday, following six sessions in a row of downside trade. The commodity was also moving higher in early Nymex trade Tuesday.

Analyst Actions

FBR Capital initiated coverage on a number of for-profit education companies.

ITT Educational Services (ESI), Capella Education (CPLA), Strayer Education (STRA) and Bridgepoint Education (BPI) got started with ratings of Market Perform.

Grand Canyon Education (LOPE) fared best, snagging a rating of Outperform.



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