The Day Ahead: German Vote Boosts Futures

 | Sep 29, 2011 | 8:24 AM EDT  | Comments
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In the Headlines

For the second day in a row, Wall Street futures indicated a higher open Thursday. However, bulls are hoping that today's session plays out differently than yesterday's, during which early bullish trade gradually lost steam, with the major indices ending at intraday lows.

Germany's parliament, as expected, approved an increase of powers to the eurozone bailout fund. Now the fund can be used to buy bonds on the secondary market and recapitalize banks, among other applications. Previously, it was only for direct government cash infusions.

The euro edged higher against the dollar early Thursday.

Most European indices were trading in positive territory after the vote. London's FTSE was an exception, showing losses as mining and commodities-related stocks traded in the red.

Asian markets, which closed before the German vote took place, finished mixed. Japan's Nikkei posted a gain of 0.99%, reversing off earlier losses. Hong Kong trading was cancelled due to a typhoon, which swept by the area.

U.S. stock futures may also have gotten a boost on comments late Wednesday from Fed Chief Ben Bernanke that the central bank would step in if inflation dropped.

Economic Docket

It's Thursday, which means the new jobless claims report is due out from the Labor Department. Just a few weeks ago, expectations for new claims were locked at the 400,000 level. That's changed, though, with economists now eyeing 420,000 as the expected number. The report will be released at 8:30 a.m. EDT.

8:30 this morning will be a busy time, as the Commerce Department is also set to issue its third revision of second-quarter GDP. Analysts are eyeing a gain of 1.2%, not a particularly strong number.

At 10 a.m., the National Association of Realtors is scheduled to release the August pending home sales report. As you might expect, analysts are not exactly optimistic about this number, and are expecting a decline of 1.8% last month.

Commodities Corner

In commodities moves, industrial metal copper, which is often seen as an indicator of economic activity in China, slipped $0.06 per pound to $3.18. The metal tumbled sharply in Wednesday's session.

Gold also fell in early Nymex trade, shedding $2.70 an ounce to $1,615.40.

Crude oil was up by $0.14 per barrel, to $81.35, in electronic trading.

Earnings News

Earnings results today include a fourth-quarter report from benchmark index component Micron Technology (MU), due out after the bell. The chipmaker is expected to earn a penny on revenue of $2.12 billion.

Those would be declines from the year-ago quarter. Earnings have dropped in the past three quarters, and sales dropped in the most recent. Micron fell $0.09 to $6.03 in early trade, a decline of 1.39%.

Fellow semiconductor name Advanced Micro Devices (AMD) skidded $0.65, a whopping 10.57%, to $5.50 in premarket trade. Late Wednesday the company slashed its revenue and EPS outlook, blaming manufacturing problems in a German facility.

Financials were among early Wall Street gainers. Bank of America (BAC) jumped $0.09, 1.46%, to $6.25. Meanwhile, Wells Fargo (WFC) advanced $0.35, 1.43%, to $24.80.

A JPMorgan Chase survey showed that most bond fund managers believed U.S. banks would withstand the eurozone debt crisis.

Analyst Actions

Thursday's analyst upgrades included Credit Suisse's promotion of Sociedad Quimica (Chemcial and Mining of Chile) (SQM) to Outperform from Neutral. Credit Suisse cited share price valuation and increasing business volume in its upgrade of the Chilean fertilizer and chemical producer.

HSBC initiated coverage on Agnico-Eagle Mining (AEM) with a rating of Overweight. Going into Thursday's session, shares of the Toronto-based gold miner were down 15.1% for the month.

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