The Day Ahead: Ready to Go Higher

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

Wall Street was ready to open higher Friday, following gains on European indices. There's a healthy dose of U.S. economic data today that have the potential to affect trading.

Better-than-expected third-quarter results from Google (GOOG) late Thursday injected some optimism into global markets.

Eurozone banks were decliners after bond rater Fitch downgraded UBS (UBS), and put BNP Paribas, Barclays, Societe Generale, Credit Suisse (CS) and Deutsche Bank (DB) on downgrade watch.

Fitch also put Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS) on its downgrade watch list.

Despite downside trade in European financials, other sectors picked up the slack. Energy and resources stocks were among the region's gainers.  Standard & Poor's downgrade of Spanish debt also failed to sink equities Friday. The euro has logged its best weekly gain in several months vs. the dollar.

In Asian trade, stocks wrapped up Friday mostly lower. Data from China showed inflation had eased, but remained at high levels. The bank downgrades also sent a fresh round of fear through Asian markets.

Economic Docket

Stateside, data about shoppers rolls in at 8:30 a.m. EDT, as the Commerce Department releases September retail sales numbers. Economists expect a gain of 0.7% after no change in August. The gain excluding autos is seen at 0.3%.

Also at 8:30 a.m., the Labor Department is scheduled to release data on import-export prices for September. This report generally doesn't get much market attention. Import prices are expected to fall 0.3%, with export prices declining 0.2%.

At 9:55 a.m., the University of Michigan is scheduled to release its preliminary consumer sentiment data for October. Although these numbers frequently diverge from actual sales figures that come in later, the survey results can affect stocks. Economists anticipate a reading of 60.2, an improvement over September's final number of 59.4.

Five minutes later, the Commerce Department is expected to publish its report on August business inventories. Analysts anticipate a rise of 0.4%, the same as July's increase. This report generally doesn't move the equity markets.

Oil and Treasuries

Crude oil rose $1.22 to $85.45 per barrel.

The yield on the 10-year note has inched higher in recent days, and was at 2.17% early Friday.

Earnings News

S&P 500 component Mattel (MAT) said third-quarter earnings were $0.86 per share, in line with views. Revenue was $2 billion, slightly ahead of expectations for $1.97 billion. The company said bottom-line results were dinged by higher input costs. Strong sales from the Barbie brand helped the top line. Mattel was up $0.22, or 0.79%, to $28 in the premarket.

Google shares bolted $38.01, or 6.8%, to $597 in early trading. After yesterday's close, the company said advertising revenue drove better-than-expected third-quarter results. That spurred optimism among traders that business spending and economic conditions in general may be better than earlier anticipated.

Early Gainers

Despite the Fitch actions regarding the banks, financials were among the S&P gainers in premarket trade.

Bank of America advanced $0.06, 0.96%, to $6.28. Wells Fargo (WFC) was up $0.23, or 0.88%, to $26.35. Citigroup (C) jumped $0.25, or 0.9%, to $27.89.

As Apple's (AAPL) new iPhone goes on sale today -- replete with the usual lines of customers waiting outside stores -- the company's shares rose $7.90, or 1.93%, to $416.33.

Analyst Actions

Analyst actions early Friday included a Wells Fargo downgrade of Gap (GPS) to Market Perform from Outperform, citing possible risk to the company's guidance. Heading into Friday, Gap shares had advanced 3.6% so far this week.

Ticonderoga downgraded Monsanto (MON) to Neutral from Buy, citing valuation. Monsanto has been a big gainer this month, rising nearly 22% and the stock's upside volume came in well above average last week.

A New IPO

Remember IPOs? They have been few and far between lately, but late Thursday, wireless equipment maker Ubiquiti Networks priced 7.04 million shares at $15 apiece, which is the low end of its proposed range. The stock begins trading on the Nasdaq today, under the ticker UBNT.

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