The Day Ahead: Higher Before the Data Deluge

 | Oct 20, 2011 | 8:11 AM EDT  | Comments
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In the Headlines

Despite a German-French disagreement on how to structure the European bailout fund, U.S. stock futures pointed higher Thursday. Not only is there the continuing European debt saga that could affect markets today, but there's also a slew of U.S. economic data.

The early price moves follow Wednesday's selloff on U.S. indices. On the Nasdaq, the big downside move was accompanied by heavy trading volume. The selloff in NYSE and Nasdaq stocks accelerated in the later part of the session, after release of the Fed's beige book, which cast doubt on the already uncertain U.S. economic recovery.

In Europe, the French president and the German chancellor are meeting today with other eurozone officials to discuss the bailout. There's also a vote in Greece today on massive tax increases and spending cuts.

European stocks were trading lower before Wall Street's open.

However, the euro jumped higher vs. the dollar early Thursday.

In Asia, traders took a cue from Wall Street, sending stocks lower on Thursday. In addition, weakness in commodities-related stocks put a dent in Asian trade. Companies with global exposure were also hit on doubts about the U.S. and Europe.

Gold, which has slipped in each of the past three sessions, dropped by $27.70 per ounce in electronic trade, to $1,619.30.

Economic Docket

In U.S. econ data, the weekly jobless data from the Labor Department are due out at 8:30 a.m. EDT. The familiar 400,000 level for new claims is once again on the radar. That would be a slight drop from the previous week's level of 404,000.

At 10:00 is the National Association of Realtors' existing-home sales report. Economists see a slowdown to 4.9 million units in September from 5.03 million in August. The report will likely be viewed in the light of yesterday's unexpected jump in housing starts.

Also at 10:00, consulting firm The Conference Board releases September leading indicators. Analysts see a rise of 0.2%, following August's 0.3% gain. The leading indicators report is essentially a compilation of some already-known data points.

The 10 a.m. data deluge continues with the Philadelphia Fed index of manufacturing activity for October. Economists see a reading of -9, better than last month's -17.5. An unexpectedly good or bad number has potential to affect stocks.

Earnings

In earnings news, AT&T (T) said third-quarter income was $0.61 per share, in line with views. Revenue at the DJIA component was slightly below estimates at $31.5 billion.

On the conference call, analysts will pay special attention to the numbers of new iPhone activations, as well as any mention of the Justice Department's efforts to stymie AT&T's planned acquisition of T-Mobile from Deutsche Telekom.

AT&T shares fell by a dime, 0.34%, to $28.99 in early trade.

Southwest Airlines (LUV) flew in with earnings per share of $0.15 on revenue of $4.3 billion. Both numbers were higher than expected. Analysts had seen earnings of $0.13 per share on revenue of $4.23 billion.

After the bell is the fiscal first-quarter report from Microsoft (MSFT). Slowing PC sales will be a main focus of analysts, particularly following better-than-expected numbers from Intel (INTC) earlier this week.

Mister Softie is expected to report quarterly income of $0.68 a share on sales of $17.25 billion.

Also due out later today is S&P 500 component Chipotle Mexican Grill (CMG), seen earning $1.85 a share on revenue of $584.14 million. Chipotle shares rallied to a new high last month, but have pulled back and found support at their 10-week moving average.

Market Movers

Early movers Thursday included eBay (EBAY), shedding $1.58, 4.76%, to $31.60. Investors were disappointed with the company's holiday-season guidance, issued after yesterday's close.

A premarket gainer was copper and gold miner Freeport-McMoRan (FCX), which advanced $0.32, 0.93%, to $34.70. Yesterday the company beat third-quarter earnings estimates, despite a big drop in copper prices.

CLSA upgraded the stock to Outperform from Market Perform.

Analyst Actions

Other analyst actions Thursday included a Goldman Sachs downgrade of info tech outsourcer Cognizant Technology Solutions (CTSH). The S&P 500 component is headquartered in New Jersey, but performs the bulk of its work from India.

Goldman demoted the stock to Neutral from Buy, citing valuation and a lack of growth factors in the near term.

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