The Day Ahead: Solid Earnings, Europe Point to Higher Open

 | Oct 21, 2011 | 8:38 AM EDT  | Comments
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In the Headlines

It may not happen Sunday, but eurozone officials said late Thursday that a plan to address the region's debt crisis will be devised soon. On that news, European stocks rallied modestly Friday, as did Wall Street futures.

NYSE and Nasdaq stocks indicated a higher open Friday, after Thursday's mixed action. Yesterday saw NYSE indices finish higher, but the Nasdaq Composite posted a loss in heavier volume. However, all the indices reversed off earlier lows, a potentially good signal, even amid the seesaw action.

As the third Friday of the month, today is options expiration day. Volume is typically heavier in such sessions.

In European trade, banks were trading sharply higher on renewed optimism that a debt deal will be reached sometime soon.

Asian indices finished mixed, as traders remained wary about the conflicting headlines from Europe going into the weekend. Shanghai stocks extended their downward streak, shedding 0.60% on the session.

There are no significant U.S. economic reports due today.

Commodities Corner

Looking at commodities, West Texas Intermediate crude rose $0.54 to $86.61 per barrel in early electronic trade. Despite the death of Libyan President Moammar Gadhafi, energy-industry analysts say it will take some time for the nation's oil infrastructure to ramp back up to full production. In addition to damage that must be repaired, political uncertainties remain.

Gold was up $17.90 in early Nymex trade, to $1,630.80 per ounce. It's fallen in the past four sessions.

Earnings

Early Friday, DJIA component General Electric (GE) met third-quarter profit views, earning $0.31 per share. Revenue was $35.4 billion, ahead of expectations for $34.9 billion. GE Capital, jet engines and health care were among the best performing business units. GE shares fell $0.21 in premarket trade to $16.42.

Fellow blue chip Verizon (VZ) earned $0.56 a share in the third quarter, a penny ahead of views. Revenue was $27.91 billion, just barely edging out expectations of $27.88 billion. So far, October marks the telecom's third straight month of upside trade, but the stock has notched a gain of just 3.69% year-to-date. Verizon shares dropped were flat at $37.10 before the open.

There's more news from DJIA components as McDonald's (MCD) reported a profit of $1.45 per share, ahead of views. Revenue was also better than expected, coming in at $7.17 billion. The company has built revenue momentum in the past three quarters. The stock has pulled back only slightly from an all-time high of $91.22 in August. It formed a choppy consolidation in the past couple of months, and ended Thursday above its 10-week average. The shares jumped $2.49, or 2.8%, to $91.50 ahead of the bell.

Market Movers

Early price movers Friday included Chipotle Mexican Grill (CMG), gaining $11.09, or 3.6%, to $319. After Thursday's close, the burrito maker reported better-than-expected third-quarter results on solid restaurant traffic.

On the downside, oil-services company Schlumberger (SLB) slipped $1.19, 1.8%, to $66.80 in the premarket. The company missed third-quarter earnings views, saying "financial turmoil" hurt demand. However, it cited North America as a strong region.

Analyst Actions

In analyst moves early Friday, miner Eldorado Gold (EGO) was upgraded to "Buy" from "Speculative Buy" at Canaccord. The analyst cited relative valuation, optimism about production and the company's dividend policy. Eldorado shares have been trading just below their 40-week average as they consolidate on a pullback from September's all-time high of $22.12. The shares added $0.33, or 2%, to 16.79 in early trade.

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