The Day Ahead: Economic Pessimism Abounds

 | Nov 16, 2011 | 8:30 AM EST  | Comments
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In the Headlines

With another round of negative news from Europe, U.S. stock futures indicated a weak open Wednesday. According to unconfirmed reports -- also known as rumors -- Italy's UniCredit bank has requested emergency funding from the European Central Bank.

Meanwhile, the president of the European Commission -- the legislative and executive branch of the European Union – said the eurozone faces a systemic crisis.

Also dampening spirits was the Bank of England, which said the U.K.'s economic outlook has weakened.

England was not the only country offering a pessimistic economic view. The Bank of Japan slashed its outlook, saying global demand was weakening – similar to the statement issued by the U.K.

Asian indices ended Wednesday's session sharply lower, with analysts attributing the selling to continued European worries.

Economic Docket

Today's U.S. economic reports include the Labor Department's Consumer Price Index for October, due at 8:30 a.m. EST. Analysts expect the headline number to be flat, with the core coming in with a gain of 0.1%.

At 9:15 a.m., the Federal Reserve steps up with its data on industrial production and capacity utilization for October. Production is seen rising 0.4%, and utilization increasing to 77.7%. Those would be gains over September's numbers.

At 10:00 a.m., the National Association of Home Builders is scheduled to release its November housing market index. This is a sentiment survey, and as usual, these numbers are expected to be grim. Analysts expect the index to show a reading of 18, unchanged from October.

Commodities Corner

At 10:30 a.m., the Energy Department is set to release its weekly crude-oil stockpile data. Last week saw a drawdown of 1.37 million barrels.

Before Wall Street's open, West Texas Intermediate crude was down a penny, to $99.36 per barrel.

Gold, which edged lower in Tuesday's session, fell $2.90 per barrel in early Comex trade, to 1779.30 per ounce.

Earnings News

Today's earnings news includes a third-quarter report from Target (TGT). The retailer trounced earnings views, reporting per-share income of $0.87, vs. expectations of $0.74. Revenue also beat, coming in at $16.4 billion. Expectations were for $16.28 billion.

Unlike Wal-Mart (WMT), which reported yesterday, Target said margins were increasing. Target shares rose $1.32, or 2.48%, to $54.50.

Abercrombie & Fitch (ANF) reported a bad earnings miss. Income was $0.57 a share, well below views of $0.71. Revenue in the third quarter was $1.08 billion, slightly higher than expectations of $1.07 billion. Abercrombie shares dropped $4.20, or 7.54%, to $51.50 in early trade.

Fellow clothing retailer Limited Brands (LTD) is due out with its third-quarter report after the bell. It's seen earning $0.24 a share with revenue of $2.16 billion. Those would mark year-over-year increases. Shares are trading just below last month's all-time high of $45.45.

Network storage specialist NetApp (NTAP) also reports later today. Analysts expect per-share income of $0.59 a share on revenue of $1.53 billion. The pace of earnings growth has slowed over the past four quarters. The stock's price is down 23.76%, year-to-date.

An early decliner was Dell (DELL), which missed revenue views when it reported yesterday and warned on its full-year outlook. The company cited the weak economy and parts shortages due to Thailand flooding. FBN Securities downgraded the stock to Sector Perform from Outperform. The shares fell $0.33, 2.11%, to $15.30 ahead of the open.

Citigroup (C) was down $0.22, 0.79%, to $27.80 in the premarket. The bank said it would slash 900 jobs from its securities and banking unit, with as many as 3,000 eventual cuts.

In addition to the FBN downgrade of Dell, analyst moves early Wednesday included a Goldman Sachs upgrade of Research In Motion (RIMM) to Neutral from Sell. Goldman cited valuation in the move. It lowered its price target to $18 from $22. RIM shares climbed $0.57, 2.98%, to $19.70 ahead of the open.

IPO Action

Two IPOs priced Thursday. Clovis Oncology, which makes pancreas and lung-cancer drugs, sold 10 million shares at $13 apiece. It begins trading today under the symbol CLVS.

Also making its debut today is InvenSense, which makes semiconductor technology for Nintendo's Wii and other consumer gear. The company sold 10 million shares at $7.50. It will trade using the ticker INVN.

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