The Day Ahead: Poised for a Lower Open

 | Nov 17, 2011 | 8:21 AM EST
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In the Headlines

Stock futures reversed off earlier highs in Thursday premarket trade, with NYSE and Nasdaq stocks poised for a lower open.

The move follows following yesterday's late-session drop on Fitch's warning that eurozone contagion could spread to U.S. banks if not addressed soon. Not only did indices tumble sharply, but selling volume accelerated into the close.

European stocks weakened after a somewhat better open this morning. The major indices were all trading to the downside before Wall Street trading got under way.

Bond yields have been edging higher for several eurozone countries, meaning greater nervousness about lending money to European nations. An auction of Spanish 10-year debt resulted in a yield of nearly 7%. Yields also rose on a French debt auction.

Asian indices closed mixed on Thursday, with financial stocks suffering on, no surprise, European concerns.

Economic Docket

This morning brings the weekly jobless claims report from the Labor Department, due at 8:30 a.m. EST. Analysts expect the number to come in at 395,000, up slightly from last week's 390,000.

The Commerce Department is also getting in on the action at 8:30 a.m., releasing its data on October housing starts. These are expected to decline to 610,000 units from last month's 658,000.

The Philly Fed is set to release its November business outlook index at 10:00 a.m. This is forecast to come in at 9.3, up from the October reading of 8.7.

Commodities Corner

West Texas Intermediate crude crossed the $100 threshold yesterday and remained above that mark. However, it slipped $2.39 in early Nymex trade, to $100.20.

Gold tumbled $32.30 early Thursday, to $1,742 per ounce, in response to reduced inflation concerns in the U.S. and a stronger dollar.

Earnings News

S&P 500 component Sears Holdings (SHLD) reported a third-quarter loss of $2.57 per share, worse than the expected loss of $2.29 per share. Revenue came in slightly below views, at $9.57 billion vs. expectations of $9.6 billion. The company has been a dismal fundamental performer in recent quarters, and Wall Street expects losses in 2012 and 2013. This time around, it blamed Canadian weakness, and poor sales of clothing and electronics gear.

Fellow benchmark index component J.M. Smucker (SJM) is expected to report second-quarter income of $1.40 a share on sales of $1.49 billion. The maker of Jif peanut butter, Folgers coffee and its famous brand of fruit spreads, raised prices to offset higher commodity costs. That's a move that other food processors have also made recently.

Video-game retailer GameStop (GME) is scheduled to report its third-quarter today, with analysts eyeing the impact of new hardware and software sales. The company is expected to report income of $0.39 a share on sales of $1.96 billion. (CRM), a growth juggernaut in 2009 and 2010, is set to release its third-quarter results after the bell. It's expected to report earnings of $0.31 a share and revenue of $571.42 million. Its share price has been consolidating since July.

Also due out after the close is a third-quarter report from Gap (GPS), seen earning $0.36 a share on revenue of $3.61 billion. Those would be year-over-year decreases on the top and bottom lines.

Early Movers

Micron Technology (MU) advanced $0.07, 1.04%, to $6.81 in the premarket. The chipmaker was upgraded to Buy from Hold at MKM Partners. The stock bolted 23.4% yesterday after a jury in California rejected claims that Micron and Hynix had conspired against chip designer Rambus (RMBS).

Google (GOOG) fell $3.57, 0.58%, to $607.90 ahead of the open. The company is launching a music service to compete with Apple's (AAPL) iTunes.

Analyst Actions

In addition to the MKM upgrade of Micron, analyst actions early Thursday included a Piper Jaffray downgrade of natural grocer The Fresh Market (TFM). The analyst demoted the stock to Neutral from Overweight, citing valuation.

Two fairly high-profile IPOs were priced last night. Delphi Automotive priced 24 million shares at $22, the low end of its proposed range. The company was formerly the parts subsidiary of General Motors (GM). It begins trading today on the NYSE under the symbol DLPH.

Angie's List, a subscription-based service for local product and service reviews, sold nearly 8.8 million shares at $13 apiece, the high end of its range. The company, which has increased its TV advertising presence lately, lists on the Nasdaq using the ticker ANGI.

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