The Day Ahead: Futures Get a Beijing Boost

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

News that Beijing had cut the reserve requirements for banks helped to boost U.S. stock futures Wednesday. NYSE and Nasdaq stocks were poised for a higher open, reversing off earlier losses. Futures also got a big lift from news that the Federal Reserve, along with other central banks in North America, Asia and Europe, announced a joint action to increase liquidity. China's easing measure was also warmly welcomed in Europe, where stocks rallied on the news. It was the first such measure from China in three years.

Previously in the session, Europe's bourses were trading lower following Standard & Poor's downgrade of 15 global banks late yesterday. Standard & Poor's said it made the move based on changes in how it's viewing the entire global banking industry.

Meanwhile, finance ministers in the eurozone have agreed to increase the region's bailout fund, and may seek assistance from the International Monetary Fund. More details will be released before Dec. 9.

The euro edged higher against the dollar early this morning.

In Asia, indices finished Wednesday mixed, prior to the China rate-cut news. Tokyo, Shanghai and Hong showed losses, with traders apprehensive about the outcome of the European meeting of finance officials. Standard & Poor's move also affected trade.

Economic Docket

As the month comes to a close, there is plenty of economic news today. ADP's employment report is due at 8:15 a.m. EST. Analysts expect a gain of 130,000 private sector jobs this month, vs. 110,000 in October.

At 8:30 a.m. EST, the Labor Department is set to release its revised third-quarter productivity report, which is expected to rise by 3%, vs. the earlier estimate of 3.1%.

At 10 a.m., the Chicago Purchasing Managers Index is scheduled to release its November numbers. The report, from Kingsbury International, is expected to come in with a reading of 59, up from October's level of 58.4. These numbers are often eyed as a precursor to national manufacturing data that are released on the first day of the month.

Also at 10 a.m., the National Association of Realtors is scheduled to release pending home sales numbers for October. Economists are expecting an increase of 2%, following September's decline of 4.6%.

At 2 p.m. is the Federal Reserve's Beige Book, anecdotal reports on economic activity from the Fed's 12 regions. This report, which comes out late in the session, has sometimes affected trade, especially when the news is disappointing.

Commodities Corner

Gold, which has notched gains in the past couple of sessions, fell by $1.70, to $1,711.70 per ounce.

Crude oil dropped $0.09, hovering just below $100 per barrel at $99.70.

Earnings News

On the earnings front, American Eagle Outfitters (AEO) is expected to report third-quarter earnings of $0.27 a share before the open. Revenue is expected to come in at $791.43 million. Year-over-year earnings growth slowed in the past two quarters.

United Natural Foods (UNFI), which was upgraded by Jefferies yesterday, also reports early today. The distributor of natural and organic foods is expected to earn $0.40 a share on revenue of $1.19 billion in the first quarter. Shares of the one-time growth leader have traded lower for the past six months.

After the bell, clothing retailer Aeropostale (ARO) is scheduled to report its third-quarter results, with analysts pegging earnings per share (EPS) at $0.27 on sales of $581.5 million. The company has beaten earnings views in the past two quarters.

Despite moving more than 3 million shares per day, the stock tends to trade in a somewhat erratic fashion, as evidenced by its high beta of 1.37.

Early Movers

Premarket movers included S&P 500 component Cummins (CMI), maker of engines and power-generation equipment. The stock jumped $2.53, 2.86%, to $91 before the bell. The stock has been consolidating price gains since May, and has traded below its 10-week average recently.

On the downside, Newmont Mining (NEM) fell $0.29, 0.44%, to $65 in early trade. The company said it had suspended construction at a $4.8 billion gold mining project in Peru, a move that appeased government concerns about environmental impact and local protests.

Analyst Actions

Netflix (NFLX), which had been enjoying a rebound this week as the broader market rallied, fell in premarket trading following a Wedbush downgrade. The already battered stock slumped $0.67, or 0.99%, to $66.90 on the demotion to Underperform from Neutral.

Accretive Health (AH), which provides a range of back-office and processing services to health insurers, was upgraded to Outperform from Perform at Oppenheimer. The analyst cited a low risk of missing 2012 earnings views, as well as a recent pullback in share price.

Consensus estimates call for Accretive to earn $0.43 a share this year, a gain of 79% over 2010. The company plans to report its fourth-quarter results in February. In 2012, the year Oppenheimer cited, Accretive is expected to earn $0.70 per share.

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