The Day Ahead: EU Action Buoys Markets

 | Dec 09, 2011 | 8:22 AM EST  | Comments
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In the Headlines

With 23 of 27 European Union countries signing on for more stringent fiscal rules, Wall Street futures turned higher Friday. This morning's optimism follows yesterday's big selloff on major indices, also driven by European news.

This morning's agreement, which includes all 17 countries that use the euro currency, was greeted favorably by traders despite strong remarks from the U.K. prime minister. David Cameron said Britain would never join the euro.

London's FTSE 100 index showed moderate gains ahead of the U.S. opening bell, but other European indices were up sharply.

Earlier, Asian stocks dropped in Friday's session, as traders were pessimistic about the possibility of a European accord. Thursday's steep losses in the U.S. also contributed to the downside in Asian indices.

Economic Docket

Yesterday's better-than-expected jobless claims in the U.S. failed to draw attention away from Europe. Today, the Commerce Department releases its data on October's trade balance. This report does not generally have much effect on stocks. Economists expect the trade gap to increase to $44 billion from $43.11 billion in September.

The report is due out at 8:30 a.m. EST.

At 9:55 a.m., the University of Michigan releases a report that tends to generate some attention: Consumer sentiment for December is expected to climb to 66 from the last reading of 64.2.

There are no significant corporate earnings reports on today's calendar.

Commodity Corner

Gold, which slumped Thursday along with equities, climbed early Friday, to $1,735.40 per ounce, a gain of $12.

Crude oil remained below the $100 level ahead of Wall Street's open but was up $0.60 to $98.94 per barrel.

S&P Shuffle

After today's close, changes in the S&P 500 go into effect. Joining the benchmark index is AGL Resources (AGL), which is acquiring current component Nicor (GAS).

Other new members are Borg Warner (BWA), replacing AK Steel (AKS), which moves to the S&P SmallCap 600. Pharmaceutical maker Perrigo (PRGO) and Dollar Tree (DLTR) also join the benchmark index, while Monster Worldwide (MWW) and MEMC Electronic Materials (WFR) go to the S&P MidCap 400.

The moves could drive some action in those names in coming sessions as index funds make trades to accommodate the changes.

Market Movers

Late Thursday, Texas Instruments (TXN) slashed its fourth-quarter outlook, citing weak demand almost across the board. Chips for smartphones and tablets were the only bright spots.

TXN shares skidded $1.91, 6.38%, to $28.01 in early trade.

Fellow semiconductor name Altera (ALTR) also cut its outlook. Shares fell $1.47, 4.14%, to $34.01 in the premarket.

Another early decliner was Hewlett-Packard (HPQ), dropping $0.11, 0.4%, to $27.55. Today, the DJIA component is expected to announce a decision on the future of its webOS mobile platform, acquired from Palm last year.

Toyota (TM) shed $0.35, 0.52%, to $66.78, after narrowing its yearly profit outlook by more than half. The company's production has been hurt this year by natural disasters in Japan and Thailand.

A premarket gainer was Alpha Natural Resources (ANR), rebounding after Thursday's 8.4% drop. Yesterday's selloff was not just due to general market action; the company agreed to pay $209 million to settle lawsuits related to last year's deadly mine explosion in West Virginia.

Shares were up $0.73, 3.23%, to $23.33 ahead of the bell.

Analyst Actions

Costco (COST) was downgraded to Negative from Neutral at Susquehanna. The analyst cited margin declines and a slowdown in membership numbers, among other factors.

Restaurant operator Yum! Brands (YUM) was promoted to Outperform from Market Perform at Bernstein. The analyst cited strong business in China and a turnaround at the company's Taco Bell chain in the U.S.

Yum! shares rose $0.79, 1.37%, to $58.28 in early trade.

IPO Corner

In the IPO world, most of the anticipation centers around next week's expected offer from online game company Zynga. However, a small deal was priced last night.

Rose Rock Midstream, a limited partnership that owns crude oil assets in Western states, priced 7 million shares at $20 apiece, the midpoint of its proposed range. The company begins NYSE trade today under the symbol RRMS.

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