The Day Ahead: Midweek Misery

 | Dec 14, 2011 | 8:20 AM EST
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In the Headlines

Wall Street futures indicated a lower open Wednesday, weakening from earlier levels. The early downside trade followed yesterday's Federal Reserve statement about "significant downside risk to the economic outlook." The lack of comment about further asset purchases disappointed many traders around the globe.

Intraday charts of the major indices on Tuesday shows an across-the-board selloff that began with the Fed's statement around 2:15 p.m. EST. The Nasdaq was hit especially hard, dropping 1.3% for the day.

The Fed mentioned the European crisis in its statement. The euro was slumping vs. the dollar early Wednesday, dropping to its lowest level in nearly a year.

European indices were trading lower before Wall Street's open, with traders going into selling mode after the Fed's comments yesterday. Among this morning's developments, yields rose to euro-era highs in an auction of Italian five-year bonds.

Commodities-related stocks fell in European trade as the dollar strengthened.

The Fed statement in the U.S. also sent Asian stocks lower, with major indices ending with losses Wednesday. It marked Shanghai's fifth day in a row of downside trade.

Economic Docket

In U.S. econ news, the Mortgage Bankers Association said loan applications rose 4.1% last week. The jump was entirely due to demand for refinancings.

Meanwhile, the National Association of Realtors revised downward its existing home sales figures for the period between 2007 and the first 11 months of this year. It said some sales may have been counted twice.

At 8:30 a.m. EST, the Labor Department releases data on import/export prices for November. Economists expect import prices to show an increase of 1.1%, following October's decline of 0.6%.

The weekly Energy Department report on crude-oil reserves is due at 10:30. Analysts expect a decline of 2.5 million barrels. Crude oil was down $1.57 per barrel in electronic trade, to $98.57. The OPEC nations reportedly have agreed to a production cap of 30 million barrels per day.

From the fixed-income side of the market, the Treasury Department is auctioning $13 billion in 30-year bonds today, following good demand in note sales earlier this week.

Gold, which has shown big declines in the past two sessions, skidded $35.90 in early Comex trade, to $1,627.20 per ounce.


In earnings news, mining equipment maker Joy Global (JOY) said fourth-quarter earnings were $1.83 a share, vs. views of $1.86. Revenue also came in below views, at $1.2 billion. Analysts had expected $1.35 billion.

Joy Global shares fell $1.55, 1.83%, to $83 ahead of the bell.

After today's close, point-of-sale software maker VeriFone (PAY) reports its fourth quarter. Wall Street expects earnings of $0.51 a share on revenue of $408.13 million. Those would mark year-over-year increases. VeriFone shares have been consolidating since pulling back from March's all-time high of $58.88.

Market Movers

Solar-gear maker First Solar (FSLR) lowered its 2011 revenue and earnings outlook, saying delays in construction projects were to blame. The stock has plummeted in recent months. Before Wednesday's open, it showed a year-to-date loss of 67%.

Premarket sentiment toward First Solar was anything but sunny, with shares falling $3.24, 7.61%, to $39.33.

An early gainer was S&P 500 component Avon Products (AVP), which leapt $1.10, 6.82%, to $17.24.

In an unusual move, the company said it was seeking a new CEO, although current chief executive Andrea Jung remains on the job. Going into Wednesday's session, shares have traded lower for seven months in a row.

BMO Capital upgraded the stock to Outperform from Market Perform on the news.

DJIA component Chevron (CVX) climbed $1.37, 1.32%, to $104.99 in early trade. News broke late Tuesday that the government of Kazakhstan would acquire a 10% stake in a consortium developing an oil-and-gas field in that nation. Chevron is among existing shareholders in the consortium.

Analyst Actions

In addition to the BMO upgrade of Avon, analyst moves included initiations of recent IPO Groupon (GRPN).

Janney Capital, Credit Suisse and Citigroup began covering the stock with a rating of Neutral. Wells Fargo awarded the online deal broker a rating of Outperform, while Deutsche Bank began its coverage with a Hold.

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