The Day Ahead: Starting Off on an Up Note

 | Dec 19, 2011 | 8:30 AM EST  | Comments
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In the Headlines

U.S. stock futures pointed higher Monday, on the heels of a solid European trade. The upside action came despite sharp declines throughout Asia, following news that North Korean leader Kim Jong-il had died on Saturday.

European markets strengthened after a shaky open, with most major indices showing gains. London's FTSE 100 rallied from earlier losses, with Frankfurt's DAX and the Paris bourse also trading to the upside.

Fitch maintained its AAA rating on France, but revised its outlook to negative.

Eurozone finance ministers are holding a conference call today to continue working out details of a debt rescue plan for the region. News from that call later today has potential to affect U.S. stocks.

Meanwhile, European Central Bank (ECB) President Mario Draghi warned about dire consequences of a eurozone breakup.

The euro was showing weakness vs. the dollar early Monday. 

In Asia, the news from North Korea had traders hitting the "sell" button as they worried about signs of instability in a regime change. Little is known about the new president, Kim Jong-un, son of Kim Jong-il. Most major indices in the region finished Monday with steep losses, although Shanghai was down just 0.30%.

Economic Docket

Stateside, today's most prominent economic report comes from the National Association of Home Builders, which releases its December builder sentiment index at 10 a.m. It's the first of three major housing reports due out this week. No one is expecting builders to have much holiday cheer, with the index seen slipping to 19 from last month's reading of 20.

Commodities Corner

Crude oil was up $0.41 to $93.94 per barrel.

The Lundberg Survey, which tracks U.S. gasoline prices, found that the average price per gallon has dropped by a nickel in the past two weeks, to $3.24.

Gold, which dropped sharply last week, fell another $3.20 in early Comex trade, to $1,594.70.  

Company News

In company news, a not-yet-public company received the princely sum of $300 million in new investment. Saudi Arabia's Prince Alwaleed bin Talal, already a noted shareholder in numerous global businesses, announced his Twitter stake this morning. Social media companies are closely watched, following last week's Zynga (ZNGA) IPO, this year's debuts of Groupon (GRPN) and LinkedIn (LNKD), and the anticipated IPOs from – eventually – Twitter and Facebook.

Today's earnings calendar is light, with the most high profile report due after the close. Open-source software maker Red Hat (RHT) is expected to report third-quarter earnings of $0.26 per share on revenue of $289.62 million. Revenue growth has been gradually trending higher over the past two years.

An early gainer Monday was oilfield services company Schlumberger (SLB), bouncing back after shedding 9.8% last week. The downside trade followed an EPA report on possible negative impacts of the hydraulic fracturing process, used in drilling. Schlumberger was up $2.89, 4.32%, to $69.80 in the premarket.

DJIA component Procter & Gamble (PG) advanced $0.15, 0.23%, to $65.29 in early trade. The company said it's put in place a hiring freeze for the remainder of its fiscal year, which ends in July, adding that it has already met its hiring goals for the year.

Fellow blue chip Pfizer (PFE) slipped $0.02, 0.10%, to $21.01 ahead of the bell. The shares have been balking as they attempt to regain their 52-week high of $21.45, which they reached in May.

Analyst Actions

Analyst actions Monday included dueling ratings on Groupon. Stifel Nicolaus initiated coverage with a designation of Hold, while Barrington started the stock with a rating of Outperform. Groupon closed at $21.03 Friday, up 5% from its IPO price, but down 56% from its opening-day high of $31.14.

Coverage also got under way on another recent IPO, computer software firm Imperva (IMPV). Deutsche Bank and Lazard Capital initiated coverage with ratings of Buy. RBC Capital gave the stock an Outperform rating, while JPMorgan awarded it an Overweight. Imperva went public at $18 last month. Shares closed Friday at $25.74.

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