Mixed Cues May lead to Indecision on Wall Street - RTTNews Daily Market Analysis

Thursday, June 19, 2008; Posted: 09:27 AM

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(RTTNews) - The major U.S. index futures are pointing to a mixed opening on Thursday. The negative news flow from companies such as Circuit City and Coventry Healthcare (CVH | Quote | Chart | News | PowerRating) could keep sentiment subdued in the session. Nevertheless, there are other positives, including a decline in the jobless claims for the recent week and a retreat in oil prices. The markets, which are confronted by mixed cues, may look forward to the release of the Philadelphia Federal Reserve's manufacturing index and the Conference Board's leading indicator index for trading direction, as they linger at multi-month lows.

U.S. stocks opened Wednesday's session lower, dragged down by credit worries that intensified following a confession of troubles and capital inadequacy by Fifth Third Bancorp. (FITB | Quote | Chart | News | PowerRating) and a bleak outlook painted by logistics company FedEX (FDX | Quote | Chart | News | PowerRating). The three major averages remained below the unchanged line throughout the session to close with notable losses.

The Dow Industrials ended the day down 131.24 points or 1.08% at 12,029 and the S&P 500 Index receded 13.12 points or 0.97% to 1,338, while the Nasdaq Composite receded 28.02 points or 1.14% to 2,430.

Retail, biotechnology and technology stocks also came under selling pressure. While the Amex Oil Index fell 1.12%, the Philadelphia Oil Service Sector Index gained 0.90%. Gold stocks also advanced, as reflected by the 0.90% gain by the Amex Gold Bugs Index.

Currency, Commodity Markets

Crude oil futures are currently easing $0.96 to $135.72 a barrel. The commodity spiked higher on Wednesday, when it rose $2.67 to $136.68 a barrel following the release of the EIA's oil inventory report for the week ended June 13th that showed crude oil stockpiles that declined for the fifth straight week, dropping by 1.2 million barrels.

Gasoline inventories fell by 1.2 million barrels, but distillate fuel stockpiles increased by 2.6 million barrels. Refinery capacity utilization averaged 88.9% over the four weeks ended June 13th compared to 88.5% in the previous week.

Meanwhile, gold futures are reversing some of their previous session's upward move, receding $3.20 to $890.30 an ounce after the commodity added $6.60 to $893.50 an ounce on Wednesday.

Among currencies, the U.S. dollar is easing down to 107.97 yen after it ended almost flat in the previous session at 107.88 yen. The greenback is currently fetching $1.5477 against a euro

Asia

The major Asian markets ended Thursday's session lower, dragged down by the weak performance of Wall Street stocks overnight. The Chinese market was the worst decliner in the region, with its key Shanghai Composite Index dropping 6.54%.

Japanese stocks slid more than 2%, as financial shares weakened on renewed credit market concerns. The benchmark Nikkei 225 Index shed 322.65 points or 2.23% to settle at 14,130.17.

Among economic news, the all-industry activity index came in at 107.0, higher than the 0.3 percent revised monthly increase in March, when the index stood at 106.2. It was also above analyst expectations that called for a 0.4 percent monthly increase.

The South Korean market closed almost 2% lower, as investors sold tech and financial shares. The benchmark KOSPI Index lost 33.41 points or 1.88% to close at 1740.72.

In the banking space, Kookmin Bank declined 2.68%, Shinhan Financial Group dropped 2.7% and Woori Finance lost 2.18%. Index heavyweight Samsung Electronics slumped 4.12%, Samsung Electronics slumped 4.12%, Hynix Semiconductor slid 2.11% and LG. Philips LCD dipped 2.68%.

Oil stock SK declined 0.71%, S-Oil lost 1.94% and energy stock KEPCO eased 0.96%. Automaker Hyundai Motor lost 2.22% and Steel maker POSCO declined 1.08%. In the telecom space, SK Telecom declined 1.06% and KT lost 0.77%.

The Australian market closed lower, with the All Ordinaries dropping 66.00 points or 1.19% to end at 5,484.30.

Among banks, ANZ shed 4.25% to touch its lowest level since September 2004, Commonwealth Bank declined 1.82%, National Australia Bank dipped 3.91% and Westpac slid 4.18%. St. George Bank slumped 4.63%. Investment bank Macquarie declined 2.15% and Babcock & Brown lost 2.62%

Despite higher commodity prices overnight, mining stocks declined. BHP Billiton eased 0.73%. Gold miners closed mixed. Lihir Gold rose 2.32%, and Newcrest Mining lost 1.55%. Oil Search gained 1.95%, Santos rose 2.55% and Woodside advanced 2.75%. However, transport-related stocks, including airlines, declined on higher oil prices. Toll Holdings slipped 5.52% on higher oil prices. Qantas Airways fell 3.11%.

Europe

The major European markets are showing modest gains on Thursday. While the German DAX Index and U.K.'s FTSE 100 Index are rising 0.05% and 0.29%, respectively, the French CAC 40 Index is receding marginally. In the European market, oil stocks are showing buoyancy, helping to offset the weakness in the technology and banking spaces.

Among the major reports from the region, the U.K. Office of National Statistics reported that retail sales grew 3.5% month-on-month in May, while economists were looking for a 0.1% decline. April's decline was revised down to 0.3% from a 0.2% fall reported earlier. On a yearly basis, retail sales jumped 8.1%, much higher than the 4.1% increase expected by economists. The annual growth of April was revised down to 3.8% from 4.2%.

U.S. Economic Reports

On the economic front, the Labor Department reported that the number of individuals claiming for unemployment benefits declined 5,000 in the week ended June 14th to 381,000 from the previous week's revised figure of 386,000. Economists had expected claims to decline to 375,000 from the 384,000 originally reported for the previous week.

Meanwhile, the less volatile four-week moving average increased 3,250 to 375,250 from the previous week's revised average of 372,00. Continuing claims in the week ended June 7th came in at 3.060 million from the preceding week's revised level of 3.136 million.

The Conference Board is scheduled to release its report on the U.S. leading index for May at 10 AM ET on Thursday. The consensus estimate calls for a flat reading for the month.

The leading indicators index for April showed a 0.1% increase, marking its second consecutive month of growth. The coincident index remained flat, while the lagging index rose 0.1% in the month. Stock prices, interest rate spread, building permits, inverted weekly initial claims for unemployment insurance, the index of supplier deliveries and manufacturer's new orders for consumer goods and materials were positive contributors to the leading index.

The results of the Philadelphia Federal Reserve's manufacturing survey are also due out at 10 AM ET on Thursday. Economists expect the diffusion index of current activity to show a reading of -10 for June, an improvement over the previous month's -15.6.

The Philadelphia Fed's May survey showed an improvement to -15.6 in May compared to -24.9 in April. While it still represented a contraction in the manufacturing sector, it was not as bad as the reading of -20 expected by economists.

Federal Reserve Vice Chairman Donald Kohn is due to testify about Risk Management before a subcommittee of the Senate Banking Committee at 2:30 PM ET.

Stocks in Focus

Coventry Healthcare (CVH | Quote | Chart | News | PowerRating) could come under selling pressure after it lowered its full year earnings estimate to $3.65-$3.75 per share from its earlier estimate of $4.39-$4.50 per share. The company also reduced its revenue estimate to $10.48-$10.7 billion from the $11.99-$12.49 billion it predicted earlier. Analysts expect earnings of $4.43 per share on revenues of $12.31 billion. The company attributed the toned down expectations to higher-than-expected costs in April and May.

Huntsman (HUN | Quote | Chart | News | PowerRating) may be in focus after it said it would vigorously enforce all of its rights under the merger agreement that it has signed with Hexion Specialty Chemicals. Hexion, which is controlled by private equity group Apollo Management, had sued Huntsman on the grounds that their proposed combination valued at $10.6 billion would render the combined company insolvent, as the performance of Huntsman has weakened significantly.

Washington Mutual (WM | Quote | Chart | News | PowerRating) is likely to react to its announcement that it is setting aside another $1 billion to help its homeowners with subprime mortgage loans to stabilize their finances and avoid foreclosure.

Ford (F | Quote | Chart | News | PowerRating) could see some buying interest after Kirk Kerkorian's Tracinda revealed in a filing that it has increased its stake in the automaker to 6.49% from 5.5%. Pier Imports (PIR | Quote | Chart | News | PowerRating) is likely to be in focus after it reported a first quarter loss of 37 cents per share compared to a loss of 64 cents per share last year. However, the loss was wider than the consensus estimate that called for a loss of 15 cents per share. Revenues were down 13% to $310 million, missing the mean analysts' estimate of $338.2 million.

Circuit City (CC | Quote | Chart | News | PowerRating) reported a first quarter loss of $1 per share compared to a loss of 33 cents per share reported last year, as net sales fell to $2.3 billion from $2.4 billion. The company expects flat sales in fiscal year 2009 and also announced that it is suspending future dividend payments.

Actuant (ATU | Quote | Chart | News | PowerRating) may move in reaction to its third quarter results that showed sales growth of 15% to $445 million and earnings per share of 60 cents per share, including a gain of 4 cents per share. The company projected second quarter earnings of 51-55 cents per share, while it updated its 2008 earnings estimate to $2.02-$2.06 per share. Analysts estimate earnings of 55 cents per share for the quarter and $2.05 per share for the year.

Among other companies that reported earnings today, Progress Software (PRGS | Quote | Chart | News | PowerRating) reported that its second quarter revenues rose 7% to $128 million and non-GAAP earnings climbed 15% to 47 cents per share. The results were ahead of the mean analysts' estimates. For the fiscal year, the company expects non-GAAP earnings of $1.91-$1.95 per share on revenues of $518-$526 million.

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