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Although U.S. stocks opened lower on Wednesday, dragged down by a few weak economic readings, they advanced in early trading, moving into positive territory after an hour of trading. The major averages continued to climb higher before closing on an extremely positive note. The Dow Industrials gained 247.14 points or 2.91% to 8,727 and the S&P 500 Index ended up 30.29 points or 3.53% at 888, while the Nasdaq Composite Index rallied 67.37 points or 4.60% to 1,532. The buoyancy was due to reassuring comments from president-elect Barack Obama that fixing the financial crisis was his top priority once he is in office.
Twenty-eight of the thirty Dow components ended the session higher, with Johnson & Johnson (JNJ | Quote | Chart | News | PowerRating) and Procter Gamble (PG | Quote | Chart | News | PowerRating) among the only decliners in the session. General Motors (GM | Quote | Chart | News | PowerRating) jumped 35.11% and Citigroup (C) rallied 15.95%, while Alcoa (AA | Quote | Chart | News | PowerRating) (up 8.04%), Caterpillar (CAT | Quote | Chart | News | PowerRating) (up 5.53%), Home Depot (HD | Quote | Chart | News | PowerRating) (up 5.84%), Intel (INTC | Quote | Chart | News | PowerRating) (up 6.40%) and Verizon (VZ | Quote | Chart | News | PowerRating) (up 6.41%) were among the other major gainers.
Among the sub-indexes, the Amex Securities Broker/Dealer Index jumped 7.15% compared to a 3.92% gain by the KBW Bank Index. The Dow Jones Transportation Average and the Amex Biotechnology Index rose 3.16% and 3.53%, respectively. While the S&P Retail Index gained 5.86%, the Philadelphia Housing Sector Index surged up 10.96%.
The Amex Oil Index, the Philadelphia Oil Service Sector Index and the Amex Gold Bugs Index rose 4.84%, 8.77% and 6.02%, respectively. The Philadelphia Semiconductor Index was up 7.64%, the Amex Disk Drive Index gained 7.59% and the Amex Computer Hardware Index gained 4.64%, while the Amex Internet Index gained close to 5%.
On the economic front, the Bureau of Economic Analysis said personal spending declined 1% month-over-month in October even as personal income rose 0.3%. Real consumer spending was down 0.5%. Meanwhile the Commerce Department's durables goods orders report showed broad based weakness in October, with the downward revision to September data intensifying the weakness. Orders for big-ticket items fell 6.2% following a downwardly revised 0.2% drop in September. Excluding transportation orders, durable goods orders fell 4.4%, while non-defense capital goods orders, excluding aircrafts fell 4%.
The University of Michigan's consumer sentiment survey showed that the consumer sentiment index for November slid to 55.3 from the mid-month reading of 57.9 and also came in below the consensus estimate of 57.5. The Chicago NAPM's survey showed a further deterioration in manufacturing conditions in the region. The purchasing managers' index fell to 33.8 in November from 37.8 in October. On a positive note, the prices paid index also slid to 50.7 from 53.7 in the previous month.
The Commerce Department said new home sales declined 5.3% to a seasonally adjusted annual rate of 433,000 from the revised September rate of 457,000. On a year-over-year basis, new home sales slumped 40.1%. The median sale price of new homes was $218,000, down from $221,700 in September and lower than $234,300 in the year-ago period.
Currency, Commodity Markets
Crude oil futures are easing $0.73 to $53.71 after they advanced $3.94 to $54.71 a barrel on Wednesday. The bullishness in oil prices came despite the weekly oil inventory report for the week ended November 21st showing a 7.3 million barrel increase in crude oil stocks to 320.8 million barrels. Crude oil stockpiles were in the upper bound of the average range for this time of the year.
Gasoline inventories increased by 1.9 million barrels and were near the lower boundary of the average range. However, distillate inventories eased 0.2 million barrels and were near the lower boundary of the average range. Refinery capacity utilization averaged 85.2% over the four weeks ended November 21st compared to 85% in the previous week.
OPEC is scheduled to meet in Cairo on Saturday to discuss a possible output quota reduction in the wake of falling prices. At its meeting in October, OPEC decided to reduce production by 1.5 million barrels per day. It remains to be seen whether oil, which traded as high as $147.47 a barrel in late July, can salvage some price even amid the slowdown in demand precipitated by the financial crisis.
Gold futures are moving up $1.40 to $812.70 an ounce.
Among the currencies, the dollar is trading at 95.445 yen and the euro is currently fetching $1.2728 versus the euro.
Asia
Stock markets across the Asia-Pacific region closed mostly higher on Friday after the European markets finished in positive terrain overnight. Trading remained subdued as the U.S. markets were closed Thursday on account of the Thanksgiving Day holiday. The Indian market edged higher after a one-day suspension of trading due to terrorist attacks in Mumbai that left at least 119 people dead. Oil prices fell below $54 a barrel in Asia.
Japan's Nikkei 225 Index showed some indecision in early trading before decisively moving into positive territory after the first hour of trading. Thereafter, the index remained above the unchanged line till the end of the session, with the buying interest intensifying in late trading. The Nikkei ended up 138.88 points or 1.66% at 8,512.
On the economic front, data released by the government showed that the unemployment rate for October fell to 3.7% from 4.0% in September, but industrial production fell by a more-than-expected 3.1% from the previous month and household spending decreased 3.8% year-over-year compared to analysts' expectation for a 3.3% decline. Retail sales dropped 0.6% on month, while Japan's core CPI rose 1.9% from a year ago.
Shippers, trading houses and construction machinery companies extended their gains after China slashed interest rates by over 100 basis points on Wednesday to prop up growth, while negative sentiment generated by weak industrial output data and downwardly revised guidance from Panasonic put a cap on the gains.
Banking and shipping stocks advanced, while exporters were mixed, with Toyota Motor rising 1.7%, Komatsu jumping 6.9%, Canon losing 2.4%, and Sony declining 1.6%.
Trading houses rose on hopes that a bouyant Chinese economy would boost demand for commodities. Mitsui & Co jumped 8.3%, Itochu Corp gained 9.0%, and Marubeni Corp rose 7.7%. Oil and gas miner Inpex Holdings advanced 6.8%, Sumitomo Metal Mining soared 10.5%, and Nippon Mining Holdings rose 8.9%.
South Korea's Kospi remained above the unchanged line for much of the session before closing up 12.6 points or 1.2% at 1,076. Investor sentiment was buoyed by Finance Minister Kang Man-soo's forecast earlier in the day that South Korea will post a current account surplus next year, along with surpluses in November and December. However, the gains were capped after government data showed that South Korea's industrial production declined in October.
Banks and construction stocks led the market higher on expectations that the government-led economic stimulus measures and restructuring efforts will lead to recovery. However, shipbuilders lost ground, with shipyard Hyundai Heavy Industries plunging 4.1% and smaller Samsung Heavy Industries falling 2.0%.
Meanwhile, the Chinese stock market retreated on renewed concern that a slowing economy will hurt earnings. Stocks fell despite the government's announcement of the biggest interest-rate cut in 11 years on Wednesday to support the stimulus plan. The benchmark Shanghai Composite Index closed down 46.70 points or 2.44% at 1,871.
Hong Kong's Hang Seng Index hovered in positive territory throughout the session, ending the session up 336.18 points or 2.48% at 13,888. The stock market advanced as an aggressive rate reduction from the mainland and cheap valuations of local blue chips pushed the main index into its fourth straight day of gains.
Market heavyweight HSBC Holdings added 2.5% and another heavyweight China Mobile rose 2.3%. Offshore oil producer CNOOC surged up 5.8%, Sinopec advanced 3.2%, and PetroChina climbed 2.2%.
Australia's All Ordinaries opened higher and moved steadily higher over the course of trading. The index rose 144.6 points or 4.1% to 3673.
Big miners led the market higher. Global miner BHP Billiton surged up 7.6% and rival Rio Tinto soared 8.8%. Elsewhere in the resources sector, gold miners fell on weaker gold prices in Sydney. Newcrest Mining lost 4.3% and Lihir Gold declined 3.1%. In the energy sector, Woodside Petroleum jumped 6.0%, Santos rocketed 6.9%, and Oil Search climbed 1.0%. Banks posted sharp gains, while retail stocks also showed some strength.
Europe
The major European markets are showing weakness on Friday. The French CAC 40 Index is receding 1.51% compared to a 1.56% decline by the German DAX Index, while the U.K.'s FTSE 100 Index is moving down about 0.42%.
In corporate news, German steel maker Thyssenkrupp reported that profits for the full year fell to 3.13 billion euros from 3.33 billion euros last year. The company also said it expects a significant decline in sales for 2008-2009. Meanwhile, STMicroelectronics (STM | Quote | Chart | News | PowerRating) said its fourth quarter revenues will be $2.2-$2.35 billion, a 13%-18% decline from a year-ago. The company had earlier forecast flat sales to an 8% decline. The company attributed the reduction to a slowdown in orders.
On the economic front, a monthly survey carried out by GfK NOP showed that consumer confidence rose one point to minus 35 in November from minus 36 reported in October. Economists had expected the sentiment index to log a reading of minus 37.
A report released by the INSEE showed that French producer prices declined 0.9% month-over-month in October, extending the declines witnessed in the previous two months. The softer price trend was mainly due to a slump in energy prices along with the declines in prices of agri-food products and in intermediary goods. Excluding energy and agri food products, domestic producer prices fell 0.4%, marking the first decline since December 2007.
The euro area's annual inflation rate is likely to be 2.1% in November, according to a flash estimate released by Eurostat, the statistical arm of the European Commission. The rate was tamer than the 3.2% rate in October.
Stocks in Focus
AIG (AIG | Quote | Chart | News | PowerRating) is likely to be in focus after it announced that it has reached an agreement with Unibanco to repurchase their crossholdings in Unibanco AIG Seguros and AIG Brasil Companhia de Seguros. The agreement allows Unibanco to buy the shareholding of certain of AIG subsidiaries in UASEG, while an AIG subsidiary will buy Unibanco's shares in AIG Brasil.
Arcelor Mittal (MT | Quote | Chart | News | PowerRating) may see some weakness after it said it will cut 9,000 jobs through voluntary agreements, thereby reducing about 3% of its global workforce. The company clarified that most of the cuts will be from non-production sectors like sales and administration, as it strives to trim costs by $1 billion.
CBRL Group (CBRL | Quote | Chart | News | PowerRating) could also be in focus after it said it is changing its name back to its original name of Cracker Barrel Old Country Store within the next two weeks. New York & Company (NWY | Quote | Chart | News | PowerRating) could gain ground after it announced that its board authorized the purchase of up to 3,750,000 shares over the next 12 months. The company also noted that its majority shareholder has revealed its intention to buy up to 3,750,000 shares through open market or private transactions.
Panasonic (PC | Quote | Chart | News | PowerRating) may come under selling pressure after it lowered its fiscal year 2009 profit forecast to 30 billion yen from its previous guidance of 310 billion yen. The company also reduced its sales estimate to 8.5 trillion yen from 9.2 trillion yen. The company blamed the toned down expectations on sharply deteriorating business conditions, intense price competition and sluggish consumer spending.
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