Market Outlook
Thursday, September 09, 2010

• 8:30… Trade Balance

• 8:30… Initial Jobless Claims

• 10:30… EIA Natural Gas Inventory

• 11:00 … EIA Petroleum Inventories

• 1:00 PM… Results of $13B, 30-Bond Auction

• 4:30 PM … Money Supply

• 4:30 PM … Fed Balance Sheet

Also the following companies are reporting their quarterly earnings:-

• National Semiconductor Corp. (NSM) and

• Smith & Wesson Holding Corp. (SWHC)

Stock futures indicated a second-straight day of gains for U.S. markets.

All three major indexes started the month with a bang following a series of stronger-than-expected economic reports. This week, trading has been a bit shaky, with little on the docket to push stocks forward. All three major indexes have still managed to gain in four out of the five previous sessions.

But stocks may have a tough time holding those gains as investors remain wary about the economic outlook, said Chip Brian, president of financial analytics firm SmarTrend.

"[Obama's proposal] provided some near-term confidence, but overall, we're still seeing stagnation," said Brian. "Obama can pull a feather out of his hat and say 'we can do this and this,' but until we start realizing some of these economic benefits for growth, we've still got a large problem."

Initial Jobless Claims

The Labor Department's weekly report on initial jobless claims comes out before the market opens.

Economists expect that 470,000 first-time claims for unemployment benefits were filed in the week ended Sept. 4, according to consensus estimates from Briefing.com. That would be down slightly from 472,000 in the preceding week.

Continuing claims -- those filed for more than one week -- are forecast to dip slightly to 4.445 million, from 4.456 million the week before.

Trade Deficit

Another report from the Commerce Department is expected to show the U.S. trade deficit fell in July to $47.3 billion, versus $49.9 billion the month before.

There are a few further points to the mornings trading which need to be considered:-

• The Dow Jones Industrial Average (DJIA) appears content to remain between support in the 10,350 region and resistance at the 10,450 level.

• The U.S. Dollar Index continues to hover near support in the 82.50 region. Heading into the open, the index was off 0.02% at 82.57.

• Benchmark crude futures: Commodities should take center stage in early trading this morning, as the Energy Information Administration (EIA) will release its weekly report on U.S. petroleum stockpiles. Currently, analysts are expecting a decline of 730,000 barrels in the latest week. Crude futures are up in anticipation of the news, rising 47 cents to $75.14 per barrel.

• Gold futures are consolidating after their recent run higher. In London, the lead contract was last seen lower by 80 cents at $1,256.70 an ounce.

• Bonds: The yield on the 10-year Treasury note rose to 2.67%, from 2.65% late Wednesday.

• Equity option activity on the Chicago Board Options Exchange (CBOE) saw 994,367 call contracts traded on Wednesday, compared to 534,906 put contracts.

U.S. markets were getting a minor boost from positive momentum in Europe overnight, helped primarily by strong performing in the auto and mining sectors.

In Paris, Pier Carlo Padoan, chief economist at the Organization for Economic Cooperation and Development, said that the slowdown in the global economic recovery is "somewhat more pronounced than previously anticipated."

The Bank of England left its key lending rate unchanged at a record low 0.5% and maintained its 200 billion pound ($309 billion) asset-purchase program on pause. Both moves were widely expected.

Also in London, the U.K.'s financial-services watchdog said it has fined Goldman Sachs Group Inc. (GS) 17.5 million pounds ($27 million) for failing to disclose a U.S. fraud probe that encompassed the firm's British operations.

European Concerns

European share markets rose in early trading. The CAC 40 in France was 0.6% higher, the DAX in Germany gained 0.5% and Britain's FTSE 100 added 0.9%.

• In Europe, at midday, London +0.81. Paris +0.60%. Frankfurt +0.47%.

The dollar rose against the euro and the British pound, but slipped versus the Japanese yen.

Asian Concerns

Earlier, Asian markets ended mixed. Japan's benchmark Nikkei index rose 0.8%, and the Hang Seng in Hong Kong edged up 0.4%. The Shanghai Composite tumbled 1.4%.

• In Asia, Japan +0.82% to 9098.4. Hong Kong +0.37% to 21167. China -1.44% to 2656. India +0.71% to 18799.66.

Futures Trading

As of 7:30 a.m. in New York, the Dow Jones Industrial Average futures were up 28 points, or 0.27%, to 10420, the S&P 500 index futures climbed 4.1 points to 1103.40 and the Nasdaq 100 futures were up 7.75 points to 1885.25.

• Futures: Dow +0.33%. S&P +0.34%. Nasdaq +0.39%. Crude +0.54% to $75.07. Gold -0.16% to $1255.50.

Men's Wearhouse Inc's (MW) reported a second-quarter profit, excluding one-time items, of 83 cents per share, Revenue increased to $537 million from $526.2 million a year ago. Analysts estimated a quarterly profit of 78 cents per share on revenue of $535 million.

• Goldman will agree to pay $27M fine to the U.K. Goldman Sachs (GS) is reportedly settling an investigation by Britain’s Financial Services Authority by agreeing to pay a fine of nearly $27M. The British regulatory authority accused the bank of fraud in April, after the SEC filed civil fraud charges for allegedly misleading buyers of complex mortgage-related investments in 2007. Goldman settled the charges in mid-July by agreeing to pay $550M, the largest penalty against a Wall Street firm in the SEC's history. According to reports, Goldman will concede that it made a mistake in regulatory disclosures about trader Fabrice Tourre.

• 7-Eleven makes bid for convenience store chain Casey’s. According to reports, 7-Eleven is behind a $40 per-share bid for convenience store operator Casey’s General Stores (CASY), which would value the company at $2B. Casey’s, which operates stores in the Midwest, rejected several lower offers from Canada’s Alimentaion Couche-Tard (ANCUF). It also said the 7-Eleven bid was too low, but said it was willing to engage in talks for a potential deal.

• BP looks to share blame for the Gulf oil spill. In its highly anticipated report of the Gulf spill, BP (BP) spread the blame around, saying a sequence of failures involving a number of different parties led to the explosion and the oil spill. Investors bought into the deflection onto rig owner Transocean (RIG) and contractor Halliburton (HAL), moving shares up 3.2%, since it boosts the likelihood that BP will wind up sharing the cost of liabilities. Meanwhile, Fitch upgraded its rating on the firm three notches to A, with a Stable outlook, reflecting "an end to the threat of further leaks from the Macondo well" and BP's progress in building liquidity to address potential lawsuits.

• Aussie regulators block NAB’s bid for AXA. Australian competition regulators ruled against National Australia Bank’s (NAUBF.PK) $12B bid for AXA Asia Pacific (AXAPF.PK) for a second time, likely scuttling the bid which would have been the second largest financial deal ever in Australia. The decision clears the way for Australia’s second biggest fund manager, AMP (AMP.AX), to launch a new bid for AXA. After the decision was announced, shares of AXA slid 10%.

• Barry Callebaut inks sweet deal with Kraft. Swiss chocolate supplier Barry Callebaut (BYCBF.PK) signed a deal with Kraft Foods (KFT) to become its key global cocoa and industrial supplier. The agreement is expected to more than double Barry Callebaut's existing business with Kraft Foods, which owns the Cadbury brand. News of the deal sent Barry shares up 8% in trading in Europe.

• U.S. Slips in competitiveness ranking. The U.S. slipped two places to fourth in an annual ranking of business competitiveness by Geneva-based World Economic Forum. The U.S. fell behind Sweden and Singapore due to huge deficits and pessimism about government, the global economic group said in its report. Switzerland kept the top spot for a second year in a row. The rankings are based on economic data and a survey of more than 13,500 business executives.

• Google launches tool to speed up web searches. Google (GOOG) unveiled an accelerated search tool yesterday called Google Instant, which displays results as soon as users begin typing their search request. The shift means Google users will begin to see an ever-evolving set of search results appearing on their computer screens, potentially changing with each additional character typed. The change might affect the many businesses that have been built around placing search ads on Google and helping Web sites figure out how to climb higher in search results to increase revenue.

• SEC stands behind proposed Citigroup settlement. The SEC defended its proposed $75M settlement with Citigroup (C) over the bank’s alleged misconduct as “fair, reasonable, and adequate.” Citigroup had agreed to the payment to settle charges that it failed to disclose subprime exposure to investors in 2007, but a federal judge decline to approve the settlement and asked the SEC for more information. In a court filing, the SEC said the settlement was “in the public interest and should be approved.”

• Sony Pictures to produce animated series based on Marvel characters. Sony Pictures Entertainment (SNE) is partnering with Disney’s (DIS) Marvel Entertainment to produce a series of animated works based on such characters as Iron Man, X-Men, and Blade and will distribute them worldwide. The characters will be animated by Japanese animation studio Madhouse and broadcast by cartoon channel Animax Broadcast Japan, a Sony Pictures unit. The partnership hopes to create new fans and generate programming and DVD sales worldwide.

U.S. stock index futures rose for a sixth day in seven on Thursday ahead of weekly data that was expected to show a tick down in applications for unemployment insurance.

The blue-chip Dow index (DJIA) rose 0.5% on Wednesday, as gains were limited by the Federal Reserve's confirmation that the American economy is slowing.

The Fed said in its Beige Book report that U.S. growth slowed over the summer, with some sectors, such as agriculture and manufacturing, holding up better than others. The biggest weaknesses were in real estate and construction.

"The overall tone of the Beige Book was not too dissimilar to the economic data we've witnessed over the past month or so," said Jim Reid, strategist at Deutsche Bank.

"Today the market will get an important labor market update from the weekly jobless claims report," Reid said in a note to clients. "Markets are forecasting a third consecutive weekly decline in initial claims."

"Investors are betting that we are probably not far from an economic rebound, and with bonds offering not much of a yield the risk-reward profile in equities is becoming appealing," said Andre Bakhos, director of market analytics at Lek Securities in New York.

Volume is expected to be low again as the Jewish New Year is celebrated and many market participants stay on the sidelines. The six lowest volume days of the year have come in the last month.