The major U.S. index futures are pointing to a higher opening on Thursday, with sentiment reflecting a return of optimism following the release of some positive data points. The jobless claims report showed an unexpected decline in claims, while the housing starts report came in mixed. Housing starts rose but building permits, an indicator of future housing activity declined. Sentiment is likely to remain guarded, as traders await the fate of the tax cut bill at the House of Representatives and the EU leaders meeting at Brussels to discuss the debt crisis. The Philadelphia Federal Reserve’s regional manufacturing survey may also move the markets.
U.S. stocks retreated on Wednesday, as traders focused on the sovereign debt crisis in Europe, especially after Moody’s warned of a possible downgrade of Spain’s credit rating. In the process, they largely ignored some fairly encouraging economic reports.
The major averages opened lower, although they recovered in early trading after a regional manufacturing report and industrial production data relayed optimism. However, by the mid-session, stocks gradually gave up their gains, dipping below the unchanged line. Thereafter, the averages mostly confined themselves to negative territory before closing lower.
The Dow Industrials ended down 19.07 points or 0.17% at 11,458 and the S&P 500 Index receded 6.36 points or 0.51% to close at 1,235, snapping six straight sessions of advances that took the average to an over 2-year high. Meanwhile, the Nasdaq Composite Index finished 10.50 points or 0.40% lower at 2,617.
Twenty-one of the thirty Dow components closed lower, with Alcoa (AA), General Electric (GE) and JP Morgan Chase (JPM) leading the declines. On the other hand, Caterpillar (CAT) and Coca-Cola (KO) post notable gains.
Among the sector indexes, the NYSE Arca Airline Index fell 1.42%, the NYSE Arca Oil Index slid 1.02%, the Philadelphia Oil Service Index lost close to a percentage and the NYSE Arca Gold Bugs Index receded 1.85%. Meanwhile, the Philadelphia Housing Sector Index moved down 1.18% compared to a 1.08% decline by the KBW Bank Index.
In the technology space, the Philadelphia Semiconductor Index declined 1.13% and the NYSE Arca Computer Hardware Index fell 1.27%.
On the economic front, the Labor Department said consumer prices rose 0.1% month-over-month in November, softer than expectations for a 0.2% increase. The core inflation rate was 0.1%, in line with expectations. The annual rate of headline and core inflation was 1.1% and 0.8%, respectively.
The New York Federal Reserve’s Empire State manufacturing survey showed that manufacturing conditions in the New York region improved, with the business conditions index rising to 10.6 in December from November’s –11.1. The new orders index climbed 27 points to 2.6 and the backlog orders index improved to –18.2 from –24.7. However, reflecting soft employment conditions, the employment index slipped to –3.4 in December from 9.1 in November and the average workweek index slipped to its lowest level since July 2009. The future business conditions index fell to 48.9 from 54.6 in the previous month.
The Federal Reserve’s industrial production report showed a 0.4% month-over-month increase in output in October following a downwardly revised 0.2% decline in September. Utilities output rose 1.9% and manufacturing output was higher for a fifth straight month, rising 0.3%. Manufacturing received a shot in the arm from a strong 0.9% increase in business equipment. Capacity utilization rate rose 0.3 percentage points to 75.2%, marking the highest level in over 2 years.
An index measuring home builders’ confidence remained unchanged in December, according to the results of a survey released by the National Association of Home Builders. The housing market index came in at 16. Among the sub-components, the present and future conditions indexes remained unchanged, while the index measuring prospective buyer traffic dipped 1 point to 11.
Currency, Commodity Markets
Crude oil futures are receding $0.38 to $88.24 a barrel after advancing $0.34 to $88.62 a barrel on Wednesday. The previous session’s climb came amid the release of the weekly inventory report, which showed that crude oil inventories fell by 9.9 million barrels to 340.6 million barrels in the week ended December 10th. Despite the decline, stockpiles remained above the upper limit of the average range.
Meanwhile, gasoline inventories rose by 0.8 million barrels, remaining in the upper half of the average range. Distillate stockpiles also increased, rising by 1.1 million barrels and were just above the upper limit of the average range. Refinery capacity utilization averaged 88% over the four-weeks ended December 10th compared to 87.5% in the previous week.
Gold futures, which fell $18.10 to $1,386.20 an ounce in the previous session, are currently receding $740 to $1,378.80 an ounce.
Among currencies, the U.S. dollar is trading at 84.069 yen compared to the 84.2405 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.3241 compared to yesterday’s $1.3214.
Asia
The major Asian markets closed Thursday’s session on a mixed note, with the Japanese, Australian, Indian and Taiwanese markets closing higher, while the Chinese, Hong Kong, Singaporean, South Korean, Malaysian and Indonesian markets ended in negative territory.
Japan’s Nikkei 225 average opened lower and showed volatility throughout the session before closing up merely 1.51 points or 0.01% at 10,311. Financial stocks ended higher, led by Shinsei Bank, Mizuho Trust & Banking, Mizuho Financial and Sumitomo Trust. Resource stocks also found buying interest. On the other hand, technology stocks closed mostly lower.
After opening lower and languishing mostly in negative territory till the afternoon, Australia’s All Ordinaries recovered thereafter. In the afternoon, the index went about a consolidation move before closing up 15.40 points or 0.32% at 4,869.
The market witnessed broad based buying interest, with only defensive real estate and telecom stocks seeing some weakness. Energy, utility and healthcare stocks led the advances. Rio Tinto (RTP) slipped slightly after it said it has sold about 25.6 million shares of Cloud Peak Energy (CLD), which was carved out from Rio Tinto, in an underwritten secondary offering for $19.50 per share. Following the completion of the offering, Rio Tinto will own about a 6.2% stake in Cloud Peak Energy. Rio’s peer BHP Billiton (BHP) rose modestly, while the four major banks closed on a mixed note.
Hong Kong’s Hang Seng Index, which opened lower and moved sideways with a modest loss till the afternoon, declined sharply thereafter to close down 306.57 points or 1.33% at 22,669. The sell-off was broad based, with forty-two of the forty-five index components closing lower.
Europe
The major European are seeing a mixed sentiment on Thursday, with the French CAC 40 Index and the German DAX Index receding 0.23% and 0.02%, respectively, while the U.K.’s FTSE 100 Index is moving up 0.04%.
In economic news, the U.K.’s Office for National Statistics reported that U.K. retail sales rose 0.3% month-over-month in November following an upwardly revised 0.7% increase in October. The increase was in line with expectations. On a year-over-year basis, retail sales growth quickened to 1.1% in November from 0.3% in October.
Meanwhile, Eurostat reported that hourly labor costs for the euro area rose 0.9% year-over-year in the third quarter following a 1.6% increase in the second quarter. Although the increase was the biggest on record, it was softer than the 1.2% growth expected by economists.
The final consumer price inflation report released by Eurostat showed that the annual inflation rate for the euro area remained unrevised at 1.9% in November, matching the rate in October. On a monthly basis, consumer prices were up 0.1%.
Markit Economics also released the results of its private sector survey, showed that the composite output index, indicating activity in the manufacturing and service sectors, declined to a 2-month low of 55 in December from 55.5 in November. The flash estimate showed that the manufacturing purchasing managers’ index rose to an 8-month high of 56.8, but the service sector purchasing managers’ index eased 1.7 points to 53.7.
U.S. Economic Reports
Housing starts in the U.S. showed a notable increase in the month of November, according to a report released by the Commerce Department, although the report also showed an unexpected drop in building permits.
