Mixed Data And Earnings May Make Traders Wary

(RTTNews) - The major U.S. index futures are pointing to a lower opening on Wednesday, with sentiment worsening in line with the pullback in oil prices. Earnings news flow has been mixed, with disappointments mainly in the form of bleak guidance offered by companies. European stocks are seeing lackluster sentiment despite the release of fairly positive economic data.

An announcement by the Chinese central bank concerning the lowering of reserve requirements could boost risk sentiment. Meanwhile, a private survey showed that the private sector in the U.S. added less jobs than had been anticipated in January. However, considering the upward revisions to the previous month's numbers, the data was fairly in line. The two straight sessions of gains could make traders wary. Traders may also stay tuned to the results of two separate service sector surveys due after the markets open.

U.S. stocks advanced solidly on Tuesday, encouraged by the extended rally in crude oil prices and optimism that Greece's new government will work out an amicable agreement with its international creditors. The major averages opened higher and moved roughly sideways, with the Nasdaq Composite even briefly dipping below the unchanged line in the mid-session. However, the averages advanced steadily in the afternoon before closing notably higher.

The Dow Industrials ended up 305.36 points or 1.76 percent at 17,666 and the S&P 500 Index added 29.18 points or 1.44 percent before closing at 2,050, while the Nasdaq Composite ended at 4,728, up 51.05 points or 1.09 percent.

All thirty of the Dow components closed higher, with Caterpillar (CAT), Chevron (CVX), Exxon Mobil (XOM), Home Depot (HD) and Goldman Sachs (GS) leading the gains.

Energy, financial, basic material, retail, housing, computer hardware, semiconductor and biotechnology stocks were among the biggest gainer of the session, while biotechnology and gold stocks came under selling pressure.

On the economic front, the Commerce Department said factory orders fell 3.4 percent month-over-month in December, steeper than the 2.2 percent drop expected by economists and marking the fifth straight months of declines.

Auto sales came in at a seasonally adjusted annual rate of 16.7 million units in January, slightly ahead of estimates.

Currency, Commodity Markets

Crude oil futures are sliding $1.69 to $51.36 a barrel after rallying $3.48 to $53.05 a barrel on Tuesday. Meanwhile, an ounce of gold is currently trading at $1,267.60, up $7.30 from the previous session's close of $1,260.30. On Tuesday, gold fell $16.60.

On the currency front, the U.S. dollar is trading at 117.61 yen compared to the 117.57 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1442 compared to yesterday's $1.1481.

Asia

The Asian markets moved mostly higher, encouraged by the positive close on Wall Street, the general rise in risk appetite and the extended rally by oil prices. However, the Chinese market bucked the uptrend and declined notably in the session.

The Japanese market advanced as the safe haven yen slipped in reaction to the rise in risk appetite. After opening higher, the Nikkei 225 average rose steadily in the morning and moved sideways thereafter. The index ended up 342.89 points or 1.98 percent at 17,679. A majority of stocks moved to the upside, led by Oki Electric, Da-ichi Life Insurance and Sumitomo Heavy Industries.

After the market closed, Sony (SNE) raised its guidance for the full year by forecasting a smaller than initially expected loss. The company's provisional results showed stronger than expected earnings and revenue growth.

Toyota (TM) reported higher profits for the December quarter and raised its operating profit guidance for the full year, citing the weaker yen.

Australia's All Ordinaries hovered in positive territory throughout the session before closing 67.50 points or 1.19 percent higher at 5,734, marking the ninth straight session of gains.

Material, energy, consumer staple, financial, industrial and utility stocks found notable strength. On the other hand, real estate, telecom, IT and consumer discretionary stocks came under selling pressure.

Hong Kong's Hang Seng Index ended at 24,680, up 124.98 points or 0.51 percent, while China's Shanghai Composite Index lost 30.78 points or 0.96 percent before closing at 3,174.

On the economic front, estimates released by Markit and HSBC showed that Chinese service sector growth slowed in January. The corresponding index fell to 51.8 in January from 53.4 in December, indicating the slowest rate of expansion in 6 months.

A government report showed that labor cash earnings in Japan rose 1.6 percent year-over-year in December following the 0.1 percent increase in November. The increase was in line with expectations.

The results of a survey by the Australia Industry Group showed that an index of activity in the Australian service sector rose to 49.9 in January from 47.5 in December.

The results of a survey by the National Australia Bank showed that its business confidence index for Australia slipped to 2 in the three months ended December from 6 in the previous three months.

Europe

European stocks opened higher but turned mixed in early trading amid higher oil prices and mixed corporate news. The indexes turned uniformly lower in late morning trading and are currently trading on a lackluster note.

In corporate news, Sky plc, which is reporting for the first time as an expanded company with pan European operations, announced a strong increase in its profit for the six months ended December 31st.

Hannover Re confirmed all its business goals for 2015, while Syngenta's full year profits declined despite modest sales growth.

On the economic front, shop prices in the U.K. fell 1.3 percent year-over-year in January, according to a report released by the British Retail Consortium. In December, shop prices had fallen by 1.7 percent.

In other news, the Eurozone private sector expanded at the fastest pace since July last year as output expanded in Germany, Italy and Spain. But the downturn in the French economy extended into its ninth month. The final services PMI climbed to 52.7 from 51.6 in December. The flash estimate showed a reading of 52.3 for January.

A separate report that eurozone retail sales growth slowed to 0.3 percent month-over-month in December, although it bettered expectations for a flat reading.

U.S. Economic Reports

Private sector employment in the U.S. rose by less than expected in the month of January, according to a report released by payroll processor ADP.

ADP said private sector employment increased by 213,000 jobs in January following an upwardly revised increase of 253,000 jobs in December. Economists had expected employment to climb by about 223,000 jobs compared to the addition of 241,000 jobs originally reported for the previous month.

The Treasury is due to make announcements concerning the auction of 3-year and 10-year notes and 30-year bonds at 9 am ET.

Markit is scheduled to release its final service sector purchasing managers' index for January at 9:45 am ET. Economists expect the index to rise to 54.1 in January from 53.3 in December, reflecting an upward revision from the mid-month reading of 54 for January.

Federal Reserve Governor Jerome Powell is scheduled to make opening remarks at the Dallas Fed conference on growth and regulatory paperwork reduction in Dallas at 10 am ET.

The Institute for Supply Management is scheduled to release its report on service sector activity in January at 10 am ET. The consensus estimate calls for a small increase in the non-manufacturing index to 56.5 from 56.2 in December.

In December, the non-manufacturing index fell to 56.2 from 59.3 in November, coming in below the 58 expected by economists. The business activity index slipped 7.2 points to 57.2, the new orders index declined 2.5 points to 58.9 and the order backlogs index moved down 6 points to 49.5. The employment index also eased 0.7 points to 56. Twelve of the industries surveyed still reported growth for the month.

The Energy Information Administration is due to release its weekly petroleum status report for the week ended January 30th at 10:30 am ET.

Crude oil stockpiles increased by 8.9 million barrels to 406.7 million barrels in the week ended January 23rd. Inventories were at the highest level for this time of year in at least the last 80 years.

Meanwhile, gasoline inventories declined by 2.6 million barrels yet were well above the upper limit of the average range. Distillate inventories fell by 3.9 million barrels and were in the lower half of the average range.

Refinery capacity utilization averaged 89.6 percent over the four weeks ended January 23rd compared to 91.2 percent over the four weeks ended January 16th.

Cleveland Federal Reserve Bank President Loretta Mester is scheduled to speak to the Ohio Bankers League economic summit in Columbus, Ohio at 12:45 pm ET.

Stocks in Focus

Disney (DIS) reported first quarter earnings and revenues that were ahead of estimates, helped by higher attendance at its domestic theme parks and strong merchandise sales based on its 2013 box-office hit "Frozen."

IAC/InterActive (IACI) reported better than expected fourth quarter results, and the company said it still projects EBITDA of more than $300 million despite expecting a small drop in overall revenue.

Arthur J. Gallagher (AJG) reported a decline in its fourth quarter profits but its revenues were ahead of estimates.

Take-Two (TWO) reported better than expected third quarter results and raised its earnings guidance for the full year.

Macy's (M) announced an agreement to buy Bluemercury for $210 million in cash. The company expects the deal to be completed by the first quarter and be accretive to its earnings in 2016. The company also raised its 2014 earnings guidance, which compares favorably to estimates.

Unum Group (UNM) reported better than expected fourth quarter operating earnings per share, while its revenues missed estimates. The company also announced the appointment of its CFO Richard McKenney as its next CEO, effective April 1st, replacing Thomas Watjen, who intends to retire after a 12-year stint at the company.

Wynn Resorts (WYNN) reported below consensus results for its fourth quarter.

Chipotle Mexican Grill's (CMG) fourth quarter earnings were ahead of estimates, while its revenues were in line.

J.M. Smucker (SJM) announced an agreement to acquire Big Heart Pet Brands for $5.8 billion in cash and stock.

Gilead (GILD) announced a $15 billion stock buyback program after reporting better than expected fourth quarter results. However, the company's full year revenue guidance was below estimates.

Myriad Genetics (MYGN) reported better than expected second quarter earnings, while its revenues missed estimates. The company also lowered its full year guidance.

Western Digital (WDC) said its board approved an increase in its quarterly dividend to 50 cents per share as well as an additional $2 billion stock buyback program.

Pfizer (PFE) said the FDA has given accelerated approval for its breast cancer treatment IBRANCE, in combination with letrozole.

Staples (SPLS) announced a deal to buy Office Depot (ODP) for $6.3 billion, signaling more consolidation in the office equipment supplies market.

Fred (FRED) reported a 3 percent increase in January sales, with comparable store sales rising 4.3 percent. General Motors (GM) reported higher earnings before interest and taxes on an adjusted basis, while its revenues missed estimates. The company also announced a 20 percent increase in its dividend.

Humana's (HUM) fourth quarter adjusted earnings were below estimates and confirmed its 2015 earnings estimate of $8.50-$9 per share. Merck (MRK) reported fourth quarter earnings that were ahead of estimates, while its revenues were slightly shy of estimates. The company anticipates full year earnings between $3.32 and $3.47 on revenues of $38.3 billion and $39.8 billion.

Motorola Solutions (MSI) reported better than expected fourth quarter results but issued weak earnings guidance for 2015.

Kohl's (KSS) reported comparable store sales growth of 3.7 percent for the fourth quarter and raised its 2015 guidance above the consensus estimate.

FMC (FMC) announced an agreement to sell its Alkali Chemicals business to Tronox (TROX) for $1.64 billion. The deal, which was done to reduce debt arising from its pending acquisition of Cheminova, is expected to close in the first quarter of 2015.

Equity Residential (EQR) reported better than expected normalized funds from operations per share for the fourth quarter and issued in line normalized funds from operations per share guidance for the first quarter and the full year.

Jack Henry (JKHY) reported second quarter earnings of 72 cents per share on revenues of $324.2 million. The results exceeded estimates. The company also said it is in the process of revenue recognition policies and will disclose the outcome of the review as soon as it is over.

21st Century Fox (FOXA), Allstate (ALL), CB Richard Ellis (CBG), Con-way (CNW), Digital River (DRIV), Everest Re (RE), FMC (FMC), Hanover (THG), Lincoln National (LNC), News Corp. (NWS), O'Reilly Auto (ORLY), Prudential (PRU), Under Armour (UA), and Yum Brands (YUM) are among the companies due to release their quarterly results after the close of trading.