Monetary Policy Uncertainty Clouds Market Outlook

(RTTNews) - The major U.S. index futures are pointing to a higher opening on Friday, with sentiment suggesting strength after the losses of the previous three sessions. With economic data and other news flow failing to clarify the outlook for monetary policy, although pointers are towards an early withdrawal of stimulus, uncertainty is likely to rule the roost. That said, some bargain hunting related upside cannot be totally ruled out.

The U.S. budget deal, which will avert another government shutdown and end some of the automatic spending cuts, sailed through the House of Representatives and now awaits Senate approval.

U.S. stocks retreated yet again on Thursday amid the release of some mixed data, which further accentuated recent uncertainty. The major averages opened mixed, with the Dow Industrials and the S&P 500 Index opening lower and languishing below the unchanged line for the better part of the session before closing moderately lower. Meanwhile, the Nasdaq Composite Index bounced back and forth across the unchanged line in a broad range before closing modestly lower.

The Dow Industrials ended down 104.10 points or 0.66 percent at 15,739 and the S&P 500 Index closed 6.72 points or 0.38 percent lower at 1,776, while the Nasdaq Composite Index ended at 3,998, down 5.41 points or 0.14 percent.

Twenty-four of the thirty Dow components closed lower, with Johnson & Johnson (JNJ), Coca-Cola (KO), Procter & Gamble (PG), UnitedHealth (UNH) and Cisco Systems (CSCO) leading the declines. On the other hand, Exxon Mobil (XOM) rallied 1.17 percent.

Gold and semiconductor stocks declined sharply, while airline and biotechnology stocks gained ground.

On the economic front, the Commerce Department reported that retail sales rose a better than expected 0.7 percent month-over-month in October. The previous month's sales growth was upwardly revised to 0.6 percent from 0.4 percent. Excluding autos, sales were up 0.4 percent in November. Core retail sales, which exclude autos, gasoline and building materials, rose 0.5 percent. Autos, furniture, electronics, building materials, online and restaurants all showed strong sales growth.

The Labor Department reported that jobless claims rose sharply to 368,000 in the week ended December 7th from 320,000 in the previous week. The four-week average rose to 328,759 from 322,750. Continuing claims calculated with a week's lag rose 40,000 to 2.791 million in the week ended November 30th. The Labor Department attributed the volatility to the difficulty performing seasonal adjustments around holidays such as Thanksgiving.

Business inventories rose 0.7 percent month-over-month in October, while annually, inventories were up 3.6 percent. Meanwhile, business sales were up 0.5 percent compared to the previous month and 3.9 percent higher from a year ago. The business inventories to sales ratio came in at 1.29 compared to 1.30 in the year-ago period.

The Dow Industrials continued to falter amid the uncertainty, and it is now staring at a medium term support around 15,677. The index also has additional supports around 15,609 and 15.546. However, if the downward momentum stalls, which looks less likely given the absence of any market moving catalysts, the index could rebound to test resistances around 15,802, 15,881, its 21-day MA of 15,959 and 16,018.

Commodity, Currency Markets

Crude oil futures are sliding $0.82 to $96.75 a barrel after edging up $0.06 to $97.50 a barrel on Thursday. Gold futures are currently rising $6.70 to $1,231.60 an ounce. In the previous session, gold tumbled $32.30 to $1,224.90 an ounce.

Among currencies, the U.S. dollar is trading at 103.16 yen compared to the 103.38 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3751 compared to yesterday's $1.3753.

Asia

The Asian markets closed mixed as recent losses led to some bargain hunting-related buying. The Japanese, Australian, Hong Kong, Malaysian, New Zealand and Taiwanese markets advanced, while the South Korean, Chinese, Indonesian and Indian markets moved to the downside.

The Japanese market benefited from the yen's weakness amid expectations that the Federal Reserve will soon begin paring back its stimulus. After seeing some volatility in the morning, the Nikkei 225 average retreated in late morning trading only to rebound immediately after. Subsequently, the index advanced steadily until late afternoon trading before moving sideways. The index ended up 61.29 points or 0.40 percent at 15,403. Export stocks moved to the upside, while utility, insurance, telecom, construction and financial stocks came under selling pressure.

Australia's All Ordinaries moved back and forth across the unchanged line in a nervous manner till the mid-session. Thereafter, the index advanced steadily before closing up 32.30 points or 0.64 percent at 5,102, with the weakness of the Aussie dollar responsible for some of the strength. Most sectors advanced, with energy, financial, healthcare and material stocks leading the gains.

Hong Kong's Hang Seng Index closed at 23,246, up 27.84 points or 0.12 percent, while China's Shanghai Composite Index fell 6.72 points or 0.31 percent before closing at 2,196.

On the economic front, revised estimates released by Japan's Ministry of Economy, Trade and Industry showed that Japanese industrial production growth for October was upwardly revised to 1 percent from the 0.5 percent growth estimated initially. The growth in shipments was also upwardly revised to 2.3 percent from 1.8 percent.

Europe

After opening lower, European stocks have turned higher over the course of the morning trading day. Subsequently, the averages gave back some of their gains and are currently trading mixed.

On the economic front, the German Federal Statistical Office reported that German wholesale prices fell 2.2 percent year-over-year in November following the 2.7 percent drop in October. On a month-over-month basis, prices were down 0.2 percent.

U.S. Economic Reports

With energy prices continuing to fall following a steep drop in the previous month, the Labor Department released a report on Friday showing a modest decrease in producer prices in the month of November.

The Labor Department said its producer price index edged down by 0.1 percent in November following a 0.2 percent drop in October. The modest decrease matched economist estimates. Meanwhile, core producer prices, which exclude food and energy prices, inched up by 0.1 percent in November after rising by 0.2 percent in October. The uptick in core prices also matched expectations.

Stocks in Focus

Adobe Systems (ADBE) reported fourth quarter non-GAAP earnings of 32 cents per share on revenues of $1.04 billion. The earnings were in line and the revenues beat estimates. For 2014, the company expects non-GAAP earnings of $1.10 per share on flat revenues. The guidance was negative.

Quiksilver (ZQK) reported a fourth quarter pro forma loss from continuing operations of 4 cents per share compared to pro forma income from continuing operations of 5 cents per share a year ago. The company also reported net revenues of $476 million. The results trailed expectations.

Quest Diagnostics (DGX) tightened its full year adjusted earnings guidance to $3.90-$3.95 per share from $3.85 to $3.95 per share, while it maintained its revenue guidance for a 3.5 percent drop from the year-ago period. The company indicated that it continues to see challenges in the operating environment. The earnings guidance is positive.

United Technologies (UTX) said its CEO Louis Chenevert told a meeting with investors and analysts that the company expects 2013 earnings to be at $6.15 per share, at the high end of its previous forecast of $6.10-$6.15 per share. The company said it continues to expect sales of $63 billion. For 2014, the company expects earnings of $6.55-$6.85 per share on sales of about $64 billion. The 2013 guidance was in line, while the 2014 guidance was below expectations.

Helix (HLX) upgraded its 2013 EBITDA guidance to $290 million to $300 million, with the company premising the forecast on better than expected fourth quarter results for Robotics along with the Skandi Constructor's continued performance in well intervention mode.

XOMA (XOMA) announced that it is offering to sell its common stock in an underwritten public offering.

Cooper Companies (COO) said its board has authorized the repurchase of up to $200 million worth of its common stock under its existing authorization, taking the total authorized limit to $500 million worth of its common stock.

Jacobs (JCE) announced the completion of its proposed acquisition of professional services firm Sinclair Knight Merz for A$1.3 billion in cash.

Edison (EIX) announced an increase in its annual dividend to $1.42 per share from $1.35 per share. Rent-A-Center (RCII) also announced that its board approved a 10 percent increase in its quarterly cash dividend to 23 cents per share.