Published On: Sat, Oct 27th, 2012

S&P Beats Five-Day Slump

On Thursday, stocks in the United States are expected to open at higher levels than they have for the last week. In the last five days, the Standard & Poor’s 500 index has had its worst slide for five months. Analysts expect Thursday to be better due to increased optimism over the economy in the United States and China. The unemployment report in the US showed that fewer Americans were filling out new claims for unemployment benefits. Last week, the number of claims dropped by 23,000 to a seasonally adjusted 369,000.

The United States showed mixed reports for business spending and manufactured goods. Uncertainty in the marketplace impacted businesses’ decisions to spend more. For the month, United States business spending remained steady. At the same time, new orders for long-lasting manufactured products grew.

In China, the Ministry of Industry and Information Technology released a report showing that factory output was expected to rise in the final three months of 2012. This new data raised hopes among investors that the second largest economy in the world would have a soft landing during its economic slowdown.
S&P Companies Report Earnings

On Thursday, 56 of the companies on the Standard & Poor’s 500 index are expected to report their third-quarter earnings. Some of these companies include Eastman Chemical Company, Apple and Amazon. Procter & Gamble Company already reported their earnings. Amid news of profits at Procter & Gamble, the stock gained 2.3 percent during premarket trading. It currently sits at $69.65. The rise in revenue is expected to be maintained over the next few months as the company seeks to lower costs and develop target markets. Colgate-Palmolive Company, a competitor of Procter & Gamble, also gained during the previous trading session.

Overall, the S&P index has dropped 3.6 percent in the last five sessions. This marks the worst performance for the benchmark index since the middle of May. It has fallen 3.9 percent since its closing high on September 14. Most of the drop in share prices is due to weaker outlooks on profit and missed revenue targets by large corporations. 186 of the companies on the S&P 500 have reported their earnings. Out of this, 38.2 percent managed to exceed revenue expectations. Normally, the S&P 500 index averages 62 percent. Futures for the index gained 7.7 percent and were higher than the fair value price.

One strong performer during Wednesday’s trading session was Sprint Nextel Corporation. Shares rose 1.4 percent to reach $5.70. The rise in shares prices came after Sprint Nextel Corporation committed to 2012 adjusted operating income that will be better than expected. Previously, the company had issued data showing a larger loss than forecasted for the third-quarter.

The United States will release pending home sales for the month of September at 1400 GMT. Investors will use this data to determine if the housing market is continuing to improve. Most analysts believe that there will be a 2.1 increase for September. August’s home sales report showed a 2.6 percent drop.

European Markets

On the Stoxx 600, three shares rose for every one that dropped on Wednesday. The second-biggest consumer goods company, Unilever, gained 2.9 percent after a higher-than-expected quarterly earnings report. Increased earnings at Unilever were partly contributed to by sales in emerging markets. BASF also rose by 1.8 percent following the release of their earnings reports. One loser for the day was Logitech International SA. The largest maker of computer mice forecasted lower profits and revenue than they had achieved in the second half of 2011. Shares in Logitech International SA managed to sink 9.3 percent by the end of the session.

A Memorandum of Understanding was signed between the International Monetary Fund, the European Central Bank and the European Commission. This memorandum granted Greece a loan totaling as much as 20 billion euros. This extra money is intended to supplement the second rescue package that was given to Greece.

On Wednesday, German ten-year bonds dropped, causing the yield to rise six basis points higher. Ten-year bonds from Germany are presently trading with 1.61 percent yields. Credit-default swaps also sank for the fifth consecutive day and slid 1.1 basis points. This marks the lowest levels for credit-default swaps since March of 2010.

In the United Kingdom, the FTSE 100 index increased by 7.32 points or 0.3 percent. It is currently at 5,822.10 points. In the previous session, the FTSE 100 index dropped to a two-week low during the day before closing out 0.1 percent higher. On Wednesday, the United Kingdom also reported a third-quarter gross domestic product growth of one percent

Mining Gains

Heavyweight miners supported the strength of blue chips on Wednesday. The industry ministry in China reported that factory output of the top metal consumers is intended to increase at a higher rate for the fourth quarter. Among other risers, the Mexican Fresnillo rose 2.4 percent.

Canada’s Index Set to Rise

Many analysts expect that the TSX will open higher on Thursday. Positive data from Chinese factories fueled the rising investor sentiment. The Federal Reserve Bank in the United States contributed to this sentiment by signaling that they would continue to stimulate the United States economy.

Among other stock market news, Potash Corporation of Saskatchewan recorded a 22 percent decrease in their third-quarter earnings. This tally comes in just beneath the expectations of analysts. Lowered earnings by the Potash Corporation were fed by decreased demand for the agricultural product by India and China. Precision Drilling also stated that their third-quarter profit dropped by 53 percent. Precision Drilling has been hurt in recent months by reduced drilling in North America. The next quarter will also be rough for Precision Drilling if natural gas prices do not increase.

During the next quarter, investors should watch out for a takeover by the CNOOC Limited .Based out of China, CNOOC Limited is expected to takeover Nexen for a purchase price of $15.1 billion.

On Wednesday, fold futures gained 0.91 percent to end at $1,716. In the United Kingdom, Brent crude oil increased by 1.08 percent to settle at $109.01.  United States crude oil prices also gained by 1.07 percent to end at $86.65.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.