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| | US Market |  | | NYSE | AMEX | Dow Jones | Nasdaq |  |  |  |  | | Please click on the images to view our interactive charts | | | The major U.S. index futures are pointing to a higher opening on Thursday, with sentiment still positive following a 3-session rally. The dollar is grinding higher and commodities are losing their appeal. Across the Atlantic, the equity market is on top gear, reacting to the Fed's dovish upward rate adjustment. A domestic economic report released short while ago showed that job market, which was premised for the Fed's upbeat outlook, is continuing to throw up positive tidings. Earnings news has been mixed. Unless curtailed by profit taking, the markets may attempt to stretch the rally.
U.S. stocks advanced solidly on Wednesday, gaining for the third straight session, as the Fed did not disappoint and announced a nominal increase to interest rates. The central bank also assured that further hikes will be gradual.
The major averages opened higher after two separate reports showed a strong increase in housing starts but a bigger than expected drop in industrial production. After gradually giving back most of their gains over the course of the morning, the indexes moved sideways ahead of the Fed announcement. There was a steep downward move in the immediate aftermath of the announcement, but the averages moved sharply higher in late trading, ending the session notably higher.
The Dow Industrials added 224.18 points or 1.28 percent before closing at 17,749, the S&P 500 Index ended up 29.66 points or 1.45 percent at 2,073 and the Nasdaq Composite closed at 5,071, up 75.77 points or 1.52 percent. The Dow is still in the red for the year, while the S&P 500 Index and Nasdaq Composite are higher.
Twenty-eight of the thirty Dow components advanced in the session, with Verizon (VZ), United Technologies (UTX), Merck (MRK), JP Morgan Chase (JPM), Goldman Sachs (GS) and General Electric (GE) leading the gains.
Among the sectors, utility, biotechnology, transportation, basic material, gold, retail, housing and financial stocks advanced strongly, while energy stocks came under selling pressure.
On the economic front, the Commerce Department reported that housing starts rose 10.5 percent month-over-month to 1.173 million units in November, while economists expected a 1.141 million-unit rate. Multi-family starts surged up 16.4 percent and single-family starts were up 7.6 percent.
Building permits, considered an indicator of future housing activity, jumped 11 percent to a 1.289 million-unit rate compare to the consensus estimate of 1.146 million units.
A report released by the Federal Reserve showed that industrial production fell 0.6 percent month-over-month in November, bigger than the 0.2 percent drop expected by economists and the steepest fall in 3-1/2 years. Manufacturing output was unchanged, belying expectations for a 0.1 percent increase. Utility output declined 4.3 percent due to unseasonably warm winter weather. Capacity utilization fell more than expected to 77 percent.
Flash estimates released by Markit showed that its manufacturing PMI for the U.S. slipped to 51.3 in December from 52.6 in November, while economists expected the index to increase to 52.8.
Fed Takes Baby Step Towards Rate Normalization
As widely anticipated by the markets, the Federal Reserve announced a 0.25 percentage point increase in interest rates to a range of 0.25-0.50 percent, with the move adopted unanimously. The rate hike, the first since 2006, came as the Fed felt the labor market has considerably improved this year and the central bank is confident of inflation rising towards its 2 percent objective over the medium term.
The Fed said the move was also spurred by the fact that policy actions take time to affect future economic outcomes. According to the central bank, even after the hike, monetary policy remains accommodative.
The Fed's view on overall economic condition was unchanged, with the Fed repeating that economic activity has been expanding at a moderate pace. The commentary on household spending, business fixed investment, the housing sector and net exports was all unchanged.
However, the Fed now feels the labor market has improved further, with underutilization of labor resources diminishing appreciably since early this year. Inflation commentary was also unaltered. The Fed said it expects the economy to continue to expand at a moderate pace and the labor market indicators to strengthen with gradual adjustments in the monetary policy stance.
The median forecasts for GDP, the unemployment rate, PCE inflation and core PCE inflation were left largely unchanged or changed slightly. Most Fed policymakers expect rates to be between 1.25 and 1.50 percent in 2016. |
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| | US Economic Reports | | | | CADUSD | Oil | Gold | Allbanc |  |  |  |  | | Please click on the images to view our interactive charts | | | The Labor Department reported that jobless claims fell 11,000 to 271,000 in the week ended December 11th from the previous week's unrevised level of 282,000. Economists had expected claims to decline to 270,000 from 282,000 in the previous week.
The four-week average fell to 270,500 from 270,750. Continuing claims calculated with a week's lag fell to 2.238 million in the week ended December 12th from 2.245 million in the week ended December 5th.
The Philadelphia Federal Reserve is set to release the results of its business outlook survey for the region at 8:30 am ET. The diffusion index of business activity is expected to slip to 1.2 in December from 1.9 in November.
The diffusion index of business activity rose to 1.9 in November from -4.5 in October, while economists expected a reading of -0.5. The employment index rose to 2.6 from -1.7 and the 6-month outlook index rose 6.7 points to 43.4. However, the new orders index remained negative for a second straight month, with a reading of -3.7, and the shipments index was at -2.5. The average workweek index came in at -16.2.
At 10 am ET, the Conference Board is scheduled to release its leading economic indicators index for November. The index is expected to increase by 0.2 percent month-over-month.
The leading economic indicators index rose 0.6 percent month-over-month in October, ahead of the 0.5 percent growth expected by economists. In September, the index edged down 0.1 percent. Stock performance and housing permits positively impacted the index. |
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| | Stocks in Focus | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | Oracle (ORCL) reported above-consensus second quarter non-GAAP earnings, while its revenues missed expectations on currency headwinds. FedEx's (FDX) second quarter results exceeded estimates.
Meanwhile, Herman Miller (MLHR) reported below-consensus results for its second quarter. The company's third quarter revenue guidance was in line, while its revenue guidance was lackluster.
Jabil Circuit (JBL) reported above-consensus first quarter core earnings per share and its revenues were in line. The company's second quarter core earnings per share guidance was in line, while its revenue guidance was weak.
Accenture (ACN) raised its fiscal year 2016 outlook for revenue growth to 6-9% in local currency and confirmed annual earnings per share outlook. The company's second quarter net revenue guidance was lackluster. The company reported below-consensus first quarter earnings, while its revenues beat estimates.
General Mills (GIS) reported below consensus results for its second quarter and it revised its 2016 growth targets.
Pier 1 Imports (PIR) reported better than expected third quarter results but lowered its full year earnings per share guidance below the consensus estimate.
Apogee (APOG) reported better than expected third quarter results, while its revenues were below expectations. The company narrowed its full year earnings per share guidance, while it lowered its revenue growth guidance to mid-single digits from high single digits.
AIG (AIG) announced its board has authorized the repurchase of up to $3 billion worth of shares.
Eli Lilly (LLY) and Boehringer Ingelheim announced the FDA has approved Basaglar, which is long acting insulin with an identical amino acid sequence to Lantus. The company said the insulin glargine injection will be available in the U.S. from December 15th, 2015.
Coca-Cola Enterprises (CCE) raised its full year comparable and currency neutral earnings per share growth guidance to the upper end of its previous guidance range of 6-8 percent. Additionally, the company expects currency neutral and comparable net sales to be slightly positive.
Steel Dynamics (STLD) forecast a steep year-over-year decline in its fourth quarter earnings to 3-7 cents per share from adjusted earnings of 40 cents per share in the year-ago period. The projection is below the consensus estimate.
Worthington Industries (WOR) reported better than expected second quarter adjusted earnings per share, while its net sales trailed estimates.
Albermale (ALB) announced a definitive agreement to sell its Mineral Flame Retardants and Specialty Chemicals businesses to Hubert Corp. The company expects the deal to close in early 2016. |
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| | European Markets | | European stocks opened on a markedly positive note and are continuing to see buoyancy, as Fed cheer is fueling a strong rally across the global markets.
In corporate news, AstraZeneca (AZN) announced an agreement to acquire a majority equity stake in Acerta Pharma, a privately-owned biopharmaceutical company based in the Netherlands and the U.S. AstraZeneca will acquire 55 percent of the entire issued share capital of Acerta for an upfront payment of $2.5 billion.
On the economic front, releasing its winter forecast, the Swiss SECO said it is maintaining its GDP growth outlook for 2016 at 1.5 percent and added that it expects inflation to turn positive only in 2017.
The results of a survey by the IfO showed that confidence among German businesses waned slightly in December. The business climate index slipped to 108.7 from 109 in November, while economists expected an unchanged reading. The current assessment and expectations indexes also weakened slightly.
U.K. retail sales rose more than expected in November, according to a report released by the U.K. Office for National Statistics. Retail sales rose 1.7 percent month-over-month and were 5 percent higher than the year-ago period in November. The monthly and annual growth exceeded estimates. Sales, excluding auto fuel, also were above estimates. |
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| | Asian markets | | | | USDCAD | USDEUR | USDGBP | USDJPY |  |  |  |  | | Please click on the images to view our interactive charts | |
The major Asian markets advanced across the board, as the Fed's widely anticipated interest rate hike and the subsequent positive reaction by the U.S. markets engendered optimism. The Chinese market led from the front, with the key average rising 1.81 percent.
The dollar's strength weakened the yen, which lent support to the Japanese market. The Nikkei 225 Index opened higher and moved sideways in the morning. Although the index gave up some of its gains in the afternoon, it still ended up 303.65 points or 1.59 percent at 19,354.
A majority of stocks advanced in the session, with SKY Perfect JSAT, Keio, Keisei Electric, Marui, Sumitomo Metal Mining and Nisshin Seifun leading the gains. On the other hand, Taiyo Yuden, Sumco and TDK declined notably. Steel makers also came under selling pressure.
Australia's All Ordinaries Index hovered above the unchanged line throughout the session before ending up 71.90 points or 1.42 percent at 5,151. The market witnessed broad based strength, although real estate stocks flat lined. IT, telecom, utility and healthcare were among the best performers of the session.
Hong Kong's Hang Seng Index ended at 21,862, up 161.03 points or 0.74 percent, and China's Shanghai Composite Index closed 63.81 points or 1.81 percent higher at 3,580.
On the economic front, a report released by Statistics New Zealand showed that the nation's GDP rose 0.9 percent sequentially in the third quarter, ahead of the 0.8 percent growth expected by economists. The increase also represented an acceleration from the 0.3 percent growth in the second quarter.
Japan's Ministry of Finance reported that the Japanese trade deficit narrowed to 379.7 billion yen in November from 898.8 billion yen in the year-ago period. Economists expected a deficit of 449.7 billion. Exports fell 3.3 percent year-over-year, while imports declined a steeper 10.2 percent.
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| | Currency and Commodities Markets | | Crude oil futures are slipping $0.14 to $35.38 a barrel after plunging $1.83 to a fresh 6-year closing low of $35.52 a barrel on Wednesday.
The previous session's decline came amid the release of the weekly petroleum status report, which showed that crude oil stockpiles increased by 4.8 million barrels to 490.70 million barrels in the week ended December 11th. Stockpiles are still near levels not seen for this time of the year in at least the last 80 years.
Gasoline inventories rose by 1.7 million barrels and were in the upper half of the average range. Distillate inventories also climbed by 2.6 million barrels and were in the upper half of the average range for this time of the year.
Refinery capacity utilization averaged 92.9 percent over the four weeks ended December 11th compared to 92.5 percent over the four weeks ended December 4th.
An ounce of gold is trading currently at $1,060.20, down $16.60 from the previous session's close of $1,076.80. On Wednesday, gold rose $15.20.
On the currency front, the U.S. dollar is trading at 122.49 yen compared to the 122.21 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0839 compared to yesterday's $1.0912. |
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