Stocks are likely to open mixed or slightly lower when trading begins this morning. Technology stocks may get a lift from a host of analyst upgrades, but the blue chips are expected to trade lower following a disappointing report on weekly jobless claims. Consequently, roughly forty-five minutes before the start of trading, index futures were pointing to a 20-point loss in the Dow Jones Industrial Average ($INDU) and a modest gain in the tech-heavy Nasdaq Composite ($COMPQ).
Stock index futures declined early Thursday following the release of the latest weekly jobless claims from the Labor Department. The weekly numbers are disseminated every Thursday morning one hour before the opening bell. This week, the Labor Department reported a surprise jump in the number of individuals filing for jobless benefits. For the week ended August 30, initial claims for state unemployment aid rose 15,000 to 413,000. That was up from a revised 398,000 the week before and well above economist estimates of 390,000.
Meanwhile, a separate report released Thursday morning showed a surge in the nation’s productivity. According to the Labor Department, US non-farm productivity jumped at a 6.8% annual rate during the second quarter, and well above the previously reported 5.7% increase. Strong productivity has allowed US businesses to increase output without hiring more workers. At the same time, unit labor costs, which are often used to gauge inflation pressures, fell 2.1% in the second quarter, according to the Labor Department's latest figures.
While the major averages are expected to open lower due to the disappointing employment numbers, the tech sector could get a lift from a series of analyst upgrades. Shares of Applied Materials (AMAT) are expected to trade higher after a UBS analyst raised the rating on the semiconductor equipment maker to “buy” from “neutral”. The analyst cited increased order flows for the upgrade. Chip stocks may also get a boost after Cypress Semiconductor (CY) said late yesterday that third quarter revenues are likely to be 2% higher than analyst estimates.
Meanwhile, shares of Symantec (SYMC) are also expected to get a lift after JP Morgan upgraded the maker of Norton anti-virus software from “underweight” to “neutral”. Analysts also upgraded their ratings on networking giant Cisco Systems (CSCO). Goldman Sachs raised shares to “outperform” and a UBS analyst boosted Cisco to a “buy” from “neutral”.
Going forward, the focus is likely to remain on the economy. National Semiconductor (NSM) is scheduled to announce earnings later today. Outside of that report, the earnings calendar remains light and investors will probably assign greater importance to the economic data. Therefore, the latest numbers of factor orders and the ISM—non-manufacturing index, both due out at 10:00 a.m. ET, will probably garner some attention from investors. However, the next key piece of economic data is scheduled for tomorrow morning when a monthly report on the employment situation is released one hour before the opening bell.
Frederic Ruffy Senior Writer & Index Strategist Optionetics.com ~ Your Options Education Site
Stocks are set to open lower Friday following five straight days of gains. The Dow Jones Industrial Average ($INDU) has risen during every trading session since last Wednesday and added more than 250 points. However, a disappointing report on the nation’s employment situation sent stock index futures lower before the start of trading Friday, and could prove to be a catalyst for a round of profit taking before the weekend. Early Friday, the Labor Department said that the nation lost far more jobs than expected in August. The monthly report, which is released on the first Friday of every month, showed that the number of non-farm payrolls dropped by 93,000 in August, after dropping 49,000 in July. It marked the seventh consecutive month of declines and was much worse than the expected. In fact, economists were expecting the report to show an increase in non-farm payrolls. The August numbers also represent the largest loss of jobs March of this year, when the non-farm payrolls decreased by 101,000.
While stock index futures fell following the unemployment report, investors reacted favorably to comments from Intel (INTC) late Thursday. The world’s largest chipmaker boosted its third quarter sales forecast—from a range of $6.3 billion to $6.8 billion to a new range of $6.6 billion to $6.8 billion. Although that represents flat or modestly lower sales from second quarter numbers, investors cheered the upward revision and sent Intel shares sharply higher after the close.
Meanwhile, PeopleSoft (PSFT) shares are likely to be active. The software marker, which is currently trying to fend off a hostile takeover from Oracle (ORCL), said late yesterday that it is shedding 900 jobs or 7% of its workforce. PeopleSoft also predicted that third quarter revenues would total $575 million to $595 million and full year revenues will probably reach $2.15 billion. Full year earnings are anticipated to total 52 to 55 cents a share. Furthermore, sales are expected to rise to $2.8 billion to $2.9 billion in 2004. Investors reacted favorably to the news and PSFT was also trading higher in after hours trading late Thursday.
In the options market, traders appear to be growing more bullish. As evidence, total call volume across the five options exchanges totaled 2.12 million contracts yesterday, compared to only 1.28 million puts. Consequently, the total put-to-call ratio dipped to .60. We have not seen such a high ratio of call to put activity since July 15, when the ratio fell to .57. At that time, bullish sentiment had also reached relatively high levels, and, interestingly, that was also the last time the stock market put in a short-term top.
Frederic Ruffy Senior Writer & Index Strategist Optionetics.com ~ Your Options Education Site
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