Morning Market Update: Friday, March 4, 2011
Opening View: DJIA Futures Higher Ahead of February Payrolls Report
Wall Street remains optimistic, while oil prices maintain footing above $100
by Joseph Hargett (jhargett@sir-inc.com) 3/4/2011 8:00 AM
The Dow Jones Industrial Average (DJIA) is trending cautiously higher in premarket trading this morning, with Wall Street anticipating strong nonfarm payrolls growth in February. In fact, futures on the DJIA and the S&P 500 Index (SPX) are trading roughly 17.8 points and 1.6 points above fair value, respectively. Economists believe that the U.S. economy added 218,000 jobs in February – the biggest gain since last April (excluding temporary census hiring). Meanwhile, the unemployment rate is seen rising to 9.1% after dipping to 9.0% in January.
Technically, the DJIA soared nearly 200 points on Thursday, placing the blue chip barometer tenuously above former support at the 12,250 level. The Dow is also trading comfortably above its 10-day and 20-day moving averages, after spending five of the past seven days trading below this duo. The DJIA is now staring up at potential resistance in the 12,300-12,350 region. The SPX is facing a potentially more significant hurdle at 1,333.58, which, as you may remember from Monday Morning Outlook, marks a double of the index’s March 2009 low. Support, meanwhile, remains in the 1,300-1,305 region.
In equity news, Bank of America-Merrill Lynch took aim at fellow financial concerns Citigroup Inc. (C) and Goldman Sachs Group Inc. (GS), downgrading both to “neutral” from “buy.” According to BofA-Merrill, the pair’s first-quarter results should come in on the weak side. While earnings “are unlikely to be dismal,” the brokerage firm said that it doesn’t “expect seasonal improvement as strong as often seen in the past. Client engagement remains subdued, Middle East turmoil likely only to further reduce customer risk appetite.” BofA-Merrill also cut its first-quarter earnings forecast for Goldman to $3.91 per share from $5.93 per share, and cut its Citigroup first-quarter forecast to 10 cents per share from 13 cents per share.
In earnings news, Marvell Technology (MRVL) reported a fourth-quarter profit of $222.85 million, or 33 cents per share, up from earnings of $204.82 million, or 31 cents per share, last year. Revenue came in at $900.5 million. On an adjusted basis, MRVL said it earned 40 cents per share. Wall Street was expecting a fourth-quarter profit of 42 cents per share on revenue of $925.3 million.
Finally, Wal-Mart Stores Inc. (WMT) announced after the close last night that its board boosted its annual dividend by 21% to $1.46 per share. The new quarterly dividend, which comes in at 36.5 cents per share, will be payable on April 4 to shareholders of record on March 11.
Earnings Preview
On the earnings front, Bronco Drilling (BRNC) and Madison Square Garden (MSG) are slated to release their quarterly earnings reports. Keep your browser at SchaeffersResearch.com for more news as it breaks.
Economic Calendar
We round out the week with a bang today, with all eyes on the Labor Department’s February nonfarm payrolls report and the unemployment rate. Later in the session, January’s factory orders will hit the Street.
Market Statistics
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,239,343 call contracts traded on Thursday, compared to 676,877 put contracts. The resultant single-session put/call ratio arrived at 0.55, while the 21-day moving average held at 0.57.
Overseas Trading
Overseas trading is broadly higher this morning, with nine of the 10 foreign indexes that we track in positive territory. The cumulative average return on the collective stands at a gain of 0.79%. In Asia, South Korean stocks rallied sharply on bargain hunting by foreign investors, while strength in Chinese banks once again led rallies in Shanghai and Hong Kong. Across the pond in Europe, regional markets are headed toward their second consecutive day of gains, as investors shift their attention from the crisis in Libya toward the U.S. employment picture.
Currencies and Commodities
With turmoil still brewing in Libya, fears of supply disruption pushed oil prices higher once again in overnight trading. In electronic activity this morning, the April crude contract has added 51 cents to trade at $102.42 per barrel. Meanwhile, the U.S. Dollar Index and gold futures are trading flat ahead of February’s nonfarm payrolls and unemployment rate. At last check, the U.S. Dollar Index was off 0.06% at 76.44, while gold futures had added $1.20 to trade at $1,417.60 an ounce in London.
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