U.S. stocks seen off to soft start, but key data looms
Friday March 16, 8:08 am Eastern Time
By Denise Duclaux
<<NEW YORK, March 16 (Reuters) - U.S. stocks are expected to open flat to a touch lower on Friday as investors juggle hopes for a jumbo interest-rate cut to invigorate the nation's sputtering economy with dim growth outlooks from bellwethers Compaq Computer Corp. (NYSE:CPQ - news) and Oracle Corp. (NasdaqNM:ORCL - news).
``If everything remains as it is now then we will have basically a flat opening,'' said Arthur Hogan, chief market analyst at Jefferies & Co., warning that economic data due before the opening bell could shift investor sentiment. ``To a certain extent the market has discounted these profit warnings. After all, we have been selling stocks for 17 months now.''
Compaq, the world's No. 1 personal computer maker, and Oracle, the world's No. 2 software maker, forecast disappointing quarterly earnings and pointed to the soft U.S. economy as the culprit. Compaq slid to $18 in pre-market trading from Thursday's close of $18.50, while Oracle dipped to $14 from its finish of $14-11/16 in the prior session.
The U.S. Federal Reserve is widely expected to lower its benchmark fed funds rate by at least half a point at Tuesday's policy-setting meeting from the current 5.50 percent to lift the economy. But many investors are hoping the central bank will slash rates by three-quarters of a point as consumer confidence spirals downward.
Wall Street is bracing for a rocky session. A slew of economic reports that may help shed light on the Fed's next move are set to be released on triple-witching Friday. Triple witching, when contracts for stock index futures, stock index options and stock options all expire on the same day, can make the markets more volatile than usual.
With more than an hour to go before the opening bell, Standard & Poor's 500 index futures for June edged down 0.70 points at 1,184.00. Nasdaq 100 index futures shed 7 points to 1,708, pointing to a modest decline of 0.4 percent at the open. The Dow Jones Industrial futures lost 30 points to 10,075.
Technology shares knocked Europe's bourses again on Friday, as investors weathered earnings warnings from both Europe and the U.S. -- and the prospect of more to come. The pan-European FTSE Eurotop 300 was down 1.5 percent and the blue-chip DJ Stoxx 50 shed 1 percent.
But Tokyo stocks closed higher for a second straight day on Friday, led by strong rebounds in finance stocks on expectations of easier monetary policy and a speedier cleanup of banks' bad loan mess. The benchmark Nikkei average closed up 80.15 points or 0.66 percent at 12,232.98.
In what could be the most important economic report of Friday's session, the University of Michigan, due at 10 a.m EST (1500 GMT) is expected to show another drop in its consumer sentiment index for March after notching its steepest three-month decline since the last recession in the December-February period. A further drop in sentiment could bolster the case for steep rate cuts.
Economists in a Reuters poll expected, on average, that sentiment dropped to 89.5 from 90.6 in February, while individual forecasts for the index went as low as 85.
Analysts said the producer price index (PPI) for February, due at 8:30 a.m. (1330 GMT), which measures price inflation at the wholesale level, had the potential to hurt the market after a surprise 1.1 percent surge in January.
Economists expected the February PPI to be tame, however, unchanged from January's reading. Excluding food and energy prices, the PPI is also expected to be unchanged.
February housing starts, due at 8:30 a.m. (1330 GMT), are expected to fall to 1.607 million on an annualized basis, compared with 1.651 million in January. Building permits were forecast down to 1.587 million until from 1.724 million in January.
And in a separate report at 9:15 a.m EST (1415 GMT), the Fed is expected to show a 0.4 percent dip in February industrial production, compared with a 0.3 percent rise in the prior month.
In corporate news, Compaq warned after the close that its first-quarter earnings would fall short of expectations amid a PC price war and a softening U.S. economy, and said it will cut about 5,000 jobs, or 7 percent of its work force, in a bid to slash costs.
Oracle said the weakening economy hit database and application software sales in the last quarter, and that it expects the U.S. economy will continue to erode. The company said it was too difficult to pin down a forecast in its key fourth quarter, but said earnings may be flat.
Computer Sciences Corp. (NYSE:CSC - news), the third-largest supplier of computer services, said on Friday before the open that its financial results would fall sharply below Wall Street hopes and that it planned to cut 700 to 900 jobs.
Publishing software developer Adobe Systems Inc. (NasdaqNM:ADBE - news) met its first-quarter profit target and said on Thursday after the close sales picked up in February, but it cut its sales forecast, cautioning U.S. economic weakness could spread abroad.
In other news, OPEC producers met on Friday to restrain exports for the second time this year and appeared ready to slice supplies at the top end of expectations. Insiders said mounting concerns about failing petroleum demand and this week's fall in oil prices meant the group might push through a cut at 1 million barrels daily or more -- tougher action than had been anticipated.
Higher energy prices have capped consumer spending and eaten into corporate profits, adding further pressure to the stock market.>> |
