Stocks Poised to Build on Thursday's Gains
Stocks are going to try to make it two days of gains in a row. Stock index futures in the U.S. are indicating a higher open on Friday.
Stocks reversed a three-day losing streak Thursday. The Dow Jones Industrial Average rose 45 points. It had been higher by more than 140 points after a solid report on jobless claims. The number of Americans seeking unemployment benefits for the first time fell to a 3-1/2 year low last week of 366,000. Other favorable reports Thursday included Empire State Manufacturing, the Philly Fed Survey, and Producer Prices for November.
Consumer Price Inflation is on tap for Friday morning. After falling slightly in October, investors are looking for a slight tick upward in November to 0.1%. At the so-called "core" rate -- which excludes volatile food and energy -- prices are also expected to rise a modest 0.1%.
CPI is important because it measures inflation. The Fed's two rounds of quantitative easing were criticized for debasing the value of the U.S. dollar and stoking inflation. The latest inflation reports suggest that that has not happened. Earlier this week, the dollar rose to the highest level in a year versus the euro.
Financials are expected to be in the spotlight. Fitch has downgraded eight of the biggest banks in the world citing "increased challenges" in Europe and the U.S.
Fitch also says that there are only eight banks that are candidates for government support -- meaning they're "too big to fail." Those include: Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), Bank of New York Mellon, Citigroup (NYSE:C), JP Morgan Chase (NYSE:JPM), State Street, and Wells Fargo.
The financial sector is often viewed as a proxy for the overall market. In many recent days, stock indices have been seen to move following the lead of the financials.
Research in Motion shares are facing another major setback. The maker of blackberry and PlayBook devices released its third quarter numbers after Thursday's closing bell. RIM beat on the bottom line but came in slightly short on the top line, with revenue of $5.2 billion. Shares were down as much as 8% in after-hours trading. RIMM shares are down nearly 80% in 2011.
Investors are growing frustrated, especially after RIM said its new phones -- deemed critical to its future following massive BlackBerry outages and competition from Google (NASDAQ:GOOG) and Android -- will be delayed until the end of 2012.
To appease growing anxiety over the company's performance, its co-CEOs said they're cutting their salaries to $1 a year effectively immediately.
The Nasdaq gets a new stock Friday. Zynga will start trading under the ticker ZNGA. Shares of the game maker for Facebook priced at the top of its expected range at $10 each, raising $1 billion.
While luxury retailer Kors, named after iconic designer Michael Kors, also raised about $1 billion in its offering Thursday, not all analysts are convinced the IPO market is hot.
In a FOX Business interview with Kathleen Smith, a principal at Renaissance Capital, a research firm specializing in IPOs, Smith says, "investors are coming into the IPO market gradually and are afraid to own unseasoned equities," meaning ones that aren’t big names or very well-known businesses.
Smith adds that "IPO investors and investors in general are discounting the future. There is a concern over...what overall economic growth will be." She notes the European debt crisis is spooking investors in the U.S., but also in Asia.
The IPO of Renren, dubbed "the Chinese Facebook," has been disappointing. It went public in May and since then, shares are down 75% from its strike price.
Speaking of the Internet, if you are still polishing off your holiday gift lists, "Free Shipping Friday" might be your incentive. More than 2,300 retailers have signed up for the made-up holiday at www.freeshippingday.com to offer free shipping on any and every order with delivery by Dec.24. About 1,700 retailers signed up last year and saw a favorable sales boost.