What's Driving The Market Thursday

by: Markos Kaminis

The SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrials (NYSE: DIA) and PowerShares QQQ (NASDAQ: QQQ) are all starting higher Thursday on U.S. economic data that did no harm. Soft jobless claims and mildly lower housing starts with a gain in building permits are offering some lift to start the day. Several company specific drivers are coming into play for Cisco Systems (NASDAQ:CSCO), Facebook (NASDAQ:FB), Sears Holding (NASDAQ:SHLD), Wal-Mart (NYSE:WMT) and Deere (NYSE:DE) this morning, while the shares of Toyota (NYSE:TM) and Honda (NYSE:HMC) should continue their Asian gains. Data should also give direction to Amazon.com (NASDAQ:AMZN), eBay (EBAY) and other important online retailers on industry data this morning. Details follow.

Overseas Drivers

Japanese shares shined today as shares of its exporters did especially well on weakness in the yen. Honda Motors Toyota Motors and Mazda (OTCPK:MZDAF) had good days in Japan, up 2%-3% on the day. Otherwise, overseas news shouldn't weigh more than U.S. data today.

International Markets



EURO STOXX 50: +0.1%

S&P/ASX 200: +1.1%

FTSE 100: -0.1%

Hang Seng: -0.5%

DAX: +0.2%

Nikkei 225: +1.9%

Click to enlarge

US Economic Drivers

Weekly Initial Jobless Claims edged up 2,000, to 366K, in the period ending August 11, adding an easing tone to the day's trading. The four-week moving average for claims fell 5,500 to 363,750 in the period. While I continue to see layoffs rising ahead, today's news is decidedly positive for the day's trading.

The annual pace of Housing Starts slipped in July to a pace of 746,000, down 1.1% from June's pace of 754,000 and short of the economists' consensus for 750K. However, the pace remains 21.5% above last July's 614K starts. Building Permits increased 6.8% in July to 812K, offering better insight moving forward. This might offer some support today to the housing industry and the SPDR S&P Homebuilders (NYSE: XHB); if not initially, due to the Starts headline, than by the close. However, I continue to warn against investment in the stocks (though buy the real estate), given economic deterioration and the cyclical nature of the industry.

The Philadelphia Federal Reserve Bank Business Outlook Survey, due at 10:00 AM EDT, is seen by economists continuing to show manufacturing sector contraction. At the consensus, economists see the index marking negative 5.0, which would be improved from July's minus 12.9 measure. The result follows yesterday's reporting of the NY area measure, which fell into contraction at negative 5.85, from 7.39 in July. The manufacturing sector has indicated a softening trend for some time now, and I've been talking about it since the start of the year (more recently in July). Look for this regional measure to reflect that national degradation and work against stocks Thursday.

The U.S. Department of Commerce reports on e-Commerce at 10:00 AM EDT. Given the latest Retail Sales gain, you should expect similar news from the market share gaining segment of the retail industry. Thus, this data point is more likely to offer a positive driver for stocks today, and especially E-Commerce mainstays like Amazon.com , eBay (Nasdaq: EBAY) and others of the sort.

The EIA reports on Natural Gas Inventory at 10:30 AM EDT. Last week's data covering the period ending August 3, 2012, showed inventory increased by 24 Bcf, rising to a level 386 Bcf above the five-year average for this time of year. The natural gas glut continues. Despite its July rise, the shares of United States Natural Gas (NYSE: UNG) are still lower on the year and on the decline again.

US Corporate Drivers

Wal-Mart shares were down more than 2% in the pre-market, after the company reported its quarterly results. The company beat on the bottom line, posting $1.18 per share, versus analyst consensus expectations for $1.17. However, revenues at $114 billion disappointed expectations for $115.8 billion. Investors need to see gains on the top line (the number hardest to manipulate) to be assured of forward growth. However, WMT did raise its EPS guidance, with especially the bottom end of the range hiked.

Sears is up nearly 3% in the early going, after it reported results. Sales fell and missed Wall Street expectations for Sears as well, but the bar was set much lower for the distressed retailer. The company's bottom line loss of $0.86 after items was in line with analysts' views. Sales at $9.47 billion were short of the $9.63 billion seen by the Street.

Facebook's tradable shares will increase by 60% starting today, as IPO lockup restrictions come off. The shares are down 2.7% in the early going on concern about potential selling. However, given the stocks' already recorded slide, some of that should be questioned. Though given the value still available to some who have otherwise not had opportunity to cash in, the concern is warranted today.

Cisco Systems shares are up 7%+ this morning after it reported results. When I penned "Cisco: A Value Buy or Trap?" a few weeks back, I concluded with a neutral position. And given the global macroeconomic backdrop I continue to see, my enthusiasm remains tempered today. The company helped investor's handle its still cautious outlook with a dividend hike and guidance in line with analyst expectations.

Deere shares are up fractionally this morning after a significant hit Wednesday. The company said global weakness would impact its near-term results, but it saw drought conditions in the U.S. adding some lift. The company's full-year profit forecast was short of its most recent view and under analysts' expectations, which is never good.

The earnings schedule for the day highlights reports from Aeropostale (NYSE: ARO), America's CAR-MART (Nasdaq: CMRT), Bon-Ton Stores (NASDAQ: BONT), Brocade Communications (NASDAQ: BRCD), Cosi (NASDAQ: COSI), Dollar Tree (NASDAQ: DLTR), DryShips (NASDAQ: DRYS), GameStop (NYSE: GME), The Gap (NYSE: GPS), Marvell Technology (NASDAQ: MRVL), Ross Stores (NASDAQ: ROST), The Buckle (NYSE: BKE) and Trans World Entertainment (NASDAQ: TWMC). I expect this will get you in gear for Thursday trading.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.