Stocks set for lower opening as markets fall overseas, ahead of weekly jobless claims report

By Stephen Bernard, AP
Thursday, November 19, 2009

Stocks futures indicate lower opening

NEW YORK — Stock futures are pointing toward a lower opening Thursday, following the lead of overseas markets and as the dollar strengthened.

Investors were little swayed by a new report on weekly unemployment claims that was in line with expectations.

Asian markets were mostly lower amid fresh worries about the financial sector as Japan’s biggest bank, Mitsubishi UFJ Financial Group, said it plans to raise $11.2 billion to shore up its balance sheet. European markets were also lower.

A rising dollar is pushing the market lower as well. Stocks have been trading in the opposite direction of the dollar in recent months. A strengthening dollar hurts the price of commodities and energy and materials stocks.

“What we’re seeing is a market consolidating at the upper end of the trading range,” said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc.

The Organization for Economic Cooperation and Development increased its forecast for economic growth in 2010 in its 30 member countries, but cautioned any recovery will be slow and bumpy because of high unemployment. The Paris-based group said unemployment is not expected to peak until the end of 2010 or the beginning of 2011.

The Labor Department’s weekly report provided further evidence that job losses continue to be a problem, and a recovery in employment is likely to be slow and bumpy.

The number of newly laid off workers seeking unemployment insurance for the first time was unchanged last week at 505,000. Economists were predicting that same figure.

Consumers worried about their jobs have cut back on spending, which has slowed a potential recovery. Consumer spending accounts for more than two-thirds of all economic activity so investors are looking for any signs that shoppers are more likely to start spending again.

Ahead of the opening bell, Dow Jones industrial average futures fell 59, or 0.6 percent, to 10,345. Standard & Poor’s 500 index futures declined 8.70, or 0.8 percent, to 1,099.80, while Nasdaq 100 index futures fell 10.50, or 0.6 percent, to 1,790.00.

The market is likely being weighed down further by a recent analyst downgrade of the chip sector, Cardillo said.

Investors will also get a private reading on the U.S. economy later Thursday. Economists predict the Conference Board’s index of leading economic indicators likely rose 0.5 percent, which would be the seventh consecutive month of growth. However the results show only a modest recovery taking place.

A report that is in line or exceeds expectations would likely reverse the early morning trend in stocks or at least “cushion the market from any major decline,” Cardillo said.

The report is due out at 10 a.m. EST.

Stocks slipped modestly Wednesday after a disappointing report showed home construction fell 10.6 percent in October to an annual rate of 529,000 units, well below the pace of 600,000 forecast by economists. Building permits, a key indication for future activity, slid 4 percent.

Worse-than-expected forecasts from the technology sector also weighed on the market. The Dow and S&P dipped 0.1 percent, while the Nasdaq fell 0.5 percent.

Meanwhile, bond prices rose modestly Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.35 percent from 3.37 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.03 percent from 0.02 percent.

Overseas, Japan’s Nikkei stock average fell 1.3 percent. In afternoon trading, Britain’s FTSE 100 was declined 0.7 percent, Germany’s DAX index fell 0.9 percent, and France’s CAC-40 declined 0.9 percent.

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