Oil could cripple stocks
Futures point to weak open as crude prices soar above $96 a barrel to a new record; slew of economic releases on tap.
NEW YORK (CNNMoney.com) -- U.S. stocks were poised for a tough open Thursday as investors awaited the October jobs report while weighing the unusual combination of surging oil prices and disappointing earnings from the nation's largest oil company.
At 9:03 a.m. ET, futures were lower, with a comparison to fair value suggesting a weak start for Wall Street.
Crude prices set another record in Asia, rising as high as a record $96.24 a barrel in electronic trading before pulling back to $95.18 a barrel, which is still up from Wednesday's close.
The surge in oil prices could stem the rally stocks mounted Wednesday after the Fed cut short-term interest rates by a quarter of a percentage point to 4.5 percent.
Investors had widely anticipated the Fed's move and stocks rose as the market breathed a sigh of relief. But the upbeat mood could fade as investors focus their attention on the economic outlook.
There is no shortage of reports for investors to sift through Thursday.
A government report on personal income and spending showed spending by individuals up 0.3 percent in September, a bit less than the 0.5 percent increase in August and the forecast of a 0.4 percent rise. Personal income increased 0.4 percent, the same as the August rise and in line with forecasts.
That report also included a key inflation measure known as the core PCE deflator, which measures prices paid by consumers for items other than food and energy. It showed a 1.8 percent increase compared to a year earlier, the same increase reported in the August report. It is widely believed the Fed wants to see that measure rise between 1 and 2 percent.
Initial jobs claims came in at 327,000, a bit less than forecasts as well as the previous week's reading.
Reports on pending home sales and the ISM index, a gauge of nationwide manufacturing activity, also are slated for release after the market opens.
Then, before the market opens Friday, comes the October jobs report. Economists surveyed by Briefing.com forecast that employers added a modest 80,000 jobs to payrolls, down from the 110,000 increase in September. The unemployment rate is forecast to remain at 4.7 percent.
Art Hogan, chief market analyst at Jefferies & Co., said that investors will have a different view Thursday of those forecasts for a relatively weak jobs report than they did before the Fed statement Wednesday afternoon, which seemed to suggest it was done cutting rates for at least the time being.
Before that statement traders might have expected the equity markets to rally on a job gain of less than 100,000 because of hopes it would bring yet another rate cut at the Fed's next meeting. But now investors will simply look at that type of reading as a sign of a weak economy.
"There's a lot of things to digest after the party we threw for the rate cut Wednesday," said Hogan. "No one wants to get in the way of that kind of rally in the last two hours of the day."
"Typically when the Fed makes a move, it's more important to look at what happens the next day when calmer minds have a full trading day ahead of them," he added. "We're probably in a healthier environment if we're not rooting for bad news."
In corporate news, Altria (Charts, Fortune 500), the nation's No. 1 cigarette maker, said Thursday it agreed to buy cigar maker John Middleton for $2.9 billion in cash. Shares of Dow component Altria slipped 0.3 percent in pre-market trading on the news.
Shares of Wall Street firm Bear Stearns (Charts, Fortune 500) were down about 1 percent in early Frankfurt trading Thursday after the Wall Street Journal reported that CEO James Cayne was often out of the office and out of reach playing bridge or golf this summer while his firm was facing a meltdown in its hedge funds that had bet incorrectly on securities backed by subprime mortgages. Those fund meltdowns helped bring on the credit crunch in global credit markets in August.
Cayne isn't the only Wall Street executives feeling heat. There were published reports Thursday that Citigroup (Charts, Fortune 500) ousted two executives responsible for the bank's mortgage-backed securities business,
U.S. automakers are due to report October sales Thursday. Analysts are looking to see if General Motors (Charts, Fortune 500) can again post improved sales compared a year earlier, as it did in September when it gained ground on both domestic rivals such as Ford Motor (Charts, Fortune 500) and Chrysler, as well as some Asian competitors such as Toyota Motor (Charts).
In global trade, Asian stocks finished higher while European stocks slipped in morning trading. The dollar, which hit yet another record low against the euro Wednesday after the Fed rate cut, gained on both the European currency and the yen Thursday as traders bet the Fed may be done easing rates for at least the foreseeable future.
Gold prices, which Wednesday topped $800 for the first time since 1980 before closing at $795.30, topped that benchmark again in early morning trading, then retreated slightly to $795.40.