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Dow May Rebound as Japanese Stimulus Takes Effect

By Roland Head - Apr 8, 2013 at 8:05AM

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Stock index futures suggest that the Dow and S&P 500 may rebound from Friday's losses when markets open this morning.

LONDON -- Stock index futures at 7 a.m. EDT indicate that the Dow Jones Industrial Average (^DJI 1.34%) may open up by 0.28% this morning, while the S&P 500 (^GSPC 2.02%) may open 0.36% higher.

European stock markets have moved modestly higher this morning, recouping some of the losses they suffered after Friday's disappointing U.S. jobs report. At 7:45 a.m. EDT, the FTSE 100 was up 0.35% and the German DAX was 0.28% higher, but there wasn't much good news to support a sustained improvement. German industrial production rose by 0.6% in February, but January's flat reading was revised down to -0.6%, and the year-on-year figure remains negative, down 1.8%. Italy remains without a new government, and Portugal's government came under renewed pressure at the weekend after a court vetoed proposed public-sector wage and pension cuts, meaning the cuts will now have to be made through further public-sector service cuts, possibly to health and education.

What support there is for European markets may be a consequence of Japan's newly enlarged quantitative-easing program. This morning, the Bank of Japan purchased 1.2 trillion yen of Japanese sovereign bonds with maturities of five years or more, triggering a further fall in the yen, which was trading at 98 to the dollar at 7 a.m. EDT.

In the U.S., the Chicago Fed is scheduled to release its Midwest Manufacturing Index for February at 8:30 a.m. EDT. No other economic reports are due, but tonight sees the start of earnings season, when traditional bellwether Alcoa reports its earnings for the most recent quarter after the closing bell. Expectations are low: The highest of the consensus forecasts is from Thomson Reuters, which is forecasting a 1.6% rise in earnings per share, while FactSet is predicting a 0.6% fall in earnings to $0.08 per share and a 1.6% drop in sales to $5.9 billion. Earnings growth across the S&P 500 has weakened over the last quarter, triggering speculation that the index -- which hit new record highs in March -- could be due for a correction.

Other companies whose stock may be actively traded today include AZZ Incorporated, which reported quarterly earnings of $0.50 per share this morning, beating expectations for earnings of $0.48 per share. However, AZZ missed revenue expectations, and its full-year guidance shows earnings per share falling below consensus estimates.

Finally, let's not forget that the Dow's daily movements can add up to serious long-term gains. Indeed, Warren Buffett recently wrote, "The Dow advanced from 66 to 11,497 in the 20th Century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and many recessions." If you, like Buffett, are convinced of the long-term power of the Dow, you should read "5 Stocks To Retire On." Your long-term wealth could be transformed, even in this uncertain economy. Simply click here now to download this free, no-obligation report.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$32,654.59 (1.34%) $431.17
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$4,088.85 (2.02%) $80.84

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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