(RTTNews) - Stocks are looking to open modestly higher on Wednesday following the release of a key report on durable goods orders. While the upbeat report may prompt some buying interest, another rise in oil prices could keep the positive sentiment muted.
Orders for durable goods increased by much more than expected in the month of July, according to a report released by the Department of Commerce, with the increase reflecting strong demand for goods meant to last for at least three years.
The report showed that durable goods orders jumped 1.3 percent in July, matching the revised 1.3 percent increase in June. Economists had been expecting a much more modest increase in orders of about 0.1 percent.
In other economic news, Atlanta Federal Reserve Bank President Dennis Lockhart called the latest CPI data a "high and worrisome" number earlier in the day, although he said that the recent price increases are "more likely to be transitory than persistent."
Speaking at an Economic Outlook Conference at Georgia State University in Atlanta, Lockhart predicted that there would be only "partial" relief from the decline in oil prices.
"I expect the recent decline in oil prices will begin to reverse some of the pressures we have seen on overall inflation in the first half of the year," he said in prepared remarks. "But the underlying global supply pressures remain tight, and demand pressures remain relatively high."
Later in the morning, the Energy Information Administration is scheduled to release its weekly petroleum inventory report. While the report is expected to show a continued increase in crude oil inventories, gasoline inventories are expected show another significant decrease.
Meanwhile, mortgage backers Freddie Mac (FRE) and Fannie Mae (FRE) may show some strength after the Mortgage Bankers Association released its weekly application survey, showing a modest increase in the volume of mortgage applications.
Amylin Pharmaceuticals (AMLN) and Eli Lilly (LLY) may see declines during the day after the drug developers reported four new deaths of patients using the diabetes drug Byetta. On Tuesday, the companies provided clarification regarding the FDA's August 18, 2008 update to a prior alert for Byetta related to pancreatitis.
On the earnings front, Apparel retailer J. Crew Group, Inc. (JCG) said Tuesday after the markets closed that its second quarter earnings fell 12 percent from last year, hurt by a disruption to its direct business as well as the continued softness in its stores business due to the macro economic environment. The company also cut its full year 2008 earnings forecast for the second time.
Elsewhere, Ikon Office Solutions (IKN) announced that it has agreed to be acquired by Japan's Ricoh Company, Ltd. for $17.25 per share, or approximately $1.6 billion in cash.
The combination of Ikon and Ricoh will leverage Ikon's sales and services capabilities with Ricoh's engineering and manufacturing expertise to better meet the needs of customers by offering full end-to-end office solutions and services.
Meanwhile, Nexmed (NEXM) may see notable weakness after the company decided not to submit an NDA for its onychomycosis drug based on the First Interpretable Results of Phase III clinical studies for the drug.
Stocks traded with a lack of direction throughout the session on Tuesday, unable to sustain any notable moves in either direction. An increase in oil prices offset positive sentiment from better than expected numbers on consumer confidence.
The major averages ended the session in a mixed fashion, with the Nasdaq closing in negative territory. While the Nasdaq closed down 0.2 percent, the Dow closed up 0.2 percent and the S&P 500 closed up 0.4 percent.
Concerns about adverse financial sector developments combined with expectations of a moderation in inflation contributed to the Federal Reserve's latest decision to leave interest rates unchanged, according to the minutes of the August meeting released on Tuesday.
The minutes of the August Federal Reserve meeting showed that most members were of the view that the next move in interest rates will be towards the upside. However, the members don't seem to share a unanimous view about the extent and timing of the policy move.
Given the fact that most of the members do not view the current policy stance as particularly accommodative, the Fed is likely to remain on hold this year.
Crude oil futures are currently rising $1.88 to $118.15 a barrel after they advanced $1.16 to $116.27 a barrel on Tuesday. The strength in oil prices could put pressure on oil-sensitive stocks such as airlines.
Gold futures are currently up $8.60 at $836.70 an ounce, adding to the strength seen in the previous session, when it gained $2.40 to $828.10 an ounce.
On the currency front, the U.S. dollar is currently trading at 109.54 yen compared to the 108.9655 yen it was worth at the close of New York trading on Tuesday. Meanwhile, the greenback is currently valued at 1.4726 versus the euro.
In overseas trading, stocks markets across the Asia-Pacific region ended Wednesday's trading with a mixed performance. While Japanese and Chinese stocks saw modest weakness, strength was visible among stocks in Hong Kong and Korea.
The major European markets are also showing mixed sentiment in Wednesday's session. While the U.K.'s FTSE 100 Index is currently up 0.5 percent, the French CAC 40 Index is down 0.3 percent and the German DAX Index is down 0.5 percent.
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