Stock futures rise modestly after JPMorgan results

July 15, 2010 6:58:31 AM PDT
Stock futures rose modestly Thursday after banking giant JPMorgan Chase & Co. became the latest company to report strong quarterly results, even as broader economic indicators point toward a slowdown.

Big gains, though, were kept in check as investors prepare for key reports on unemployment, inflation and manufacturing that will shed more light on the pace of recovery.

JPMorgan Chase easily topped earnings forecasts, following others like Intel Corp. and Alcoa Inc. in reporting strong results. The bank also cut down its loan-loss reserves, which could be a sign that mortgage and loan defaults are moderating.

However, JPMorgan's CEO Jamie Dimon still struck a cautious tone about future economic growth. Dimon has regularly been cautious about the recovery.

Ahead of the opening bell, Dow Jones industrial average futures rose 29, or 0.3 percent, to 10,335. Standard & Poor's 500 index futures rose 4.10, or 0.4 percent, to 1,095.20, while Nasdaq 100 index futures rose 8.25, or 0.5 percent, to 1,859.50.

The small gains come ahead of a key reading on weekly unemployment claims. Continued high unemployment remains the biggest obstacle to a strong, sustained recovery. So any signs that employers might ramping up hiring would be a welcome sign.

Economists polled by Thomson Reuters predict initial claims for unemployment benefits fell to a seasonally adjusted 450,000 last week from 454,000 a week earlier. The report from the Labor Department is due out at 8:30 a.m. EDT.

The drop could be distorted though by General Motors decision to keep factories running in July. The automaker often shuts down production during the month, which normally adds to jobless claims during the month.

In recent months, reports on weekly jobless claims and the monthly employment report have regularly fallen short of forecasts, which has been a drag on stocks.

Traders will also get a report on inflation at the wholesale level. The Producer Price Index likely fell 0.1 percent in June, its third straight monthly decline. The drop in prices means inflation remains benign and should allow the Federal Reserve to hold key interest rates at historically low levels to try and stimulate the economy.

A government report on industrial production is expected to show output at the nation's factories, mines and utilities fell by 0.1 percent in June after rising 1.3 percent a month earlier.

Two regional manufacturing surveys are likely to be conflicting about whether the recovery in the sector is slowing. The Empire State Manufacturing index likely dipped in July, while the Philadelphia Federal Reserve manufacturing index rose.

Manufacturing had shown the most consistent growth coming out of the recession, so signs of a slowdown could provide further evidence for investors that the economic is set to slow down considerably during the second half of the year.

The Dow eked out a gain of 4 points Wednesday to extend its winning streak to seven days. However, the S&P 500 snapped its run of gains by falling less than 1 point. A mixed picture of the economy continued to play out Wednesday, pulling investors in two directions.

Early earnings reports remained strong. Investors were upbeat after chipmaker Intel Inc. reported a better-than-expected profit and provided a positive outlook for the rest of the year. However, economic data again disappointed. This time it was sagging retail sales that diminished excitement for future growth.

The Federal Reserve also was cautious about future growth in the minutes from its June meeting that were released Wednesday. The Fed lowered its outlook for the gross domestic product, the broadest measure of the economy.

The euro climbed above $1.28 for the first time in more than two months Thursday as investors worried about the strength of growth in the U.S.

Bond prices were narrowly mixed ahead of the crush of economic data. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.06 percent from 3.05 percent late Wednesday.

Overseas, Britain's FTSE 100 fell 0.3 percent, Germany's DAX index gained 0.1 percent, and France's CAC-40 fell 0.1 percent. Japan's Nikkei stock average fell 1.1 percent.