Adam Sarhan Quote: Futures climb on China support hope, data on tap

Published: Thursday, 27 Sep 2012 | 8:21 AM ET

NEW YORK (Reuters) – U.S. stock index futures rose on Thursday, on track to snap a five-day losing streak, as hopes grew that the Chinese government would step in to bolster the nation’s slowing growth.

Chinese stocks rebounded from multi-year lows on speculation the China Securities Regulatory Commission would announce steps to support beleaguered domestic markets which could include changes to the initial public offering market. Traders said China’s central bank fed $57.9 billion into money markets this week, the largest weekly injection in history.

China’s securities regulator will hold a regular meeting on Thursday, but reforming the system for initial public offers is not on the agenda, a regulatory source told Reuters.

U.S. cyclical sectors, which have sold off in recent sessions, will likely benefit from any measure to boost Chinese growth. Material and energy shares should be particularly strong as they are tied to demand forecasts.

The world economy has been relying on China’s growth to make up for weakness in the United States and Europe. While the U.S. has shown signs of recovery and the Federal Reserve recently announced measures to support markets, slowing growth in China has been a concern, especially with Europe’s debt crisis still in focus.

“I wouldn’t be surprised to see China’s central banks jump on the easing bandwagon with growth easing there, but we need to see if it will be a concerted push to force the market’s growth into a stronger gear, or more of a symbolic gesture,” said Adam Sarhan, chief executive of Sarhan Capital in New York.

Spain is set to announce economic reforms and a 2013 budget on Thursday. The tension in Europe, underlined by anti-austerity measures in Madrid and Athens, had contributed to the S&P’s 1.9 percent drop over the past five days.

Despite the protests and international lenders admitting to difficulty in working out how to solve Athens’ debt crisis, investors may look for bargains in U.S. stocks at these levels after their recent decline.

“We’re in a short-term oversold condition after five weak days, and it wouldn’t be surprising to see a bounce to alleviate some of that,” Sarhan said.

S&P 500 futures rose 6.8 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 65 points and Nasdaq 100 futures rose 13.5 points.

While early trading has tracked movements in Asia and Europe, market participants await domestic data for further trading impetus. Weekly jobless claims, the final read on second-quarter gross domestic product and August durable goods data will all be released at 8:30 a.m. ET (1230 GMT). August pending home sales data will then be released at 10:00 a.m. ET.

Economic data has been mixed lately, though the housing market has shown signs of improvement. Pending home sales are seen staying flat in the latest month, while durable goods are seen falling 5 percent and jobless claims dropping by 4,000 to 378,000. The GDP read is expected to hold steady from its previous reading at 1.7 percent.

In company news, Hewlett-Packard Co <HPQ.N> fell 1.8 percent to $16.80 in premarket trading after Jefferies downgraded the stock to “underperform,” expecting continued problems in the company’s personal computer segment.

Tempur-Pedic International Inc <TPX.N> agreed to buy rival mattress maker Sealy Corp <ZZ.N> for about $242 million and assume about $750 million in debt. Tempur shares rose 6.4 percent to $28.50 while Sealy rose 4.2 percent to $2.23 before the bell.

The S&P 500 is up 5.2 percent so far for the third quarter and 1.9 percent for September, historically a weak month for equities. Gains were largely tied to economy-boosting actions taken by the U.S. Federal Reserve and European Central Bank.

Nike Inc <NKE.N>, Discover Financial <DFS.N> and Micron Technology Inc <MU.O> are among the companies reporting results today, and investors will be looking for signs that the economy is weighing on profits after Caterpillar Inc <CAT.N> and FedEx Corp <FDX.N> recently cut their forecasts.

Third-quarter outlooks are at the most negative since 2001, according to Thomson Reuters data. The negative-to-positive ratio for the upcoming earnings period stands at 4.3 to 1.

The S&P 500 fell for a fifth straight trading day on Wednesday as the protests in Europe raised fresh concerns over the region’s ability to get its debt crisis under control.

(Editing by Bernadette Baum)

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