A modestly positive open is likely after an upbeat outlook from Alcoa helped US stocks edge higher on renewed optimism about corporate earnings.
The March SPI 200 futures contract ended the night session 11 points or 0.3% stronger at 4689 as the big Australian miners joined the first rally in the benchmark indexes in the US in three days.
The S&P 500 advanced 0.26%, hitting its high early in the session and fading steadily for the rest of the night. The Dow held on to 62 points or 0.47% of an initial gain of 117 points. The Nasdaq added 0.46%.
The session got off to a robust start after Alcoa's profit report, released yesterday morning Australian time, helped soothe nerves going into the four-quarter corporate reporting season. Shares in Alcoa jumped as much as 2.5% in early trade but the gains shrunk to less than 0.1% despite the company's prediction that aluminum demand will grow by 7% this year, up from 6% in 2012.
"Clearly no one is expecting a stellar earnings season," an investment strategist at Edward Jones in the US told Reuters. "With the number of companies that lowered guidance over the last few weeks, I think there's some concern that we could see companies disappoint. However, based on the fact that many companies have lowered guidance, that means they've put the bar so low they could crawl over it, and I would expect what we'll see is some relief as earnings come in."
Cyclical stocks continued to prosper. The Dow Jones Transportation Average, a traditional measure of risk appetite, hit its highest level since July 2011. The Russell 2000 index of small caps rallied 0.49%. BHP rallied 0.45% and Rio Tinto put on 0.35%.
The major European markets rallied despite disappointing German industrial data. Germany's DAX gained 0.31%, France's CAC 0.3% and Britain's FTSE 0.75% after German industrial production increased just 0.2% in November, well short of the expected rebound after two months of decline.
Gold struggled to retain Tuesday's gains as a rising US dollar stripped demand for alternative stores of wealth. Gold for February delivery was recently down $5 or 0.3% at US$1,657.20 an ounce.
The mood was brighter on the London Metal Exchange, where Alcoa's improved aluminium outlook encouraged buying. Copper put on 0.55%, aluminium 1.2%, lead 1.9%, nickel 1.1%, tin 1.6% and zinc 1.1%. US copper for March delivery was recently down less than 0.1% at US$3.67 a pound.
Oil remained stuck around the US$93 a barrel level, where it has hovered for the last five sessions. West Texas crude for February delivery was lately up one cent or less than 0.1% at US$93.16 a barrel.
TRADING THEMES TODAY
STEADY AS SHE GOES: Can't accuse Wall Street of getting over-excited about the Alcoa result, but at least it broke a two-session losing run. That should be enough for another positive session here, provided China's trade balance update due today (exact time uncertain) doesn't throw a cat amongst the pigeons. Trading volumes are close to normal this week and that's creating more opportunities at the mid-cap/blue chip level. Meanwhile, the specs are on fire. These are dream conditions for momentum/breakout traders, with plenty of "hot" money looking for the next runner. The trick is to share the spoils without getting left holding the bag. One of the main reasons that specs run hot and cold is that eventually the available pool of loose money gets stuck in losing trades. Stay nimble.
ECONOMIC NEWS: Building approvals are due at 11.30am EST. Also likely today are Chinese trade balance figures but the exact release time is uncertain. The European Central Bank holds a rate policy meeting tonight. The US finally has some substantial economic data tonight in weekly jobless claims and wholesale inventories.
