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Friday Look Ahead: Surfing the Dell Wave

Published: Thursday, 27 Aug 2009 | 9:54 PM ET

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By: Patti Domm
Executive Editor

Dell's forecast that second half revenue should come in stronger than the first half are encouraging words for a stock market that has been doing little more than treading water this week.

Sharon Lorimer
Dell [DELL Loading... () ] also said its consumer markets are stabilizing, but its corporate business remains difficult.

Friday's data, consumer sentiment and personal income, will provide more clues about the U.S. consumer Friday. Consumer sentiment, reported at 9:55 am New York time, follows on a better than expected consumer confidence report earlier this week. Personal income is released at 8:30 am.

Tiffany's [TIF Loading... () ] earnings will also give a look at how its high-end consumer is faring.

The Dow finished up 37 points at 9,580 Thursday, and the S&P was up 2 at 1,030. The dollar traded lower, while oil and metals traded higher. Bonds, especially longer duration, saw selling.

Dell was higher in late trading Thursday, after its quarterly profits and sales beat expectations. Dell reported a profit of $472 million or 24 cents a share on sales of $12.8 billion.

Another company that saw better earnings after Thursday's bell was J.Crew [JCG Loading... () ]. Unlike many retailers, J.Crew profit rose year-over-year. The retailer said second quarter net of $18.6 million or 29 cents a share, up from $18.1 million or 28 cents a share last year. Analysts expected just 15 cents per share, and J.Crew forecast third quarter could be 30 to 33 cents per share, compared to analysts' expectations of 30 cents per share.

High Fliers?

Watching the tape these days is like watching a who's who among tarnished financial names. These stocks have dominated trading volume in an otherwise dull market. Citigroup [C Loading... () ], Fannie Mae [FNM Loading... () ], Bank of America [BAC Loading... () ], Freddie Mac [FRE Loading... () ], AIG [AIG Loading... () ], CIT [CIT Loading... () ] were Thursday's top volume leaders on the NYSE. The financials also were the best performers of the day.

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"There's really not a lot going on. If you take the out the financials' volume, and you look at the volume in the rest of the tape, it's terrible," said John O'Donoghue, head of equities trading at Cowen.

Thursday's standout was AIG, which ramped up in a short squeeze and amid all kinds of related hype. Former Chairman Hank Greenberg's name came up, after his reported talks with AIG CEO Robert Benmosche. He denied one rumor that he was going to return as a buyer for the company, but the idea of a Greenberg role with the company certainly helped boost the stock. AIG traded nearly five times its 10-day average, on 148 million shares, jumping 27 percent.

Traders also pointed to a rush of buying in puts, implying that many investors expect the stock to move lower. Bose George, an analyst with Keefe Bruyette, was quoted as saying stocks like AIG could actually be worth nothing longer term, depending on what the government does to wind down their ownership stakes and support for the companies.

China Syndrome

The dollar fell against both the yen and euro Thursday. The dollar [EUR= Loading... () ] was off 0.8 percent against the euro at $1.4367, and it was down just slightly against the yen [JPY= Loading... () ], at 134.13.

"What looked like a good dollar day just got smacked back down," said Brian Dolan, chief strategist at Forex.com. Dolan said the move was largely position driven.

For Investors:

In the foreign exchange market, there's a nagging concern about China's growth, the same fear that hit the stock markets last week when the Shanghai stock market tumbled. Stocks there are stabilizing, but analysts continue to watch for signs that China's is slowing down.

Analysts say China has been signaling it will try to constrain growth. On Wednesday, official China news said the state council was studying industries where there's overcapacity, like steel.

"Overall the dollar has been doing a little better on more positive news, specifically out of the U.S. and part of that is it's tough to differentiate how much of that is doubt over the outlook for the next couple of months," Dolan said. "Part of that is China. China's expansion looks to have run its course and they are looking to rein it in. That's a problem for the overall outlook, and for the risk proposition."

"One thing we're looking at is the Chinese leading index is basically at the same level it was at in 2007 when global expansion was at its peak ... are we anywhere near that global growth where the Chinese indexes should be at that level?” he said. “If you were China, you want to tamp down that data ... you would want to say everything's fine. No bubble here. Look elsewhere."

— Questions? Comments?