Reuters

Thu Sep 27, 2012 9:10am EDT

* GDP weaker than expected, jobless claims fall
* China measures could support cyclical shares
* Investors await Spain’s budget as riots continue
* Futures up: Dow 52 pts, S&P 6.1 pts, Nasdaq 6.75 pts
By Ryan Vlastelica
NEW YORK, Sept 27 (Reuters) – U.S. stock index futures pared some earlier gains and were poised to open modestly higher Thursday in the wake of weak data that reflected the nation’s sluggish economic growth.
Still, equities remained on track to snap a five-day losing streak on hopes the Chinese government would take steps to bolster the country’s slowing growth, and as U.S. jobless claims fell a lot more than expected in the latest week.
Futures pared gains as data showed second-quarter gross domestic product growth of 1.3 percent, against expected growth of 1.7 percent. At the same time, August durable goods tumbled 13.2 percent, much more than the 5 percent drop expected.
“None of these numbers are really trending upwards… a lot of investors are starting to wonder how much markets are over-valued,” said Tim Speiss, head of personal wealth advisors at EisnerAmper in New York.
Jobless claims dropped by 23,000 to 359,000, significantly more than the 4,000 drop that had been expected. Pending home sales will be released later on Thursday.
S&P 500 futures rose 6.1 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 52 points and Nasdaq 100 futures rose 6.75 points.
In China, 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. Analysts said investors may look for U.S. stocks offering value after the recent declines.
In company news, Hewlett-Packard Co fell 2.5 percent to $16.68 in premarket trading after Jefferies downgraded the stock to “underperform,” expecting continued problems in the company’s personal computer segment.
Tempur-Pedic International Inc agreed to buy rival mattress maker Sealy Corp for about $242 million and assume about $750 million in debt. Tempur shares rose 7.9 percent to $28.90 while Sealy rose 3.3 percent to $2.21 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.
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.
URL: http://www.reuters.com/article/2012/09/27/markets-usa-stocks-idUSL1E8KR1VW20120927