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TheStreet Open House

Stock Futures Slide, Treasuries Soar

NEW YORK ( TheStreet) -- Stock futures were falling and Treasuries were soaring Thursday as investor sentiment dampened on downbeat economic growth numbers from the eurozone and Japan, and as traders awaited options expiration day Friday.

Stocks pared losses a bit after data showed a decline in U.S. initial and continuing jobless claims.

Futures for the Dow Jones Industrial Average were sliding 40 points, or 50.70 points below fair value, at 13,918. Futures for the S&P 500 were down 3.25 points, or 1.73 points below fair value, at 1514. Futures for the Nasdaq were falling 7.50 points, or 2.78 points above fair value, at 2762.

JJ Kinahan, chief derivatives strategist at TD Ameritrade, said he thinks one of the things that options traders will most assuredly be paying attention to this week is options expiration day on Friday.

"We still do get some movement (particularly in underlying indexes such as SPX) on expiration Thursday and Friday so that is something to definitely watch," said Kinahan. He added that the 1525 level in the SPX is where traders will start to see resistance and the market may have trouble climbing through. He noted that the SPX was positive Wednesday with a positive VIX and he did see traders purchasing options with the thought that they could see a temporary breather in the S&P over the next two days.

European markets were retreating after Eurostat, the statistical office of the European Union, said flash estimates show that gross domestic product fell by 0.6% in the euro area during the fourth quarter of 2012 compared with the previous quarter..

The FTSE in London was falling 0.76% and the DAX in Frankfurt was declining 1.15%.

"The weakness in Q4 ... reflects a number of special or calendar related factors that may quickly be reversed," said Michel Martinez, an economist at Societe Generale.

Martinez said that much of the decline appeared to be related to the impact of the three-point VAT increase in Spain at the start of September, which resulted in "consumption switching effects" between the third and fourth quarters that were felt across Europe particularly in the car sector.

Martinez said the decline in Italy in particular was especially weak and probably continues to reflect the weakness in real disposable income which Martinez estimated declined by around 5% year-over-year in the fourth quarter. Elsewhere, poor weather in December also had a pronounced affect on construction, especially in Germany, the economist added.

Major U.S. stock averages closed mixed Wednesday. U.S. retail sales in January, released Wednesday, came in as expected.

"As the retail sales numbers came in as expected, this is an important measure of things and as it is released weekly allows for extra scrutiny," said Kinahan. The other economic number left to look at will be the consumer sentiment index on Friday to see if it falls in line with retail sales or paints a "scary picture," he added.

The Labor Department reported Thursday that initial jobless claims for the week ended Feb. 9 were 341,000, a decrease of 27,000 from the previous week's upwardly revised revised figure of 368,000. The four-week moving average was 352,500, an increase of 1,500 from the previous week's average of 351,000.

Continuing claims for the week ended Feb. 2 were 3.114 million, a decrease of 130,000 from the preceding week's level of 3.244 million.

Economists were expecting jobless claims of 365,000 and continuing claims of 3.2 million.

The Nikkei in Japan finished up 0.5% Thursday as upbeat company earnings offset profit-taking on financial stocks. Data indicated that the Japanese economy contracted for a third straight quarter in the fourth quarter. Hong Kong's Hang Seng index settled up 0.85% as the Hong Kong market re-opened after the lunar new year holiday.

Gold for April delivery was down 80 cents at $1,644.30 an ounce at the Comex division of the New York Mercantile Exchange, while March crude oil futures were down 19 cents at $96.82 a barrel.

The benchmark 10-year Treasury was soaring by 1 25/32, pushing the yield down to 2.032%. The dollar was up 0.58%, according to the U.S. dollar index .

In corporate headlines, the merger of AMR (AAMRQ.PK) subsidiary American Airlines and US Airways (LCC) was formally announced Thursday. US Airways shares were rising 1.5% and AMR shares were soaring by more than 19%.

Cisco (CSCO) beat Wall Street's second-quarter earnings and revenue estimates. Shares were down 0.19% in premarket trading.

Automaker General Motors (GM) posted fourth-quarter earnings of 48 cents a share on revenue of $39.3 billion, versus the average estimate of 51 cents a share on revenue of $39.14 billion amid ongoing weakness in its European segment. Shares were trading sideways.

Whole Foods (WFM), the natural and organic grocery chain, said Wednesday that fiscal first-quarter profit rose 24% as revenue jumped almost 14%.

Whole Foods narrowed its revenue forecast and said its earnings growth may slow through the remainder of the fiscal year.

Shares were tumbling more than 6%.

PepsiCo (PEP) shares were rising more than 1.5% after the food and beverage giant posted fourth-quarter earnings of $1.09 a share on revenue of $19.95 billion, beating analysts' earnings estimates of $1.05 a share on revenue of $19.7 billion. The company said that PepsiCo Americas Foods saw organic revenue grow 8% in the quarter driven by organic revenue gains in all divisions including Latin America Foods. U.S. market share trends for Frito-Lay North America and PepsiCo Americas Beverages improved sequentially in the fourth quarter.

The company also announced a quarterly dividend increase of 5.6%, starting in June.

CBS (CBS) is expected to post fourth-quarter earnings of 69 cents a share after the market close.

-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.

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