US stock futures are on pace for solid gain Thursday morning after another bout of heavy selling yesterday due to concerns about a full-blown nuclear meltdown. While yesterday concerned comments from the EU energy chief and Japanese officials sent stocks plummeting, overnight there were no new updates in the on-going crisis. Military helicopters were brought in today to dump water on overheating fuel stores at the Fukushima Daiichi power plant, and energy officials in Japan hope to restore power to the facility soon so it can restart cooling pumps. *Update: As of 8:15 am, the Japanese Press is reporting that Tokyo Electric Power Co Inc. workers have connected a power cable to the Fukushima plant and could now be cooling the cores of the reactors.
In addition to the deepening crises in Japan, there is increasing unrest in the Middle East. Bahrain has erupted in protests, and Saudi troops have been ushered in to crack down on the the violence. In Libya, ruler Moammar Gadhaffi’s troops have begun taking back rebel strongholds, and it looks like the status quo will remain for now. Oil futures are up overnight in electronic trading.
For more market and stock commentary, watch the Morning Call with Scott Redler below.
On the home front, there is a slew of economic data points on tap today. At 8:30, weekly jobless claims will be released. After that, the Fed will release stats on industrial production and capacity utilization. Also, The Philadelphia Fed is set to release data about economic data in its district. On the earnings front, hot apparel maker lululemon atletica, inc. (LULU) beat estimates this morning with earnings per share of $0.76 vs. $0.57 expected, and revenues of $245.4 million vs. $239.0 million expected. The stock traded down sharply immediately following the announcement, but now looks to be pushing higher. Nike Inc. (NKE) will report earnings after the close today, expecting profits of $1.12 per share.
As far as levels in the market are concerned, we are set to open back above Tuesday’s low, which was breached yesterday after grave warnings about the Japanese nuclear situation being “out of control”. Yesterday, after a small gap down, stocks looked to be trending higher before the comments, and we will now see if, in the absence of further bad news, the market can begin repairing the technical damage. We are opening right back near resistance in the 1275 area of the S&P, so it will be a tell-tale sign of whether we can power through that zone or if investors remain cautious.
Play Stocks that Held Up in Bearish Tape
As is always the case during a bearish tape, we will look to play stocks that have shown relative strength during the down-draft. Among those stocks (or in this case an ETF) is the Oil Service HOLDRs Trust ETF (OIH). With catalysts in the Middle East continuing to buoy oil prices, Oil Service HOLDRs are seeing some residual strength. OIH has held up well amid the turmoil, consolidating in a range. The true technical buy would be a breakout above $157, but we believe you can get to the part earlier as long as the market doesn’t come back under pressure. Scott Redler of T3Live.com says he will not look to short the OIH, but technically that would be the play below $149.
Baidu.com, Inc. (BIDU) is another name we have been highlighting all week as a strong stock that could take off if the market catches a firm bid, and we continue to like the Chinese search stock. BIDU has held in an ascending channel in a weak market, and if it can clear $125, it should quickly get back to new highs above $130.
Watch the Coal Group
With the nuclear crisis in Japan, we expect there to be at least a small shift from nuclear power into safer alternatives. We have already seen solar stocks take off higher, and we also think the shift away from nuclear energy will be a boon to the coal sector. Marc Sperling of T3Live.com believes some coal stocks that have pulled off can get back to highs of the year from January, and possibly even higher on a longer-term basis. His favorite in the group right now is Patriot Coal Corp. (PCX), but others to watch are Alpha Natural Resources, Inc. (ANR) and Peabody Energy Corporation (BTU), which has been touted by Jim Cramer in recent days.
Netflix Run Over?
Netflix, Inc. (NFLX) has been one of the strongest stocks in the market over the last two years, with the stock growing nearly five-fold in that period. However, after a massive short squeeze sent Netflix parabolic back in mid February, the stock has begun to correct. Although it has been one of the stronger stocks in the market over the last few days following an upgrade from Goldman Sachs Group Inc. (GS). However, over the last few weeks, Netflix has broken its long-term uptrend, retested it and turned down. The stock is up this morning, but with increasing competition, this stock looks destined for lower prices according to Evan Lazarus of T3Live.com.
*DISCLOSURE: Scott Redler is long GLD. Marc Sperling is long BP, GLD, GOOG, AMRN, TZOO, NVLS. Evan Lazarus is short NFLX.
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