Stock Futures Point to Lower Open After Fed Raised its Discount Rate. Stocks to Watch: DELL, FSLR, FCX, INTU, SHLD, and WFC

Published on Friday, 19 February 2010 08:24 Written by Christopher Lynn

New York, Feb 19th (TradersHuddle.com) – Stock futures pointed to lower open, with the market poised to snap its 3 day consecutive winning streak. The Fed spooked investors, yesterday after the close, as the central bank raised its discount rate, signaling the end of extraordinary stimulus measures. Stocks and commodities around the world fell, while the Dollar strengthened.

The Federal Reserve raised its discount rate from 0.5% to 0.75% and signaled no change in policy, saying that the move will encourage financial institutions to rely more in money markets rather than on the central bank for short term financing needs. The policy makers followed the increase of the discount rates with comments that this move is in no way an immediate precursor to a rise in the benchmark Fed Funds rate, The move by the Fed was somewhat expected, however the timing surprised the markets.

On economic news, the government is set to release January consumer price index data at 8:30 am, with economists forecasting an increase of 0.3%, following December's 0.1% gain. The inflation gauge will be closely watched, as a higher than expected CPI, along with the Fed move could spark a big sell-off in the trading session.

Trading should be expected to be volatile, as today is options expiration day, and movements in stock prices will be likely into the close.

Today Stocks to watch: Dell (NASDAQ:DELL), First Solar (NASDAQ:FSLR), Freeport McMoRan (NYSE:FCX), Intuit Inc. (NASDAQ:INTU), Sears Holdings (NASDAQ:SHLD), and Wells Fargo (NYSE:WFC)

Dell (NASDAQ:DELL), the third largest maker of personal computers in the world, is reported quarterly earnings yesterday after the closing bell. The PC-maker beat earnings expectations but still disappointed investors, as the gross profit margin missed estimates because of higher component costs and increased sales of less-profitable PCs over the holidays. Dell earned 28 cents a share, down from 29 cents a share in the same period last year. The Austin based company saw its revenue for fiscal 2010 slump compared to the prior year, falling 13% from $61.1 billion to $52.9 billion.

Shares of First Solar (NASDAQ:FSLR), the world’s largest maker of thin-film solar power modules, will likely be under pressure all day. The company reiterated its prior 2010 sales and profit forecasts, disappointing investors who had expected an increase. First Solar predicted the solar power industry will struggle through a rough 2010 as increasing supplies and dwindling European subsidies cut into profits. First Solar reported earnings of $1.65 a share; the company earned $1.61 a share in the same period last year. Revenue increased 48 percent to $641.3 million.

Freeport McMoRan (NYSE:FCX), the copper and gold miner, will likely give back yesterday’s gains, after the Dollar strengthened on the Fed’s move to raise the discount rate. Copper and Gold prices moved lower as the greenback moved higher.

Shares of Intuit Inc. (NASDAQ:INTU), the world’s biggest maker of tax- preparation software, will likely move higher as second-quarter profit beat analysts’ estimates as U.S. taxpayers began filing returns and more small companies bought finance software. The maker of Quicken and TurboTax earned 38 cents a share compared with the expected 32 cents a share. The company also increased its full year outlook, citing share gains in their turbo tax software, especially with the online version.

Sears Holdings (NASDAQ:SHLD), will be in focus, ahead of its Monday release of its quarterly earnings report. Wall Street analysts expect on average for the company to report a profit of $3.54 a share on revenue of $12.90 billion. Expected results have a range a wide range. The high estimate calls for a profit of $3.88 a share and the low estimate is calling for a profit of $2.74 a share, a year ago for the quarter the company reported a profit of $2.94 a share.

Wells Fargo (NYSE:WFC), the San Francisco based bank, was lower in European and pre-market trading, as the Fed’s move to raise the discount raise. Many economists said that banks were not using the Fed’s discount rate, so they said the move is purely technical. Banks make profits by borrowing short term and lending long term, currently the difference between short- and long-term interest rates is near a record high, presenting a profitable opportunity for banks. However a signal that short interest rates may raise will limit the ability for banks to book easy profits.