After being moderately higher in futures trading, stocks found themselves in negative territory by early afternoon after the IMF said it expects the world economy to shrink by 1.4 % in 2009, slightly worse than its earlier estimate of 1.3 %. However, markets reversed direction to end the seesaw day, giving the blue chips a moral victory while holding the other major indices to mild losses. The Dow Jones industrials rose 14.81, or 0.2 %, to 8,178.41. The broader Standard & Poor’s 500 index fell 1.47, or 0.2 %, to 879.56 and the Nasdaq composite index rose 1.00, or 0.1 %, to 1,747.17.

The International Monetary Fund did raise its estimate for global economic growth in 2010 to 2.5 %, up from its April projection of 1.9 %.

Oil prices fell for a sixth straight day, dropping $2.79 to settle at $60.14 a barrel as the EIA showed gains in inventory stockpiles. Just a week ago, crude futures were at an eight month high of $73.

Morning Outlook

Markets tumbled in Japan overnight, as the yen reached its highest level against the dollar in five months; sending exporters retreating. The Nikkei 225 stock average lost 129.69 points, or 1.4 %, to 9,291.06. Elsewhere in Asia, Hong Kong’s Hang Seng had a solid session, rising 69.52, or 0.4 %, to 17,790.59

In Europe, stocks rose modestly during afternoon trading following Alcoa’s better than expected earnings from the 2nd quarter. The FTSE 100 index of leading British shares was up 27.53 points, or 0.7 %, at 4,167.76 while Germany’s DAX rose 61.50 points, or 1.3 %, at 4,634.15. The CAC-40 in France was higher by 24.25 points, or 0.8 %, to 3,033.96.

On Wall Street, futures look to a positive opening for the major averages. In the premarket, before weekly jobless claims, Dow Jones industrial average futures are up 50, or 0.6 %, to 8,166. Standard & Poor’s 500 index futures are gaining 7.30, or 0.8 %, to 881, while Nasdaq 100 index futures advanced 10.25, or 0.7 %, to 1,417.25.

Currencies and Commodities

After touching a 5 month low, the dollar rebounded 0.727% at 92.25 yen in the forex market. The euro appreciated 0.7037% to $1.3981 while the pound gained 1.1756% to $1.6261 after the Bank of England left rates unchanged. Gold rose $3.80 to $913.10 an ounce, while silver edged up 0.22% at $12.88. Light, sweet crude for August delivery rebounded from a 7 week low, up 91 cents to $61.05 on the NYMEX; a 1.91% advance.

On the Corporate Front

Aluminum maker Alcoa (AA) topped rather low Wall Street expectations Wednesday to kick off earnings season.

Alcoa’s loss amounted to 47 cents per share for the three months ended in June. During the same period last year, the company earned $546 million, or 66 cents per share. Alcoa’s loss from continuing operations in the latest quarter was $312 million, or 32 cents per share. Revenue tumbled 41 % to $4.24 billion. The street had pegged Alcoa to lose 38 cents per share on revenue of $3.93 billion. Strong cost cutting and containment measures helped the blue chip beat the top and bottom line,
while production was slashed 20% on sluggish global demand.

Economic Calendar

8:30 AM
Jobless Claims: New unemployment claims for the week of July 4th, to show the number of individuals who filed for unemployment insurance for the first time. The fewer people filing for unemployment benefits, the more have jobs, the more income in the consumer’s pocket, as well as a forecast on the strength of the economy. The consensus is for an increase of 610,000 for first time jobless claims, down from last week’s reading of 614,000; where continuing claims fell 53,000 to 6.702 million

10:00 AM
Wholesale Trade: Measures the value, in dollars of sales made and inventories held by merchant wholesalers. It is a component of business sales and inventories. A drop in inventory creates a need for manufacturing and production, alongside a sign of consumer demand.