US & World Daily Markets Financial Briefing 01-04-2010

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Stocks Posting Strong Gains On Upbeat Economic Data

Stocks are showing notable strength in mid-morning trading on Thursday, as a bigger than expected pickup in national manufacturing activity and a modest drop in weekly jobless claims have sparked considerable buying interest. The major averages are all in positive territory, looking to add to recent gains.

The Institute for Supply Management said that activity in the manufacturing sector expanded for the eighth consecutive month in March, with the index of activity in the sector rising by more than economists had been expecting.

The ISM's manufacturing index jumped to 59.6 in March from 56.5 in February, with a reading above 50 indicating growth in the sector. Economists had been expecting a more modest increase by the index to a reading of 57.0.

Earlier, the Labor Department reported that initial jobless claims fell to 439,000 in the week ended March 27th from the previous week's revised figure of 445,000. Economists had been expecting claims to edge down to 440,000 from the 442,000 originally reported for the previous week.

With the modest decrease, jobless claims extended a recent downward trend after seeing a brief rebound in mid-February. The drop pulled jobless claims down to their lowest level since a matching number in the week ended February 6th.

Meanwhile, the Commerce Department released a report showing that construction spending fell 1.3 percent to an annual rate of $846.2 billion in February from the revised January estimate of $857.8 billion. Construction spending had been expected to decrease by about 1.0 percent.

The major averages have seen some downside in recent dealing, backing off of their session highs. Nonetheless, the Dow currently remains up 76.18 points or 0.7 percent at 10,932.81, the Nasdaq is up 15.51 points or 0.7 percent at 2,413.47 and the S&P 500 is up 9.74 points or 0.8 percent at 1,179.17.

Sector News

Resource stocks are some of the day's strongest performers thus far, with the NYSE Arca Gold Bugs Index and the NYSE Arca Steel Index posting gains of 3.6 percent and 2.2 percent, respectively. The gold index remains rangebound, while the steel index jumped to a nineteen-month intraday high in earlier dealing.

Rio Tinto plc (RTP) is boosting the steel sector, registering a 3.4 percent gain. With the upward move, the stock has set an eighteen-month intraday high.

Semiconductor stocks are also seeing strong buying interest, resulting in a 1.9 percent gain by the Philadelphia Semiconductor Index. The index has broken out of a recent trading range and moved to its best intraday level in twenty months.

Oil service, airline and healthcare provider stocks are also moving higher, contributing to the day's rally. The strength in the oil service sector comes a notable increase by the price of oil, which is up by $1 a barrel.

Stocks Driven By Analyst Comments

Foot Locker (FL) is moving higher after being upgraded at FBR Capital Markets from Perform to Outperform. The stock is currently up 2.5 percent after climbing to its best intraday price in nearly eighteen months earlier.

Millicom (MICC) is also on the rise following an upgrade by JP Morgan Chase from Neutral to Overweight. Shares are currently up by 2.8 percent, setting a twenty-one month intraday high.

On the other hand, Intermec (IN) is under pressure after a downgrade by Robert W. Baird from Outperform to Neutral. The stock has lost 3.2 percent, sliding to its lowest intraday price in nearly two months.

Bay Street Looks To Grind Out Further Gains

Canadian stocks are likely poised for a mixed open Thursday amid continued recovery in commodities prices and lackluster corporate earnings news.

While a relatively encouraging prelude to Friday's US non-farm payrolls report may lift spirits, disappointing quarterly results from RIM and Bombardier could raise red flags about the corporate climate.

On Wednesday, the S&P/TSX Composite Index ended almost flat, easing 6.49 points or 0.05% to 12,037.73, after gaining in the past two sessions.

Canadian stocks may stall after grinding out gains to reach their highest levels since the onset of the financial crisis.

North American markets are closed for Easter break Friday.

The price of oil was up $1.06 to $84.65 a barrel, near its calendar year high, and the price of gold moved up $8.30 to $1,121,60 an ounce.

In corporate news, blackberry maker Research In Motion reported fourth-quarter net income of $1.27 per share up from $0.90 per share in the year ago period. However, the numbers missed analysts' expectations for a net profit of $1.28 per share. For the forthcoming quarter, the company guided earnings per share to be in the range of $1.31-$1.38. Goldman Sachs trimmed its rating on the stock to 'Sell' from 'Neutral'.

Wireless communications company BCE Inc. said Wednesday that it will purchase for cancellation 4 million of its common shares pursuant to a private agreement with an arm's-length third-party seller.

Bombardier Inc. reported lower net income of $0.10 per share in fourth-quarter, compared to $0.17 in the same quarter last year. The company announced a quarterly dividend of C$0.025 per share.

Gold miner Barrick Gold acquired an additional 25% interest in the Cerro Casale Project in Chile from Kinross Gold Corporation for $474 million and now owns a 75% interest in and gains control of the project.

Australian miner Lihir Gold announced Thursday that it has rejected a A$9.20 billion takeover bid by rival gold producer Newcrest Mining.

Mineral explorer Lake Shore Gold said it will sell its 50% ownership interest in the Ti-pa-haa-kaa-ning Joint Venture to Northern Superior.

Oil and gas firm Canadian Natural Resources said it will buy-back up to 2.5% of its outstanding shares in the next 12 months.

Oil fields services provider Forbes Energy Services reported a wider fourth quarter net loss of C$0.10 per share, compared to a net loss of C$0.04 per share in the prior year quarter.

Diamond miner and retailer Harry Winston Diamond reported a narrower fourth quarter net loss of $0.04 per share, compared to a loss of $1.19 per share in the same period last year.

Renewable energy company Ram Power, slipped into the red, posting fourth-quarter net loss of C$0.15 per share, compared with a net income of C$0.01 per share in the same quarter last year.

Oil and gas industry services provider Hyduke Energy Services reported fourth quarter net income of C$0.001 per share, compared to a net loss of C$0.186 per share in the previous year quarter.

Electronics manufacturing services company Adeptron Technologies reported fourth-quarter net loss of C$0.01 per share, compared with a net income of C$0.01 per share in the same quarter last year.

In economic news from the U.S., the Labor Department said initial jobless claims fell to 439,000 in the week ended March 27 from the previous week's revised figure of 445,000. Economists were expecting claims to edge down to 440,000 from the 442,000 originally reported for the previous week.

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Asian Markets End Higher On Optimism About Recovery

The markets across Asia ended the trading session on Thursday, the first day of second quarter, in positive territory, on increasing optimism about sustaining the pace of global economic recovery. Better than expected economic data from China and positive results from Tankan Survey in Japan lifted market sentiment. Higher commodity prices, including oil prices, also lifted market sentiment with major investors evincing fresh buying interest on select blue-chip stocks.

In Japan, the benchmark Nikkei-225 Index rose 154.46 points, or 1.4%, to 11,244, while the broader Topix index of all First Section issues rose 6.45 points, or 0.7%, to 985.

On the economic front, the latest Tankan Corporate Survey released by the Bank of Japan revealed that business confidence among large Japanese manufacturers improved for the fourth straight quarter, led by a strong revival in exports to Asia. The headline figure for large manufacturers' confidence was -14 in the March quarter - exactly in line with analyst forecasts and up from -25 in the December quarter. At the same time, the indicator for medium-sized manufacturers improved to -19 from -28, while that for small manufacturers rose to -30 from -41.

A statement released by the Japan Automobile Dealers Association revealed that non-mini vehicle sales rose 37.2% year-on-year to 443,298 units in March. That was the eighth consecutive rise in sales after twelve months of drops. It followed a 35.1% growth in February. The statement further noted that in March, passenger car sales climbed 40.7% annually to 402,826 units. Truck sales rose 10.7% to 37,778 units and sales of buses rose 2.3% to 2,694 units.

Machinery related stocks led the gains on optimism about economic recovery in the new fiscal year. Daikin Industries surged up 3.27%, JTEKT Corp. climbed 3.89%, Ebara Corp. soared 5.03%, Hitachi Construction Machinery added 0.77%, Komatsu Ltd advanced 0.71% and Kubota Corp. gained 1.53%.

Trading companies also ended in positive territory. Mitsubishi Corp. advanced 1.51%, Mitsui & Co., gained 1.78%, Toyota Tsusho Corp. rose 1.71%, Sumitomo Corp. climbed 2.14%, and Itochu Corp. increased 1.71%.

Real estate stocks gained on optimism about economic recovery and weaker local yen. Mitsui Fudosan rose 1.64%, Sumitomo Realty & Development advanced 0.96%, Heiwa Real Estate climbed 3.20% and Tokyu Land Corp. added 0.28%.

Mixed trading was witnessed among automotive stocks. Suzuki Motor Corp., gained 1.41%, Nissan Motor Co. rose 1.50%, Mazda Motor advanced 0.76% and Isuzu Motors climbed 1.19%. Mitsubishi Motor remained unchanged from previous close. However, Toyota Motor slipped 0.67% and Honda Motor edged down 0.30%.

In Australia, the benchmark S&P/ASX 200 Index advanced 32.20 points, or 0.66% to close at 4,908, while the All-Ordinaries Index ended at 4,926, representing a gain of 32.80 points, or 0.67%.

On the economic front, data released by the Australian Bureau of Statistics revealed that the country posted by a seasonally adjusted trade deficit of A$1.924 billion in February. The deficit was wider by A$804 million from the revised deficit reported for the previous month. As per the data, export of goods and services decreased a seasonally adjusted 1% to A$19.922 billion, while imports increased 2% or A$516 million, to A$21.8 billion.

A separate report released by the Statistics Bureau revealed that the total number of job vacancies in Australia in the three months to February increased a seasonally adjusted 12.5% from the preceding three month period to 169,300. The number of vacancies in the public sector rose 3% on a quarterly basis to 17,100 in February, while those in the private sector were up 13.7% to 152,200.

The Reserve Bank of Australia stated that commodity prices in SDR terms climbed 3.2% month-on-month in March after the revised 1.4% increase in the previous month. The central bank further noted that the largest contributors to the rise were increases in the prices of iron ore, coal and crude oil, the central bank said.

Lihir Gold surged 33.33% on huge volume, after the gold miner rejected an unsolicited offer from Newcrest Mining to acquire it for $8.4 billion, citing low offer value as the primary reason. The other gold mining company, Newcrest Mining advanced 2.93%.

Mining and metal stocks also advanced on firm commodity prices amid speculation demand will increase further. BHP Billiton advanced 0.83%, Rio Tinto gained 1.53%, Fortescue Metals rose 1.43%, Iluka Resources climbed 3.42%, Macarthur Coal surged up 5.84%, Mineral Resources increased 2.96% and Oz Minerals was up by 3.93%.

Oil related stocks also ended in positive territory. Woodside Petroleum added 0.04%, Santos advanced 0.61%, Oil Search rose 0.50% and Origin Energy gained 0.54%.

In Hong Kong, the Hang Seng Index ended in positive territory with a gain of 297.65 points, or 1.40%, at 21,537, on increasing optimism that economic recovery will take place at a much faster pace in the second quarter. Select buying by investors on the first day of the second quarter, positive economic data released in mainland China and good results from Tankan Survey in Japan also lifted market sentiment. As many 41 of the 42 components in the index ended in positive territory.

In South Korea, the benchmark KOSPI Index surged up 26.32 points, or 1.55%, to close at 1,719.17, on optimism about economic recovery. Positive closing across the markets in the region on the first day of the second quarter, buying interest evinced in blue-chip stocks by foreign institutional investors lifted market sentiment. Technology, automotive and financial stocks led the gains in the market.

Strong global cues amid encouraging economic reports from China, Japan and Europe helped the Indian market snap its 2-day slide on Thursday. While IT stocks bounced back on short covering after three consecutive sessions of losses, telecom stocks closed mixed, auto stocks reversed early gains, and defensive FMCG stocks ended on a subdued note. The market will remain shut on Friday on account of Good Friday. In the 30-share Sensex pack, 23 stocks advanced while 7 stocks ended in the red. The Sensex average ended at 17,693, up 165 points or 0.94% and the 50-share Nifty rose by 41 points or 0.79% to 5,290.

Among the other major markets, Indonesia's Jakarta Composite Index advanced 52.69 points, or 1.90%, and closed at 2,830, Singapore's Strait Times Index gained 55.56 points, or 1.92%, to close at 2,943, China's Shanghai Composite Index climbed 38.31 points, or 1.23%, to close at 3,147, and Taiwan's Weighted Index rose 93.03 points, or 1.17% to close at 8,013.

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The major European markets are advancing on Thursday, with the averages cheering the solid growth data from Asia and Europe. The French CAC 40 Index and the German DAX Index are moving up 1.58% and 0.92%, respectively, while the U.K.’s FTSE 100 Index is gaining 0.68%.

On the economic front, the results of the Markit manufacturing surveys across the euro zone were upbeat. The French manufacturing purchasing managers’ index rose to a 40-month high of 56.5 in March, slightly higher than initially estimated. The U.K. manufacturing PMI was also upwardly revised to 57.2, above the consensus estimate of 56.8. Meanwhile, the German manufacturing PMI came in at 60.2 compared to expectations for 59.6. The manufacturing PMI for the euro zone rose to 56.6 in March from 54.2 in the previous month.

At the same time, the German Federal Statistical Office reported that retail sales fell by 0.4% in real terms in February compared to the previous month. Economists had expected retail sales to have remained unchanged. Annually, sales fell 0.9% compared to the 4% drop in January.

U.S. Economic Reports

Individual automakers are scheduled to release their monthly U.S. sales results for March. The data will reveal the unit sales of domestically produced cars and light duty trucks, including sports utility vehicles and mini-vans, during the month.

First-time claims for unemployment benefits showed another modest decrease in the week ended March 27th, according to a report released by the Labor Department, with jobless claims falling to their lowest level since early February.

The report showed that initial jobless claims fell to 439,000 from the previous week's revised figure of 445,000. Economists had been expecting claims to edge down to 440,000 from the 442,000 originally reported for the previous week.

The results of the Institute for Supply Management’s manufacturing survey based on data compiled from purchasing and supply executives nationwide, are due out at 10 AM ET. Economists expect the index of activity in the manufacturing survey to show a reading of 57 for March.

In February, the index declined to 56.4 from 58.4 in January. However, the index still remained at levels consistent with growth. While the new orders index declined to 59.5 from 65.9 in the previous month, the backlog orders index rose by about 5 points to 61. On a positive note, the employment index rose 2.8 points to 56.1, marking the highest reading since January 2005. The inventories index edged up 0.8 points to 47.3, but the prices paid index declined 3 points to 67.

The Commerce Department's construction spending report to be released at 10 AM ET is expected to show a 1% decline in spending for February.

Construction spending declined 0.6% month-over-month in January, with the drop coming in line with expectations. Private construction spending fell 0.6% compared to a 0.7% decline by public construction spending. In the private construction category, declines in lodging, office, commercial, transportation and manufacturing construction offset a 1.3% increase in residential construction spending.

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CarMax (KMX) is likely to move in reaction to its announcement that its fourth quarter net sales and operating revenues rose 25% to $1.83 billion. The company reported net income of 33 cents per share compared with 17 cents per share last year. The results of the recent quarter included a gain of 7 cents per share. Analysts estimated earnings of 25 cents per share on revenues of $1.76 billion.

Research In Motion (RIMM) receded in Wednesday’s after hours session despite reporting fourth quarter revenue growth of 18% to $4.08 billion, with the company saying that it added 4.9 million net new Blackberry subscriber accounts during the quarter. The company’s net income rose to $1.27 per share from 92 cents per share last year. Analysts estimated earnings of $1.28 per share on revenues of $4.31 billion. For the first quarter, the company estimates earnings of $1.31-$1.38 per share on revenues of $4.25 billion to $4.45 billion. The consensus estimates call for earnings of $1.22 per share on revenues of $4.33 billion.

Meanwhile, Micron (MU) gained ground in Wednesday’s after hours session after it reported a profit of 39 cents per share for its second quarter compared to a loss of 99 cents per share last year. Net sales rose to $1.96 billion from $993 million last year, ahead of the $1.82 billion consensus estimate.

Citigroup (C) is likely to be in focus after it announced that it has sold $320.4 million worth of shares of Primerica in an IPO, with the offer priced at $15 per share. Citi noted that the common stock of Primerica would begin trading on the NYSE under the symbol ‘PRI’ beginning April 1st, 2010. Following the public offering and giving effect to the sale of Primerica shares and warrants to Warburg Pincus, Citi will own a 43% stake in Primerica.

SkillSoft (SKIL) may also be in focus after it said it has reached an agreement on the terms of a revised recommended acquisition for cash by SSI Investments III Limited for an increased price of $11.25 per SkillSoft share. Earlier, SSI Investments had made an offer for $10.80 per share in cash.

Sanderson Farm (SAFM) is expected to see some activity after it announced that it has priced its underwritten public offering of 2 million shares at $53 per share. The offering is expected to close on April 7, 2010.

Schulman (SHLM) is also likely to be in focus after it reported that its second quarter adjusted earnings were 12 cents per share compared to 26 cents per share last year. Excluding certain one-time items and a bad debt expense, earnings for the recent quarter would have been 24 cents per share. Net sales rose 21.4% year-over-year to $331 million. Analysts estimated earnings of 23 cents per share on revenues of $290.60 million.

Borders Group (BGP) rallied strongly in Wednesday’s after hours session after it announced that it has entered into an amended and restated revolving credit agreement. The company has now secured a $700 million senior secured asset-based credit facility maturing in March 2014. Additionally, the company said it closed on a $90 million term loan credit facility, which will mature in March 2014. The company also said it has met an obligation to Pershing Square Capital Management for the payment of a $42.5 million senior secured term loan due April 1st.

Separately, Borders announced that its fourth quarter earnings from continuing operations rose to 91 cents per share from 48 cents per share last year. Consolidated sales fell 13.3% to $937.3 million.

Flagstar Bancorp. (FBC) rose in Wednesday’s after hours session after it announced that it has completed its previously announced registered offering of 575 million shares of common stock. The company also noted that the offering resulted in aggregate net proceeds of about $276.1 million.

AMD (AMD) and Rambus (RMBS) may move in reaction to their announcement that AMD has renewed a patent license agreement running through the end of the third quarter of 2015. The agreement grants AMD the license to use Rambus’ IC and circuit board products, with the companies stating that the license fee due to Rambus will be finalized only at the end of 2010.

Chevron (CVX) is expected to see some activity after it said that its Perdido deepwater project located in the U.S. Gulf of Mexico region has started crude oil and natural gas production.

Immucor (BLUD) is expected to be in focus after it reported that its third quarter revenues rose 7% to $80.5 million. The company reported earnings of 28 cents per share, higher than 27 cents per share last year. Analysts estimated earnings of 27 cents per share on revenues of $80.93 million. For 2010, the company estimates revenues of $326 million to $330 million and earnings per share of $1.14-$1.16, including a 5 cents per share charge. The Street estimates earnings of $1.15 per share on revenues of $330.81 million.

Global Payments (GPN) may move in reaction to its announcement that its third quarter revenues grew 11% year-over-year to $389.5 million. The company’s earnings from continuing operations rose to 58 cents per share from 43 cents per share last year. The consensus estimates called for earnings of 53 cents per share on revenues of $394.71 million. The company raised its 2010 guidance, with the firm now expecting earnings of $2.49-$2.54 per share on revenues of $1.62 billion to $1.63 billion. Analysts estimate earnings of $2.47 per share on revenues of $1.62 billion.

Resources Connection (RECN) may also see some activity after it announced that its third quarter revenues declined 19.7% to $125.3 million. The company reported a GAAP loss of 11 cents per share, including 10 cents per share in charges, compared to net income of 5 cents per share a year-ago. Analysts estimated a loss of 2 cents per share on revenues of $126.76 million.

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