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Stocks Seeing Strength On Upbeat Jobs, Service Sector Data
Stocks are moderately higher in mid-morning trading on Wednesday, as positive news on private sector employment and activity in the service sector has boosted market sentiment. The major averages are all in positive territory, building on the last two days of gains.
Initial upside came after payroll processor Automatic Data Processing (ADP) released a report showing that non-farm private employment fell by 20,000 jobs in February following a revised decrease of 60,000 jobs in January. The drop in jobs came in line with economist estimates.
While the drop in employment marked the twenty-fifth consecutive month of job losses, the pace of job losses was the slowest since employment began falling in February of 2008.
Further boosting the markets was news from the Institute for Supply Management, which reported that its non-manufacturing index rose to 53.0 in February from 50.5 in January, with a reading above 50 indicating growth in the service sector. Economists had been expecting a more modest increase by the index to a reading of 51.0.
The next batch of economic news is on tap for 2:00 p.m. ET, when the Federal Reserve will release its Beige Book report, compiling economic conditions from each of the 12 Federal Reserve districts along with commentary from the Fed Board.
In corporate news today, Pfizer Inc. (PFE) and Medivation Inc. (MDVN) said that results from two Phase 3 trials of the investigational drug Dimebon in patients with Alzheimer's disease failed to meet primary and secondary goals. Shares of Medivation have fallen almost 70 percent on the news.
On the earnings front, BJ's Wholesale Club Inc. (BJ) said its fourth-quarter net income came in at $0.95 per share on an adjusted basis. On average, Wall Street analysts expected earnings of $0.96 per share for the quarter. Net sales for the quarter grew to $2.74 billion, coming in short of the $2.79 billion forecast for the quarter.
Earlier in the day, Costco Wholesale Corp. (COST) reported second-quarter net income of $0.67 per share on revenues of $18.74 billion. Analysts expected the company to report earnings of $0.72 per share on revenues of $18.53 billion.
The major averages have seen some downside in recent dealing, backing off of their highs of the session. The Dow currently remains up 43.61 points or 0.4 percent at 10,449.59, the Nasdaq is up 6.28 points or 0.3 percent at 2,287.07 and the S&P 500 is up 4.80 points or 0.4 percent at 1,123.11.
Sector News
Steel stocks are some of the morning's best performers, driving the NYSE Arca Steel Index up by 2.4 percent, rising for a sixth straight session. With the move, the index has risen to a six-week intraday high.
Gold stocks are also posting strong gains, with the NYSE Arca Gold Bugs Index up by 1.8 percent, also rising to its best intraday level in six weeks. The advance in the gold sector comes as gold for April delivery is up by $1.10 at $1,138.50 an ounce.
Further, oil service stocks are also seeing buying interest, resulting in a 1.5 percent gain by the Philadelphia Oil Service Index. The index is being led higher by shares of Baker Hughes (BHI), which have risen 2 percent to a seventeen-month intraday high.
Outside of the resource sector, biotechnology, telecommunication and networking stocks are also moving higher, while weakness is visible among electronic storage and trucking stocks.
Stocks Driven By Analyst Comments
Freeport-McMoRan (FCX) is on the rise in mid-morning trading after being upgraded at RBC Capital Markets from Sector Perform to Outperform. The stock has gained 2.5 percent, rising to a six-week intraday high.
Spirit Aerosystems (SPR) is also moving higher following an upgraded at FBR Capital Markets from Perform to Outperform. The broker also raised its target price on the stock from $21 to $24. Shares are currently up by 1.3 percent, climbing to a one-month high.
On the other hand, Cameco (CCJ) is retreating after RBC Capital Markets lowered its rating on the stock from Outperform to Sector Perform. The stock has lost 1.8 percent but remains rangebound. |
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TSX Likely To Build On Recent Gains Wednesday
Canadian stocks may continue to rally for a third session Wednesday on steady commodity prices. Moreover, encouraging news from the Europe could also help lift sentiment.
The European Union hinted more tighter regulation of its member countries and raised speculation for a bailout plan for the debt-ridden Greece. Meanwhile, Greece announced a $6.5 billion austerity plan by way of trimming government's salary expenses and hiking taxes.
However, profit booking at higher levels may cap gains as the main index closed just 1% shy off its calendar year high. On Tuesday, the S&P/TSX Composite Index rose 100.25 points or 0.86% to 11,828.31. So far this year, the index had oscillated between 11,953 and 11,094.
The price of oil was hovering above $80 a barrel, adding $0.38 to yesterday's close. The bullion also held steady near $1,140-mark, as the dollar eased against a basket of currencies.
In corporate news, RBC Bank said its first-quarter 2010 net income increased to C$1.00 per share from C$0.78 per share last year and declared a quarterly common share dividend of C$0.50 per share.
Rivval CIBC announced the acquisition of a minority interest in Bermuda-based Bank of N.T. Butterfield & Son Ltd for $150 million.
Transition Therapeutics said it could earn as much as much as $250 million in milestone fees as it reached an exclusive licensing deal with Eli Lilly & Co for certain diabetes drugs.
Infrastructure development company Aecon Group reported fourth quarter net income of C$0.26 per share, compared to C$0.40 per share in the prior year quarter.
Real estate company Killam Properties reported fourth quarter funds from Operations of C$0.17 per share, compared to C$0.17 per share in the prior year quarter.
Fuels and convenience stores operator Parkland Income Fund said its fourth-quarter net earnings declined to C$0.09 per unit from C$0.20 per share in the year ago quarter.
Media company Torstar Corp. swung to profit in fourth-quarter, reporting net income of C$0.73 per share compared with a loss of C$2.71 per share in the same period last year.
In brokerage updates, Macquarie upped its price target on the stock of GMP Capital by C$0.50 to C$13.00. UBS hiked its price target on Bank of Montreal to C$59 from C$56.
In economic news from across the border, data from the U.S. Automatic Data Processing Inc. revealed that non-farm private employment fell by 20,000 jobs in February following a revised decrease of 60,000 jobs in January. The numbers came in in line with the economists' expectations. |
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Asian Markets End In Positive Territory
The markets across Asia, excluding HongKong and Indonesia, ended in positive territory on Wednesday with marginal gains amid light volumes as traders, optimistic about sustaining global economic recovery, stayed away from the market awaiting key economic data from the U.S. for direction.
In Japan, the benchmark Nikkei 225 Index rose 31.30 points, or 0.3%, to 10,253, while the broader Topix index of all First Section issues advanced 2.94 points, or 0.3%, to 906.
On the economic front, a report released by Markit Economics revealed that the Japan Nomura services purchasing managers' index stood at a seasonally adjusted 44.6 in February, up from 43.4 in the previous month. A reading above 50 indicates expansion, while one below suggests contraction. The report further noted that services output declined at a slower pace in February, while the level of new work placed at Japanese service providers fell again, extending the current period of decline to 26 months. Although the pace of reduction in new orders was solid, it was the least marked in six months.
Separately, a report released by the Ministry of Health, Labor and Welfare revealed that wages for Japanese workers unexpectedly increased in January. According to the report, total cash earnings of employees in establishments with five or more employees increased 0.1% year-on-year to JPY 273,142 in January, which was the first rise in 20 months. Economists were expecting a 1.2% fall for January. In December, cash earnings dropped by a revised 5.9%. The report further noted that real wages grew 1.6% in January from the previous year, following a 4.2% fall in December. At the same time, total hours worked climbed 0.3%, reversing December's 0.9% drop. The number of regular employees were down 0.2%, the same rate as in December.
Light sweet crude oil futures for April delivery ended at $79.66 a barrel in electronic trading, down $0.02 per barrel from previous close at $79.68 a barrel in New York on Tuesday.
Steel stocks led the gains after the Japan Iron & Steel Federation announced that the country's steel product export in January rose 71.7% to 3.44 million tons, attributing rising demand from countries like Taiwan, China, South Korea and Thailand as the primary reasons.
Among the steel stocks, JFE Holdings gained 1.47%, Pacific Metals Corp. surged up 3.60%, Sumitomo Metal Industries climbed 3.90%, Nippon Steel rose 1.78% and Kobe Steel increased 3.05%.
Retail company Fast Retailing led the gains in the market after reporting an increase in domestic sales growth at its Uniqlo casual clothing chain. The stock surged up 4.66%.
Automotive stocks also ended in positive territory on positive auto sales report in the US. Toyota Motor surged up 3.17%, Honda Motor added 0.49%, Suzuki Motor gained 1.42%, Mitsubishi Motors advanced 0.76% and Hino Motor rose 1.20%.
Mixed trading was witnessed among shipping stocks. Kawasaki Kisen Kaisha gained 1.26% and Nippon Yusen added 0.62%. However, Mitsui OSK Lines bucked the trend and ended in negative territory with a loss of 0.34%.
In Australia, the benchmark S&P/ASX 200 Index gained 33.80 points, or 0.72% to close at 4,736, while the All-Ordinaries Index ended at 4,744, representing a gain of 33.90 points, or 0.72%.
On the economic front, the Australian Bureau of Statistics revealed that the country's economy grew by a seasonally adjusted 0.9% in the final quarter of calender year 2009, which was in line with economists' mean expectations. The Bureau also noted that for the full year 2009, the economy registered a growth of 2.7%, slightly better than expectations. The statistics bureau also reported that Australia's terms of trade was up a seasonally adjusted 2.9% for the quarter, but down 11.2% on year. Real net national disposable income was up 1.2 percent on quarter and down 1.2 percent on year.
A statement released by the Australian Federal Chamber of Automotive Industries revealed that sale of news cars in the country increased 17.1% year-on-year in February. The statement noted that a total of 82,219 passenger car sales were sold during the month.
The Australian Industry Group revealed that the AIG / Commonwealth Bank Australia performance of services index rose to 48.3 in February from 47.4 in the previous month. A reading above 50 indicates expansion, while one below suggests contraction.
Light sweet crude oil futures for April delivery ended at $79.66 a barrel in electronic trading, down $0.02 per barrel from previous close at $79.68 a barrel in New York on Tuesday.
Metals and mining stocks advanced on higher commodity prices in the international market. BHP Billiton gained 1.41%, Rio Tinto rose 2.57%, Fortescue Metals climbed 3.19%, Gindalbie Metals surged up 7.84%, Iluka Resources advanced 1.08%, Macarthur Coal soared 4.92%, Murchison Metals added 1.20% and Oz Minerals increased 1.85%.
Gold stocks surged up on higher gold prices in the international gold market. Lihir Gold surged up 4.68% and Newcrest Mining advanced 1.35%.
Oil stocks also ended in positive territory. Woodside Petroleum added 0.25%, Santos edged up 0.07% and Origin Energy advanced 0.18%. However, Oil Search bucked the trend and ended in negative territory with a loss of 2.05%.
Banks also advanced on optimism about economic recovery. ANZ Bank added 0.21%, Commonwealth Bank of Australia advanced 0.40%, National Australia Bank rose 2.34% and Westpac Banking Corp. gained 0.97%. Investment banker Macquarie Group increased 0.93%.
Retail stocks also advanced on expectation of higher demand. David Jones rose 2.07%, Harvey Norman gained 1.84%, JB Hi-Fi Ltd climbed 2.09%, Reject Shop advanced 0.96% and Wesfarmers increased 1.46%. Woolworths, however, bucked the trend and ended in negative territory with a loss of 0.68%.
In Hong Kong, the Hang Seng Index ended in negative territory for the second successive day with a loss of 29.32 points, or 0.14%, at 20,877, as traders await further direction on global economy and more cues from mainland China. Profit taking in realty stocks and caution ahead of key economic data in the US kept most of the traders in the sidelines. Among the major stocks, Sino Land lost 2.92% and Henderson Land fell 2.12%.
In South Korea, the KOSPI Index ended in positive territory with a gain of 7.32 points, or 0.45%, at 1,622, as traders evinced fresh buying interest in steel and technology stocks, taking cues from the European and US markets that ended higher as concerns about Greece eased considerably and hopes of sustaining global economic recovery strengthened.
Strong Asian cues, data showing a jump in business activity among Indian companies in February and reports that both the Trinamool Congress and DMK parties have softened their stand on the fuel price hike helped the Indian market end sharply higher for a third straight session. The benchmark Sensex opened firm at 16,778 and rose to a high of 17,013 before finishing at 17,000, up 227 points or 1.36% and the Nifty jumped 71 points or 1.42% to 5,088.
Among the other major markets, Singapore's Strait Times gained 10.59 points, or 0.38% to close at 2,783, China's Shanghai Composite Index rose 23.90 points, or 0.78%, to close at 3,097, and Taiwan's Weighted Index advanced 31.90 points, or 0.42%, to close at 7,629. However, Indonesia's Jakarta Composite Index bucked the trend and ended in negative territory with a marginal loss of 9.50 points , or 0.37%, to close at 2,567. |
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The major European markets are trading mixed on Wednesday after seeing some weakness earlier in the session. The major averages had ended higher for three straight sessions leading up to the current session. The German DAX Index and the U.K.’s FTSE 100 Index are moving up 0.09% and 0.06%, respectively, while the French CAC 40 is declining 0.07%.
In corporate news, U.K. bank Standard Chartered reported a pre-tax profit of $4.6 billion in 2009, up 13% year-over-year. The bank’s revenues rose 9%. U.K. homebuilder Taylor Wimpey reported an adjusted loss of 96.1 million pounds for the full year compared to a loss of 74.7 million pounds in the year-ago period. Revenues declined to 2.6 billion pounds from the year-ago’s 3.5 billion pounds.
German athletic footwear maker Adidas reported fourth quarter net income of 19 million euros that fell from 54 million euros in the year-ago period. For 2010, the company expects net income of 400 million euros to 450 million euros.
On the economic front, the German Federal Statistical Office released its retail sales report for January, showing a 3.4% year-over-year decline in real terms. Upon calendar and seasonal adjustments, retail sales remained unchanged in real terms compared to the previous month.
In the U.K., the Nationwide Building Society reported that its consumer confidence index for the U.K. rose to 80 in February from 74 in January. Economists had expected a reading of 73 for the month. The present situation index rose 4 points to 27 compared to a 6 point-climb in the expectations index to 115.
Meanwhile, the British Retail Consortium said that shop prices in the U.K. climbed 1.7% year-on-year in February after the 2.3% annual increase in January. Shop prices were up 0.6% on a monthly basis.
The Greek government unveiled a few austerity measures, as it strives to mobilize support from fellow European Union countries to help tide the debt crisis. This would result in deficit reduction of about 4.8 billion euros.
U.S. Economic Reports
Automatic Data Processing released a report showing a continued decrease in private sector employment in February, the pace of job losses was the slowest since employment began falling in February of 2008.
The report showed that non-farm private employment fell by 20,000 jobs in February following a revised decrease of 60,000 jobs in January. Economists had expected employment to fall by 20,000 jobs compared to the loss of 22,000 jobs originally reported for the previous month.
The Institute for Supply Management is scheduled to release the results of its non-manufacturing survey at 10 AM. The non-manufacturing index is likely to show a reading of 51 for February.
Activity in the services sector expanded at a slower than expected rate in January. The non-manufacturing index rose to 50.5 from 49.8 in the previous month but came in below expectations for a reading of 51. The weakness was apparently due to soft construction and retail activity. The new orders index climbed 2.7 points to 54.7, marking the highest reading since October 2007, and the employment index was up 1 point to 44.6. However, the index of order backlogs fell 2.5 points to 45.5.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended February 26th at 10:30 AM ET.
The oil inventory report for the week ended February 19th showed a 3 million barrel increase in crude oil stockpiles to 337.5 million barrels. Crude oil inventories are now above the upper limit of the average range for this time of the year.
Gasoline stockpiles rose by 0.9 million barrels, remaining above the upper limit of the average range. On the other hand, distillate stockpiles fell by 0.6 million barrels, although they remained above the upper boundary of the average range. Refinery capacity utilization averaged 79.4% over the four weeks ended February 19th compared to 78.8% last week.
The Federal Reserve is due to release its Beige Book, which is a compilation of anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts, at 2 PM ET. The report is normally released about two weeks before the monetary policy meeting is held.
Earnings
Costco Wholesale (COST) reported that its second quarter net sales rose 11% to $18.36 billion. The company’s earnings rose to 67 cents per share from 55 cents per share last year. Analysts estimated earnings of 72 cents per share on revenues of $18.56 billion. For February, the company reported comparable store sales growth of 9%.
BJ’s Wholesale Club (BJ) said its fourth quarter adjusted net income was 95 cents per share compared to 89 cents per share in the year-ago period. The company’s total revenues rose to $2.80 billion from $2.256 billion in the year-ago period. The consensus estimates called for earnings of 96 cents per share on revenues of $2.79 billion. For 2010, the company expects GAAP net income of $2.54-$2.64 per share. Analysts’ estimates, which typically exclude one-time items, call for earnings of $2.71 per share.
Big Lots (BIG) reported fourth quarter adjusted income from continuing operations of $1.31 per share compared to $1 per share in the year-ago period. Net sales rose 7% to $1.46 billion. Analysts estimated earnings of $1.28 per share on revenues of $1.45 billion. For the first quarter, the company estimates earnings from continuing operations in the range of 60-65 cents per share and comparable store sales growth of 4%-6%. The consensus estimates call for earnings of 53 cents per share. |
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Copart (CPRT) receded in Tuesday’s after hours session despite reporting second quarter earnings of 42 cents per share compared to 32 cents per share last year. Revenues rose 4% year-over-year to $176.6 million. Analysts estimated earnings of 40 cents per share on revenues of $178.51 million.
Thor Industries (THO) could gain ground after it announced that it acquired privately held ambulance manufacturer, SJC Industries for $20 million in cash. Thor expects the deal to be accretive to its earnings.
Fluor (FLR) may see some strength after it announced that it has won an engineering, procurement and construction management contract from Debswana Diamond Co. to execute the Jwaneng Cut 8 mining project in Botswana. Fluor noted that the value of the contract it secured is about $450 million.
Hovnanian Enterprises (HOV) rose in Tuesday’s after hours session after it reported a after-tax net income of $2.97 per share for the first quarter compared to a loss of $2.29 per share in the year-ago period. The company noted that the recent quarter’s results included a federal income tax benefit of $291.3 million. Revenues fell to $319.6 million from $373.8 million last year. Analysts’ estimates, which typically exclude one-time items, call for a loss of 45 cents per share on revenues of $318.75 million.
Bristol-Myers (BMY) could be in focus after it announced that its current Chairman and CEO James Cornelius would retire, effective May 4th. The company said its board has designated its COO Lamberto Andreotti as CEO.
URS Corp. (URS) could see some activity after it reported that its fourth quarter net income fell to 41 cents per share from 55 cents per share last year. The company’s adjusted earnings rose to 65 cents per share from 54 cents per share in the year-ago period. Revenues fell to $2.11 billion from the year-ago’s $2.71 billion. Analysts estimated earnings of 55 cents per share on revenues of $2.35 billion. For 2010, the company expects GAAP earnings of $3.35-$3.45 per share on revenues of $9.4 billion to $9.7 billion. The consensus estimates call for revenues of $9.89 billion.
Baxter (BAX) is likely to move in reaction to an announcement from the FDA that it has classified Baxter’s recent Urgent Product Recall regarding increased intraperitoneal volume associated with HomeChoice and HomeChoice Pro peritoneal dialysis cyclers as a Class I recall.
Novell (NOVL) may rally after it said that it has received an unsolicited conditional proposal from Elliot Associates to buy the company for $5.75 per share in cash. The company said its board would review the proposal.
Merck (MRK) may be in focus after it said a late stage study of its investigational oral allergy immunotherapy tablet in patients aged between 5 and 17 with grass pollen allergy showed a 26% improvement in the total combined score compared to patients receiving placebo.
PDL BioPharma (PDLI) could move in reaction to its announcement that its fourth quarter revenues from continuing operations fell to $58.3 million from the year-ago revenues of $68.7 million. The company’s earnings also declined to 17 cents per share from 26 cents per share last year. For the first quarter, the company expects revenues of $62 million
Big 5 Sporting Goods (BGFV) is also likely to be in focus after it reported fourth quarter net sales of $237.6 million compared to $219.6 million last year. The company reported earnings of 29 cents per share, including a charge of 3 cents per share, compared to 17 cents per share last year. Analysts estimated earnings of 33 cents per share on revenues of $237.46 million. The company guided first quarter earnings of 17-23 cents per share, while analysts estimate earnings of 18 cents per share.
Human Genome Sciences (HGSI) declined in Tuesday’s after hours session after it reported fourth quarter revenues of $53 million compared with $12.9 million a year-ago. The company reported a net loss of 6 cents per share, narrower than the loss of 46 cents per share last year. The consensus estimates called for a loss of 10 cents per share on revenues of $50.68 million.
Verifone (PAY) also tumbled in Tuesday’s after hours session after it reported that its first quarter non-GAAP net income remained flat at 17 cents per share. Revenues rose to $223.4 million from the year-ago’s $217.8 million. The Street estimated earnings of 23 cents per share on revenues of $217.87 million. For the full year, the company expects non-GAAP earnings per share of $1-$1.10 on revenues of $925 million to $940 million. Analysts estimate earnings of $1.04 per share on revenues of $909.19 million. |