US & World Daily Markets Financial Briefing 04-03-2010

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Stocks Seeing Lackluster Performance In Mid-Morning Trading

Stocks have shown a lack of direction over the course of morning trading on Thursday, as light trading has gripped the markets ahead of tomorrow's landmark monthly jobs data and after today's mixed economic news.

Before the start of trading, the Labor Department released a report showing that first-time claims for unemployment benefits showed a notable decrease in the week ended February 27th, with the drop in claims coming roughly in line with economist estimates.

The report showed that initial jobless claims fell to 469,000 from the previous week's revised figure of 498,000. Economists had expected claims to fall to 470,000 from the 496,000 originally reported for the previous week.

In a separate report, the Commerce Department revealed that factory orders increased by 1.7 percent in January following an upwardly revised 1.5 percent increase in December. Economists had expected orders to increase by 1.8 percent compared to the 1.0 percent growth originally reported for the previous month.

Meanwhile, the National Association of Realtors said its pending home sales index fell 7.6 percent to 90.4 in January from an upwardly revised 97.8 in December. The decrease by the index came as a surprise to economists, who had expected the index to increase by 1.0 percent.

Same-store sales figures from the nation's major retailers for February are also in the spotlight today, with traders looking to the data for insight into the strength of consumer spending.

Saks (SKS) reported monthly same-store sales that rose 2%, Target (TGT) saw a 2.4% increase in same-store sales and Kohl's (KSS) saw a pick-up in same-store sales of 3.7%, largely beating Wall Street estimates.

On the earnings front, Ciena Corp. (CIEN) said its first-quarter net loss widened to $0.58 per share and to $0.12 per share on an adjusted basis. Wall Street analysts expected the company to report a loss of $0.06 per share for the quarter.

Ciena said its revenue for the quarter rose to $175.9 million from $167.4 million in the comparable period but fell short of the $184.55 million forecast for the quarter.

The major averages are currently turning in a mixed performance, with the Dow posting a modest gain. While the Dow is up 5.97 points or 0.1 percent at 10,402.73, the Nasdaq is down 3.66 points or 0.2 percent at 2,277.02 and the S&P 500 is down 0.80 points or 0.1 percent at 1,117.99.

Sector News

Despite the choppy trading, retail stocks are seeing some strength, with the S&P Retail Index up by about 1 percent following the day's strong retail sales data. At its high for the session, the index was at its best intraday level in over two years.

Brokerage, banking and healthcare provider stocks are also moving to the upside, while gold stocks are moving notably lower following recent gains. The NYSE Arca Gold Bugs Index is down by 1.9 percent, backing off the six-week closing high reached yesterday.

The decline in the gold sector comes as the price of the precious metal for April delivery has dipped by $8.20 to $1,135.10 an ounce on the day.

Networking, airline and semiconductor stocks are also under pressure in mid-morning trading, giving back recent gains.

Stocks Driven By Analyst Comments

Boeing (BA) is on the rise in mid-morning trading after being upgraded at UBS from Sell to Neutral. The stock has gained 1.5 percent, setting an eighteen-month intraday high.

Coca-Cola (KO) is also moving higher following an upgrade at UBS, which raised its rating on the stock to Buy from Neutral. Shares are currently up by 1.3 percent but remain rangebound.

On the other hand, Amylin Pharmaceuticals (AMLN) is retreating after BMO Capital Markets Market downgraded the stock from Perform to Underperform. The stock has lost 2.5 percent, moving further off of Friday's seventeen-month closing high.

TSX May See-saw Thursday After 3-day Rally

Canadian stocks are likely poised for a volatile session Thursday amid mixed clues and as traders were anxious ahead of the country's budget set to announced later today.

While flat commodity prices may put pressure on the commodity stocks, financial stocks may be in play on encouraging earnings number from the country's second largest bank, Toronto Dominion Bank.

The U.S. stock futures point to a marginally higher opening.

On Wednesday, the S&P/TSX Composite Index added 24.55 points or 0.21% to 11,852.85, just 100 points shy off its calender year high.

The price of oil and gold were little changed in morning deals. Crude for April eased $$0.04 to $80.83 a barrel and bullion edged down $3.70 to $1,139 an ounce.

Canadian banks in general continued to post encouraging earnings reports. In line with other major banks, Toronto Dominion today announced quarterly results that were widely higher than analysts' estimates. Yesterday, financial stocks were under pressure after RBC reported profits that missed consensus estimates.
 
TD Bank said its first quarter income almost doubled to C$1.44 per share from C$0.75 in the year ago period. Before one-time items, the earnings were at C$1.60 a share, widely beating the consensus estimates of C$1.34 a share.

Global asset manager Brookfield Asset Management is reportedly planning approximately A$4 billion initial public offering of its Brookfield Multiplex Australian office portfolio.

Independent full service investment banker Canaccord Financial said it has signed a definitive agreement to acquire Genuity Capital Markets for about $290 million, consisting of 26.5 million Canaccord common shares and $30 million in cash.

Gold mining company Yamana Gold, reported a lower net earnings of $0.26 per share for fiscal 2009, compared to $0.62 per share in the prior year.

Allied Gold said it has completed the compulsory acquisition of the remaining shares in Australian Solomons Gold to make it as its wholly-owned unit.

Canadian Natural Resources said its fourth-quarter net earnings dipped to $0.85 per share from $3.27 per share in the previous year. The company upped its dividend payout by over 40% to C$0.15 a share. Also it said it will subdivide its common shares on a two for one basis after necessary approvals.

Pharmaceuticals and medical device company Angiotech Pharmaceuticals reported a narrower fourth quarter net loss of $0.18 per share, compared to a loss of $0.90 per share in the same period last year.

Pharmacy benefit management and healthcare solutions provider SXC Health Solutions reported better than estimated fourth-quarter net income of $0.49 per share, compared to $0.20 per share in the year ago period.. Analysts expected the company to report earnings of $ 0.41 per share for the quarter.

In economic news, Statistics Canada said building permits unexpectedly dropped 4.9% in January from the previous month. However, it noted that this value was 32.70% higher compared to a year ago period.

From the U.S., the Labor Department said initial jobless claims fell to 469,000 in the week ended February 27, from the previous week's revised numbers of 498,000. Economists were expecting the claims to fall to 470,000.

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Asian Markets Slip On Profit Taking

The markets across Asia, excluding Australia, ended in negative territory on Thursday as traders preferred to lock in gains from the recent rally and preferred to move to the sidelines awaiting data from the U.S. Resource stocks lifted the Australian stock market in to positive territory on higher commodity prices. Commodity stocks across the markets gained limiting the losses.

In Japan, the benchmark Nikkei 225 Index fell 107.42 points, or 1.05%, to 10,146, while the broader Topix index of all First Section issues lost 8.01 points, or 0.88%, to 898.

On the economic front, a statement released by the Ministry of Finance revealed that capital expenditures in the country declined 17.3% on year in the fourth quarter of 2009 following the 24.8% contraction in the previous quarter. The report further noted that excluding software, capital spending was down 18.5 percent on year following the 25.7 percent annual decline in the previous three months. Economists expected the capital expenditure to decline 18.4% on year during the fourth quarter.

Light sweet crude oil futures for April delivery ended at $80.58 a barrel in electronic trading, down $0.29 per barrel from previous close at $80.87 a barrel in New York on Wednesday.

Almost all the sectors in the index ended in negative territory as traders preferred to lock in gains and move to sidelines.

Real estate stocks ended in negative territory. Mitsui Fudosan declined 2.15%, Mitsubishi Estate lost 1.44%, Sumitomo Realty & Development slipped 1.01% and Heiwa Real Estate lost 2.14%.
 
Among trading companies, Mitsubishi Corp. lost 1.66%, Mitsui & Co., fell 1.92%, Toyota Tsusho Corp. declined 1.77%, Itochu Corp. slipped 1.23% and Marubeni Corp. declined 1.12%.

Automotive stocks also ended weaker. Toyota Motor slipped 1.23%, Honda Motor shed 0.65%, Hino Motor declined 2.37%, Isuzu Motors edged down 0.44% and Mitsubishi Motors plunged 10.81%, after announcing that it would shelve plans for capital tie-up with French carmaker PSA Peugeot Citroen.

J Front Retailing was among the few gainers in the session having surged up 5.08%, while Mitsubishi Chemicals climbed 3.05%.

Banks also ended in negative territory. Sumitomo Mitsui Financial shed 1.00%, Mizuho Financial slipped 0.56%, Mitsubishi UFJ Financial fell 0.44% and Resona Holdings lost 1.49%.

Exporters also ended weaker on stronger local currency. Canon Inc., declined 0.79%, TDK Corp. lost 2.92%, Sharp Corp. 2.23% and Sony Corp., slipped 1.12%.

In Australia, the benchmark S&P/ASX 200 Index advanced 14.80 points, or 0.31% to close at 4,751, while the All-Ordinaries Index ended at 4,758, representing a gain of 13.80 points, or 0.29%.

On the economic front, the Australian Bureau of Statistics revealed that the country recorded a seasonally adjusted trade deficit of A$1.176 billion in January, narrower by A$998 million compared to A$2.174 billion reported in the previous month. Economists expected a trade deficit of A$1.5 billion for the month. The report further noted that exports were up A$278 million or 1% on month to A$20.15 billion,while imports eased A$719 million or 3.0% on month to A$21.32 billion.

Results of a survey revealed that morale among small businesses in the country eased during the March quarter. The Sensis business index for March showed business confidence eased to 49% in the three months to March, from 52% in the three months to December. Moreover, employment by Australia's small businesses fell sharply during the quarter, reaching the lowest level in the 17-year history of the survey.

Light sweet crude oil futures for April delivery ended at $80.58 a barrel in electronic trading, down $0.29 per barrel from previous close at $80.87 a barrel in New York on Wednesday.

Metals and mining stocks ended in positive territory on higher commodity prices in the international market. BHP Billiton gained 1.46%, Rio Tinto advanced 0.72%, Fortescue Metals added 0.62%, Minara Resources climbed 3.29%, and Mincor Resources rose 2.13%. Oz Minerals, Illuka Resources and Murchison Metals remained unchanged from previous close.
 
Gold stocks ended in positive territory on higher gold prices in the international market. Lihir Gold gained 1.03% and Newcrest Mining rose 1.67%.

Mixed trading was witnessed among the oil stocks. While Woodside Petroleum added 0.23% and Oil Search advanced 0.57%, Santos edged down 0.07% and Origin Energy declined 1.98%.

Banks also ended mixed. ANZ Bank, which announced that the Reserve Bank of India has granted an in-principle approval for a foreign bank license in India, declined 0.88%. Commonwealth Bank of Australia shed 0.31% and Westpac Banking Corp. edged down 0.19%. However, National Australia Bank bucked the trend and ended in positive territory with a gain of 1.72%.

Airline companies ended higher. Qantas gained 1.49% and Virgin Blue Holdings surged up 4.38%.

In Hong Kong, the Hang Seng Index ended in negative territory for the third consecutive day amid speculation that mainland China might further tighten measures to control the economy. The index declined 301.01 points, or 1.44%, to close at 20,576. China-related stocks, resource stocks and Chinese banks led the decline. Weak trading across other markets in the region ahead of key economic data in the U.S. also impacted market sentiment.

In South Korea, the KOSPI Index ended in negative territory with a marginal loss of 4.24 points, or 0.26%, at 1,618, as traders preferred to lock in gains from recent rally and move to the sidelines ahead of key economic data in the U.S. Weak closing on Wall Street in the previous session and negative trading across other markets in the region also impacted market sentiment.

Profit taking after a three-day rally and subdued global cues dragged the Indian market lower on Thursday. However, significant buying in realty, consumer durable and metal stocks in late trading helped the market end off the day's lows. After moving in a narrow range of 17,025-16,888, the BSE Sensex finished at 16,972, down 28 points or a modest 0.17%, while the Nifty fell by 8 points or 0.15% to 5,080.

Among the other major markets, Singapore's Strait Times slipped 14.09 points, or 0.51% to close at 2,769, China's Shanghai Composite Index declined 73.63 points, or 2.38%, to close at 3,023, Taiwan' s Weighted Index fell 59.72 points, or 0.78%, to close at 7,570, and Indonesia's Jakarta Composite Index ended in negative territory with a loss of 1.44 points , or 0.06%, to close at 2,566.

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The major European averages are trading mixed on Thursday following gains in four straight sessions. The French CAC 40 Index and the U.K.’s FTSE Index are moving down 0.10% and 0.02%, respectively, while the German DAX Index is declining 0.09%.

On the economic front, the Lloyds Banking Group’s Halifax division reported that house prices in the U.K. declined 1.5% month-over-month in February compared to the 0.4% increase in the previous month. The indicator fell for the first time in eight months.

The revised fourth quarter GDP report released by Eurostat showed that the euro zone economy expanded 0.1% sequentially, slowing from the 0.4% expansion in the previous quarter. The slower growth reflected a loss of momentum following the expiration of various stimulus measures that had helped consumer spending.

In a central bank decision from the region, the Bank of England announced today that it has maintained its key interest rates unchanged at a record low of 0.5%. The previous reduction in interest rates was a 0.5 percentage point reduction implemented in March 2009. The Monetary Policy Committee of the bank also voted to maintain the value of asset purchases financed by the issuance of central bank reserves at 200 billion pounds.

Meanwhile, the European Central Bank also held its key interest rate unchanged at a record low of 1% for a tenth straight month. The decision was in line with economists' expectations. The central bank also retained its interest rate on the marginal lending facility at 1.75% and that on the deposit facility at 0.25%.

The last change in the key interest rate was in May 2009, when the bank cut the rate by 25 basis points to the current level of 1%. The bank has lowered the key interest rate by a total of three and a quarter percentage points since early October 2008.

U.S. Economic Reports

First-time claims for unemployment benefits showed a notable decrease in the week ended February 27th, according to a report released by the Labor Department, with the drop in claims coming roughly in line with economist estimates.

The report showed that initial jobless claims fell to 469,000 from the previous week's revised figure of 498,000. Economists had expected claims to fall to 470,000 from the 496,000 originally reported for the previous week

Final estimates by the Labor Department showed that that fourth quarter non-farm productivity rose at a 6.9% sequential rate in the fourth quarter, upwardly revised from the 6.2% growth estimated earlier. Economists had expected the reading to be revised up to 6.5%.

The productivity growth was helped by a 7.6% increase in output, but partly offset by the 0.6% increase in hours worked. Meanwhile, unit labor costs fell at a downwardly revised rate of 5.9%.

The Commerce Department is due to release its report on factory goods orders for January at 10 AM ET. Orders for manufactured goods are likely to have increased 1.8% in the month.

Durable goods orders, which make up the bulk of the factory goods orders, rose 3% month-over-month in January compared to the 1.7% growth expected by economists. The strength was mainly due to a sharp climb in non-defense aircraft orders. However, excluding transportation, durable goods orders fell by 0.6%, with machinery orders serving as a drag. Non-defense capital goods orders, excluding aircrafts, declined 2.9%.

Data on Pending Home Sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 AM ET. A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. The index is expected to show an increase of 1% for January.

The pending home sales index rose 1% month-over-month in December following a 16.4% plunge in November. The indexes for the Northeast, Midwest and the South rose, but the index for the West declined.

Earnings

Ciena Corp. (CIEN) reported a first quarter loss of 12 cents per share on an adjusted basis compared to a loss of 9 cents per share in the year-ago period. Revenues fell to $167.40 million from the year-ago’s $175.88 million. Analysts estimated a loss of 6 cents per share on revenues of $184.55 million. For the second quarter, the company expects revenues of $185 million to $195 million, while analysts estimate revenues of $194.46 million.

Urban Outfitters (URBN) said its fourth quarter net sales rose to $588.49 million from the year-ago’s $508.08 million. The company reported earnings of 45 cents per share compared to 24 cents per share last year. Analysts estimated earnings of 40 cents per share on revenues of $584.44 million.

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Take-Two Interactive Software is expected to be in focus after it reported a loss of 43 cents per share for its first quarter compared to a loss of 66 cents per share last year. On an adjusted basis, the company reported a loss of 31 cents per share on 9% revenue growth to $163.2 million. The consensus estimates had called for a loss of 51 cents per share on revenues of $125.3 million. The company also announced that it would trim 15% of its workforce.

Transatlantic Holdings could gain ground after Standard & Poor’s announced that the company would replace Encore Acquisition in the S&P MidCap 400 Index after the close of trading on March 9th. Other stocks that could see buying interest over inclusion in indexes are ONEOK, which will replace Black & Decker in the S&P 500 Index and Powell Industries, which will replace Greenhill & Co. in the S&P SmallCap 600 Index.

RealNetworks receded in Wednesday’s after hours session after it announced that it has settled a lawsuit with 6 major Hollywood movie studios, Viacom (VIAB) and the DVD Copy Control Association related to the company’s RealDVD product. The agreement terms prohibit RealNetworks from distributing or supporting RealDVD protected by the content scramble system, ArccOS or RipGuard. RealNetworks also agreed to pay the studios $4.5 million for their costs and fees in connection with the litigation while also withdrawing its pending appeal of the District Court’s preliminary injunction.

Agilent Technologies may see some activity after it announced the resignation of its CFO Adrian Dillon, effective April 1st. The company said Dillon is leaving the company to take up the position of chief financial and administration officer at Skype.

Petsmart could move to the upside after it reported fourth quarter sales of $1.41 billion, up 3.4% year-over-year. The company’s earnings slipped a cent to 61 cents per share. The consensus estimates had called for earnings of 56 cents per share on revenues of $1.40 billion. The company expects 2010 sales growth to be in the low-to-mid-single digit range, while it expects earnings per share of $1.73-$1.83. For the first quarter, the company expects earnings of 40-44 cents per share. Analysts estimate earnings of $1.68 per share for 2010 and 38 cents per share for the first quarter.

Coldwater Creek may also gain ground after it reported that its fourth quarter net sales rose to $318.4 million from $283.2 million last year. The company reported a net loss of 11 cents per share, including a charge of 1 cent per share, compared to a loss of 20 cents per share last year. Analysts estimated a loss of 9 cents per share on revenues of $311.98 million. For 2010, the company expects earnings of 8-12 cents per share, while analysts estimate break-even results.

Comtech Telecommunications tumbled in Wednesday’s after hours session after it reduced its full year guidance, now expecting revenues of $740 million to $760 million and earnings per share of $1.85-$1.95. The company attributed the revision to the year-to-date performance and the pushing forward of some shipments to 2011 due to production and technical issues. The company reported second quarter net sales of $171.1 million, higher than $143.9 million last year, but missing the consensus estimate of $184.62 million. The company’s GAAP net income fell to 81 cents per share from $1.26 per share last year.

Sina retreated in Wednesday’s after hours session after it reported fourth quarter net revenues of $98.2 million, down 3% year-over-year, and non-GAAP net revenues that rose 5% to $93.5 million. The company reported non-GAAP net income of 31 cents per share, down 35% year-over-year. Analysts estimated earnings of 36 cents per share on revenues of $94.93 million. For the first quarter, the company estimates non-GAAP net revenues of $78 million to $80 million.

Altera moved lower in Wednesday’s after hours session after it said it expects its first quarter revenues to rise 7%-10% sequentially. Earlier, the company had estimated 5%-10% growth. Analysts estimate revenues of $393.87 million.

Aeropostale is expected to see activity after it said its previously announced 3-for-2 stock split becomes effective on March 5th, 2010.

AMR Corp. could be in focus after it said its subsidiary American Eagle’s load factor rose 1.5 points to 66.7% in February. Traffic rose 1% compared to a 1.3% drop in capacity. Meanwhile, AMR’s load factor also rose 1.5 points to 75.5% in February. Traffic and capacity fell 2.2% and 4.2%, respectively.

Among retailers, Hot Topic reported a 7% decline in same store sales for February compared to a 10.8% jump in the year-ago period. Zumeiz surged up in Wednesday’s after hours session after it reported that its February same store sales jumped 11.2% on top of a 13.4% increase in the year-ago period.

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