US & World Daily Markets Financial Briefing 04-06-2009

You can now manage your positions directly from your web browser, whether you use PC or Mac.  Test-drive VT Trader™ Web with your free practice account! Click Here

Stocks Showing A Lack Of Conviction In Mid-Morning Trading

After moving modestly higher at the open, stocks are showing a lack of conviction in mid-morning trading on Thursday. The major averages have bounced back and forth across the unchanged line, as traders remain uncertain about the near-term economic prospects.

Earlier, traders digested a report released by the Labor Department that showed that first time claims for unemployment benefits decreased in the week ended May 30th. The report also indicated the first decrease in continuing claims in twenty weeks.

Initial jobless claims fell to 621,000 from the previous week's revised figure of 625,000. Economists had been expecting jobless claims to edge down to 620,000 from the 623,000 originally reported for the previous week.

The report also showed that continuing claims fell to 6.735 million in the week ended May 23rd from the preceding week's revised level of 6.750 million. The modest decrease in continuing claims breaks a recent streak of record highs and marks the first decrease since the week ended January 3rd.

In a separate report, the Labor Department revealed that productivity increased by 1.6 percent in the first quarter compared to the 0.8 percent increase that had been reported last month. Economists had been expecting the increase in productivity to be revised up to 1.2 percent.

Additionally, the data indicated that unit labor costs increased by 3.0 percent in the first three months of the year, a downward revision from the originally reported 3.3 percent increase. The increase in costs was expected to be revised down to 2.9 percent.

On the corporate front, Ciena Corp. (CIEN) reported an adjusted second quarter net loss of $22.5 million or $0.25 per common share, compared to net income of $42.3 million or $0.40 per common share in the year-ago quarter. Wall Street analysts expected the firm to report a loss of $0.09 per share.

Meanwhile, membership warehouses operator Costco Wholesale (COST) reported a 7 percent drop in its comparable sales for the four-week period ended May 31, 2009, with a 5 percent decline in net sales.

A number of other retails have also reported their monthly sales results, with Abercrombie & Fitch (ANF), J.C. Penney (JCP), Bon-Ton (BONT) and American Apparel (APP) all reporting declining sales on a comparable store basis.

Retail giant Wal-Mart (WMT) did not release its monthly sales results, however, as the company announced last month that it would ceases providing its monthly results.

The major averages have moved to the upside in recent trading and are currently posting modest gains. The Dow is currently up 20.46 at 8,695.74, the Nasdaq is up 6.23 at 1,832.15 and the S&P 500 is up 3.95 at 935.71.

Sector News

The major sectors are mostly positive, contributing to the mild gains being shown by the major averages on the day.

Resource stocks are resuming their upward move after a pullback in the previous session, with gold, oil service and natural gas stocks all climbing on the day. Specifically, the Amex Gold Bugs Index and the Philadelphia Oil Service Sector are up by 2.6 percent and 2.1 percent, respectively.

Banking stocks are also seeing some upside, with the Kbw Bank Index up by 2.7 percent, looking to move to the upper end of a recent trading range.

On the other hand, retail stocks are treading on the downside, with the S&P Retail Index falling by 2.3 percent. Shares of Abercrombie and Fitch are dragging the index lower, showing a 10.5 percent decline and moving further off of the seven-month closing high set on Monday.

The weakness in the retail sector has come on the heels of notable declines in comparable store sales by the nation’s leading retailers.

Airline, healthcare insurance and housing stocks are also retreating on the day. The weakness in the airline sector comes as oil prices have risen by nearly $2 a barrel on the day.

In overseas trading, stock markets across the Asia-Pacific region finished modestly lower on Thursday. Japan's benchmark Nikkei 225 Index slipped by 0.8 percent, while Hong Kong's Hang Seng fell by 0.4 percent.

Meanwhile, the major European markets are mixed. The U.K.'s FTSE 100 Index is down by less than 0.1 percent, while the French CAC 40 Index and the German DAX Index are up by 0.4 percent and 0.2 percent, respectively.

In the bond market, treasuries are showing notable weakness. Subsequently, the yield on the benchmark ten-year note is trading at 3.648 percent, an increase of 9.7 basis points.

Get our Daily Trade Signals and Grain Newsletter along with a copy of the CBOT Introduction to Agricultural Futures and Options Book for Free! The grain trading professionals at MF Global can guide you in the right direction with your trading. Click here to Get your Free Grain Trading Kit Today

Toronto stocks could be poised to rebound on Thursday morning in early trading. The market is looking to rebound back from yesterday's decline of nearly 3%.

Also on Thursday morning, the Bank of Canada announced it has decided to leave the overnight target rate at 0.25%.

Resource stocks could bounce back with commodity prices moving higher in early trading. Crude oil has rallied $1.68 to $67.80 in electronic trading after a sharp fall yesterday.

On the metal front, gold is up $5.50 to $971.10 an ounce and copper has gained 2.9 cents to $2.241 a pound.

Kinross Vice President James Crossland said the gold producer is interested in mergers and acquisitions in the countries where it already has operations, according to reports.

Harry Winston Diamond reported first-quarter net loss of US$45.1 million or US$0.68 per share, compared to net income of US$21.3 million from US$0.35 per share last year.

Domtar Corp. announced that it had raised the tender capital from US$250 million to US$400 million, related to its previously announced tender offer for its outstanding 7.875% notes due 2011.
 
Wi-LAN reported a second quarter GAAP net loss of C$1.0 million or C$0.01 per share, compared to a net loss of C$4.0 million or C$0.04 per share in the year ago quarter.

Enghouse Systems Limited reported a second quarter net income of C$0.9 million or C$0.04 per share, compared to C$1.3 million or C$0.05 per share in the prior year quarter.

Baja Mining Corp. said that it has appointed Michael Shaw as chief operating officer, effective immediately. Shaw joined the company in August 2007 as vice president construction and engineering.

On the economic front, Statistics Canada reported building permits were down 5.4% in the month of April. Non-residential permits fell 14.4%.

In the U.S., a Labor Department report showed that initial jobless claims fell to 621,000 from the previous week's revised figure of 625,000. Economists had been expecting jobless claims to edge down to 620,000 from the 623,000 originally reported for the previous week.

Wednesday, the S&P/TSX Composite Index dropped 298.67 points or 2.82% to settle at 10,290.12. Last week, the index reached an eight-month high above 10,600.

Click Here

The markets across the Asia-Pacific region drifted into negative territory amid concerns about the U.S. economy following weak U.S. private employment and services sector reports. Profit taking following recent strength and caution ahead of a key U.S. jobs report along with lower commodity prices in international market influenced market movement. However, the Indian market ended in positive territory, bucking the overall trend in the region on expectation of more reforms from the new Government.

Japan's Nikkei 225 Average opened down by more than 50 points at 9,692, reflecting the losses on Wall Street. The market recovered smartly and moved above the unchanged line in the morning session to 9,743. However, profit taking in the afternoon ahead of the release of the key non-farm employment report on Friday and a lack of buying interest dragged the index down, as it closed at 9,669, down 72.71 points or 0.75%. The broader Topix Index of all first section issues also edged down 3.51 points, or 0.38% to close at 911.

On the economic front, the Ministry of Finance stated that Japanese companies reduced their spending on plants and equipment in the first quarter of 2009. Capital spending plunged 25.3% during the Jan-Mar period in 2009 following a 17.3% decline in the last 3 months of 2008. Economists were expecting a 30% drop in investment.

Shipping stocks ended weaker on profit taking following their recent gains. Kawasaki Kisen lost 3.51%, Nippon Yusen fell 4.52%, and Mitsui OSK Lines shed 3.41%. A mixed trend was witnessed among automotive stocks. Mitsubishi Motors surged up more than 15% following news that the company is planning to sell plug-in electric vehicles in the country in the next 4 years. Nissan Motor Co. gained 1.68%. However, Toyota Motor lost 2.31%, and Honda Motor fell 1.22% on profit taking.

Financial stocks ended in positive territory. Mitsubishi UFJ gained 1.30%, Mizuho Financial added 1.28%, Resona Holdings advanced 2.64% and Sumitomo Mitsui rose 1.08%. Brokerage Nomura Holdings advanced 3.11% after Fitch Ratings affirmed ratings for debt in the U.K and U.S.

Australia's All Ordinaries Index opened below the 4,000-mark at 3,989 compared to its previous close of 4,009, mirroring the weak closing on Wall Street, and it continued to slide further, dragged down by resource stocks on lower commodity prices in the international market. After moving sideways for the bulk of the session, the index slipped further in reaction to a trade balance report. The benchmark S&P/ASX 200 Index followed a similar trend and ended down at 3,935, with a loss of 82.60 points, or 2.06%.

On the economic front, the Australian Bureau of Statistics revealed that the trade balance unexpectedly turned to a deficit in April, coming in at a seasonally adjusted shortfall of A$91 million.

Resource stocks led the declines after a measure of six commodities traded on the London Metals Exchange, comprising of copper, zinc and nickel among others, declined 1.8% on Wednesday. BHP Billiton declined 5.18%, Orica Ltd shed 3.04%, Oz Minerals lost 3.33% and Rio Tinto slumped 6.56%. Among gold stocks, Lihir Gold lost 3.95%, Newcrest Mining shed 2.99% and Sino Gold edged down 0.77% on higher gold prices. In the oil stocks space, Woodside Petroleum lost 3.57%, Santos shed 3.08% and Oil Search fell 4.01%.

Banking stocks ended mixed on profit taking. Commonwealth Bank edged down 0.03%, National Australia Bank lost 3.93% and Westpac Banking slipped 0.16%. However, ANZ Bank bucked the trend and ended higher with a gain of 2.93%.

In Hong Kong, the Hang Seng Index opened lower at 18,418 and saw weakness, as property and resource stocks declined on profit taking. Strength among utility and retail stocks helped limit the losses and the index ended at 18,503, down 73.70 points or 0.40%.

Property stocks ended lower on profit taking. Henderson Land lost 3.27%, Hang Lung Property shed 3.57% and Sino Land fell 2.57%. All other property stocks also ended in negative territory. Resource and China-related stocks also declined.

Retailer Li & Fung, which supplies toys and other materials to Wal-Mart, surged up 6.85% after Wal-Mart reported that it would create 22,000 new jobs in the U.S. during 2009. Utility stock HK & China Gas gained 4.56% on lower commodity prices.

In South Korea, the benchmark KOSPI Index ended in negative territory, as foreign institutional investors preferred to take profits amid concerns about the U.S. economy. After opening lower at 1,410 compared to its previous close at 1,415, the Kospi continued to drift lower amid selling by foreign institutional investors. The index ended the session with a loss of 36.75 points or 2.60% at 1,378.

Financials, shipbuilding, and construction stocks ended lower on FII selling. Technology and automakers gained on a weaker local currency, helping limit the losses to some extent.

In India, the stock market ended in positive territory, erasing the losses seen in early trading on hopes of an economic recovery. The address of the President to the two houses of Parliament also lifted the market sentiment. The BSE Sensex gained 137.78 points or 0.93% to close at 15,008.

Among the other major markets in the region, China's Shanghai Composite Index ended lower by 11.34 points or 0.41% at 2,767, the Strait Times Index in Singapore ended lower by 0.88% or 21.08 points at 2,363 and the Taiwan Weighted Index fell 107.08 points or 1.55% at 6,786. However, Indonesia's Jakarta Composite Index gained 21.80 points or 1.08% to close at 2,033.

Come Into the LIVE Online Trading Session and Watch Us Make at Least 1 Point ($500 - $2000 a Day). The LIVE Trading Session is Completely FREE! - Sign Up Now here!

The major European markets are trading higher on Thursday, with the French CAC 40 Index and the German DAX Index moving up 0.60% and 0.65%, respectively, while the U.K.’s FTSE 100 Index is gaining 0.03%.

In corporate news, U.K.’s Johnson Matthey reported a small increase in pre-tax profits for the full year to 267.9 million pounds. British supermarket chain Wm Morrison said its like-for-like sales, excluding fuel, rose 8.2% in the first quarter. The company maintained its guidance for the full year. Department store Debenhams said it would raise 323 million pounds through the placement of shares.

In a central bank decision, the Bank of England said it is maintaining its key interest rate at 0.5%. The decision came as no surprise. The committee also opted to continue with its asset purchase program totaling 125 billion pounds financed by the issuance of central bank reserves. The central bank expects the program to take another 2 months to complete and decided to keep the scale of the program under review.

As expected, the European Central Bank also left its main refinancing operations rate at 1% after cutting the rate by a quarter point in May from 1.25%. The ECB had lowered interest rates by a total of three and a quarter percentage points since early October 2008.

Among the economic reports, the latest report from Halifax showed that U.K. house prices rose 2.6% month-over-month in May after three successive monthly declines of between 1.8% and 2.3%. Economists expected prices to fall 1%. Annually, house prices dropped 16.3% in May compared to a 17.7% fall in the previous month. Economists had expected a decline of 17.2%.

Eurostat said in a report that Eurozone retail sales increased 0.2% month-over-month in April compared to the 0.1% drop in the previous month, revised from the 0.6% drop reported initially. Economists were looking for a decline of 0.2%. Annually, retail sales declined 2.3% in April, smaller than 2.9% decline expected by economists.

U.S. Economic Reports

Among the duo of reports released by the Labor Department, initial jobless claims came in at 621,000 for the week ended May 23. This was down 4,000 from a revised mark of 625,000 in the previous week. The 4-week moving average of initial claims, a statistic that flattens out week-to-week fluctuations in the data, increased to 631,250 from the revised mark of 627,250 seen in the previous week.

Continuing claims, which measures the number of people receiving ongoing unemployment help, declined from record high levels. The statistic fell 15,000 to 6.735 million.

In a separate report, the Labor Department said first quarter non-farm productivity rose at an upwardly revised 1.8% quarter-over-quarter rate and unit labor costs climbed 2.7%. The consensus estimates had called for a 1.2% increase in non-farm productivity and 2.9% growth in unit labor costs.

The improvement in productivity reflected a 8.8% drop in hours, which more than offset the 7.2% decline in output. Hourly compensation rose 4.5% quarter-over-quarter.

Here are 10 simple Dos and Don’ts any investor can follow which may contribute to potential for success in trading futures. This FREE guide can provide some of the basic principles that traders inherently live by.

Click Here to Request Your Free Guide!

Wal-Mart is likely to be in focus after it said it would add 22,000 people in its new or expanded stores in 2009. JetBlue could react to its announcement that it has increased its previously announced offering of 20 million shares to 23 million shares at a price of $4.25 per share. The company noted that Deutsche Lufthansa would buy 3.58 million shares.

Copart could be in focus after it reported that its third quarter income from continuing operations was 48 cents per share, down 7.7% from last year. Net sales and revenues fell to $197.33 million from last year’s $221.15 million. Analysts estimated earnings of 48 cents per share on revenues of $202.97 million.

Airlines United Airlines and American Airlines are likely to move in reaction to their May traffic results. United Airlines reported a load factor of 80%, as traffic and capacity declined 12.3% and 10.2% year-over-year, respectively. American Airlines’ load factor rose 0.2 percentage points year-over-year to 73.3%. Traffic fell 14.3% compared to a 14.5% drop by capacity.

Valero is also likely to be in focus after it announced that it has priced its public offering of 40 million shares at $18 per share. The company intends to use the proceeds for general capital purpose, including its capital spending program as well as recently completed and pending acquisitions.

Cyberonics may see some strength after it said its fourth quarter sales rose 14% year-over-year to $38.6 million, ahead of the consensus estimate of $37.66 million. The company’s earnings per share doubled to 22 cents per share. The company said it anticipates 2010 revenues of $157 million to $161 million compared to the $156.4 million consensus estimate.

NetApp, Data Domain and EMC Corp. the three protagonists in a takeover tangle could continue to be in the spotlight after NetAPP and Data Domain announced a revised agreement for the purchase of Data Domain for $30 per share in cash and stock or $1.9 billion, net of Data Domain’s cash. The revised offer is a bump up from NetApp’s earlier bid price of $25 a share made on May 20th and matched an offer by EMC.

Comtech is likely to move to the upside after it reported third quarter adjusted earnings of 34 cents per share, above the 22 cents per share consensus estimate. The company’s sales dipped 6.9% to $128.5 million.

SAIC is also expected to trade higher after it said its first quarter earnings rose to 28 cents per share from 24 cents per share last year, as revenues rose 12% to $2.65 billion. The consensus estimates had called for earnings of 27 cents per share on revenues of $2.51 billion.

The retail space may see some activity in reaction to the release of retailers’ same store sales results for May. Hot Topic’s same store sales fell 6.4% in May compared to a 0.2% decline in May last year. Among the other teen retailers, Abercrombie said its comparable stores for May were down 28% and Aeropostale’s same store sales dropped 19%. Zumiez said its May same store sales slumped 20.7%.

Wholesaler Costco said its comparable store fell 7% in May, while BJ’s Wholesale reported a 6.8% decline in same store sales. Specialty apparel and personal care products retailer Limited Brands  also reported a 7% decline in same store sales for May.

Ciena is expected to move in reaction to its second quarter results, which showed revenues of $144.2 million, notably lower than $242.2 million last year. On a non-GAAP basis, the company reported a loss 25 cents per share compared to a loss of 40 cents per share last year. Analysts expected a loss of 9 cents per share on revenues of $156.73 million. Intel could see some weakness after it announced a deal to acquire Windriver Systems for $884 million or $11 per share in cash.

Our informative 24”x36” wall chart explores 40 years of historical market data on Crude Oil, Gold and S&P500 markets, and includes historical event call-outs. It’s a great trading and analytic tool for professional and beginner traders.

Sign up here to receive your chart today!

Investors Hub Services