US & World Daily Markets Financial Briefing 05-02-2010

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Stocks Turning In A Lackluster Performance In Mid-Morning Trading

Stocks are showing uncertainty in mid-morning trading on Friday, as traders are looking for direction following the day's mixed jobs report. The major averages are on opposite sides of the unchanged mark after yesterday's sharp sell-off.

Ahead of the opening bell on Wall Street, the Labor Department released a report showing that non-farm payroll employment fell by 20,000 jobs in January following a revised decrease of 150,000 jobs in December. Economists had expected employment to edge up by 15,000 jobs compared to the loss of 85,000 jobs originally reported for the previous month.

The Labor Department report also said that the unemployment rate unexpectedly fell to 9.7 percent in January from 10.0 percent in December. The decrease surprised economists, who had expected the unemployment rate to remain unchanged at 10.0 percent.

On the corporate front, diversified chemicals company Air Products & Chemicals Inc. (APD) made an offer to acquire industrial, medical and specialty gases distributor Airgas Inc. (ARG) for $60 per share in cash. The deal is valued at about $7 billion, including $5.1 billion of equity and $1.9 billion of assumed debt.

Trucking company Con-way Inc. (CNW) reported a fourth quarter loss that narrowed from last year, excluding the impairment and restructuring charges recorded in the year ago quarter. Revenues for the quarter declined from a year ago but came in ahead of Street estimates.

The major averages have all seen some upside in recent dealing, recovering from their lows amid a volatile session. While the Dow remains down 4.99 at 9,997.19, the Nasdaq is up 8.43 at 2,133.86 and the S&P 500 is up 0.58 at 1,063.69.

Sector News

Housing stocks are notably lower in mid-morning trading, with the Philadelphia Housing Sector Index posting a loss of 1.2 percent, testing last month's lows. Weyerhaeuser (WY) is helping to lead the sector lower after reporting a wider than expected fourth quarter loss.

While healthcare provider and health insurance stocks are also moving notably lower, strength is visible among commercial real estate stocks, resulting in a 1.9 percent gain in the Morgan Stanley REIT Index. The index is bouncing off of the two-month closing low set yesterday.

Semiconductor, gold and computer technology stocks are also moving to the upside, offsetting the losses in other sectors.

Stocks Driven By Analyst Comments

Despite the lackluster market performance MEMC Electronic Materials Inc. (WFR) is moving higher after being upgraded at Credit Suisse from Neutral to Outperform. The broker also raised its target price from $17 to $19.50. The stock has gained 7.8 percent, recovering from a fourteen-month low set at the close of yesterday's session.

On the downside, Argon ST (STST) is retreating after being downgraded at Oppenheimer from Outperform to Perform. Shares are currently down by 2.7 percent, sinking to a three-week intraday low.

Leap Wireless (LEAP) is also under pressure following a downgrade by JP Morgan Chase from Neutral to Underweight. The broker also lowered its target price on the stock from $12 to $10. The stock has fallen by 3.4 percent but remains rangebound.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed lower by notable margins on Friday. Japan's benchmark Nikkei 225 fell by 2.9 percent, while Hong Kong's Hang Seng Index declined by 3.3 percent.

The major European markets also continue to post notable losses. The U.K.'s FTSE 100 and the German DAX Index are down by 1.5 percent and 1.2 percent, respectively, while the French CAC 40 Index is down by 2.5 percent.

In the bond markets, treasuries are mixed, although the benchmark ten-year note is currently higher. The yield on the note, which moves opposite of its price, is trading at 3.589 percent, posting a loss of 2.1 basis points.

Bay Street Looking For Direction As US Jobs Picture Remains Murky

Canadian stocks were looking to recoup some of yesterday's losses on Friday as traders were digesting mixed economic news from both sides of the border.

While Canada reported improvement in jobs situation, the numbers from the U.S., country's biggest trading partner, was relatively discouraging. Moreover, commodity prices were struggling to come off from their recent lows, while concerns over euro region still lingered in the minds of investors.

The S&P/TSX Composite Index plummeted 261.70 points or 2.3% to 11,128.76 Thursday, its lowest level in the week.

The prices of oil and gold edged down marginally continuing their huge fall in the previous session. Oil was down $0.19 to $72.95 a barrel, while the price of bullion slipped $8.90 to $1,053.30.

In corporate news, information technology player RDM Corp. reported first quarter net loss and comprehensive loss of C$0.02 per share, compared to a net loss and comprehensive loss of C$0.08 per share last year.
 
Commercial real estate company Brookfield Properties said its fourth-quarter funds from operations or FFO increased to $222 million from $191 million in the year-ago period.

Aerospace and industrial products maker Heroux-Devtek Inc. reported third-quarter net income of C$0.12 per share, compared to net income of C$0.16 per share in the same quarter last year.

Bombardier Aerospace announced that it has delivered 302 aircraft for the fiscal year ended January 31, 2010 versus 349 aircraft deliveries made in the previous fiscal year 2008-09.

In brokerage updates, UBS cuts Shoppers Drug Mart price target to C$50 from C$52. RBC trimmed TMX Group price target to C$31 from C$33, while cutting that of Fortis Inc. to C$30 from C$31.

In economic news, Statistics Canada said the economy has created more jobs in January than expected, with the employment rising by 43,000 in the month, against the consensus estimates for a rise of 15,000. With this, the unemployment rate fell to 8.3%.

From across the border, the U.S. Labor Department said payrolls fell 20,000 in January, while economists were expecting it to increase by 15,000. However, unemployment rate unexpectedly declined to 9.7%.

Commodity, Currency Markets

Crude oil futures are edging down $0.01 to $73.12 a barrel after retreating $3.84 to $73.14 a barrel on Thursday. An ounce of gold is trading at $1,061.90, down $1.10. The precious metal slumped $49 to $1,063 an ounce in the previous session.

Among currencies, the U.S. dollar is recovering and is trading up at 89.662 yen after it weakened to 89.055 yen at the close of New York trading on Thursday. Against the euro, the dollar is trading at $1.3725 versus yesterday’s $1.3723.

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Asian Markets Sell-off On Wall Street Cues, Global Economic Concerns

The markets across Asia plunged sharply on Friday amid concerns about global economic recovery. The weak closing on Wall Street and the European markets in the previous session amid concerns about sovereign credit worries in Greece, Spain and Portugal and weaker than expected weekly jobless claims weighed on sentiment.

In Japan, the benchmark Nikkei 225 Index at 10,057.09, down 298.89 points or 2.89%,. while the broader Topix index of all First Section issues lost 19.31 points, or 2.12%, to 892.

On the economic front, a preliminary report released by the Cabinet Office revealed that Japan's leading index strengthened for the tenth consecutive month in December at 94, higher than the reading of 91 reported for November. Analysts expected the index at 93.5 for the month. The report further revealed that as of January 31, foreign currency reserves amounted to $1.001 trillion, while reserves with the International Monetary Fund stood at $4.27 billion. Gold reserves totaled $26.53 billion, while SDRs were worth $20.79 billion.

Sharp decline in US and European markets in the previous session following weaker than expected jobless claims in the US and sovereign debt concerns in Greece dragged the market sharply lower. The strengthening of the local currency, Japanese Yen, against the dollar as traders shunned risk aversion also impacted market sentiment.

Toyota Motor, which had been declining in the past few trading session amid concerns about recall of defective cars, was among the gainers, having added 1.22%. Other automakers ended in negative territory. Honda Motor fell 3.73%, Isuzu Motor lost 4.88%, Mazda Motor declined 4.90%, Mitsubishi Motor shed 3.15% and Nissan Motor backpedaled 3.93%.
 
Trading companies also ended in negative territory. Mitsubishi Corp. declined 3.29%, Mitsui & Co., plunged 4.58%, Sumitomo Corp. lost 4.05%, Toyota Tsusho Corp. fell 2.77% and Marubeni Corp. shed 3.63%.

Bank stocks also ended weaker. Resona Holdings plunged 5.51%, Sumitomo Mitsui Financial lost 2.06%, Mitsubishi UFJ Financial shed 1.30% and Mizuho Financial declined 1.71%.

Shipping stocks ended sharply lower amid concerns about economic recovery. Kawasaki Kisen Kaisha lost 2.95%, Mitsui OSK Lines plunged 4.42% and Nippon Yusen fell 2.43%.

Exporters ended weaker on stronger yen. Canon Inc. declined 3.53%, NEC Corp lost 2.86% and Sharp Corp., edged down 0.37%.

In Australia, the benchmark S&P/ASX 200 Index plunged 107.50 points, or 2.33% to close at 4,514, while the All-Ordinaries Index ended at 4,533, representing a steep loss of 111.60 points, or 2.40%.

On the economic front, the Reserve Bank of Australia, releasing the quarterly Monetary Policy Statement, predicted modest increases in inflation and GDP in the country, apart from slight moderation in joblessness. The central bank stated that it would resort to more interest rate hikes if any or all of its forecasts materialize. The apex bank expects inflation to ease from 3.25% through 2009 to 3% by middle of 2010 and to 2.5% by the end of the year. RBA earlier projected inflation rate of 2.25% for 2010. The bank further noted that it expects inflation to rise to 2.75% by the end of 2011 and into 2012.

In a separate statement, the Reserve Bank of Australia stated that the country's official reserve assets totaled A$46.58 billion in January, slightly higher than A$46.51 billion reported for December. The bank further stated that the value of official reserve assets increased by A$69 million primarily due to earnings. Of the total official reserve assets of the country, foreign exchange stood at A$36.84 billion, larger than the A$36.79 billion in December. Special Drawing Rights increased to A$5.41 billion from A$5.39 billion in the prior month. Reserves with IMF came in at A$1.21 billion and gold reserves totaled A$3.11 billion.

Metals and mining stocks declined sharply on lower commodity prices in the international market. BHP Billiton lost 3.51%, Rio Tinto plunged 5.02%, Fortescue Metals fell 5.45%, Gindalbie Metals shed 4.74%, Macarthur Coal declined 5.55%, Minara Resources backpedaled 4.58% and Oz Minerals slumped 6.25%.

Gold stocks slumped after bullion prices declined sharply in the international market. Lihir Gold shed 4.20% and Newcrest Mining fell 2.56%.
 
Oil stocks also ended in negative territory. Woodside Petroleum declined 3.89%, Santos fell 4.07%, Oil Search plunged 5.32% and Origin Energy slipped 1.34%.

Banks also ended sharply lower amid global economic concerns. ANZ Bank fell 2.43%, Commonwealth Bank of Australia edged down 0.53%, National Australia Bank fell 2.16% and Westpac Banking lost 2.25%. Investment banker Macquarie Group plunged 5.60%.

Healthcare stocks bucked the weak sentiment in the market. CSL Ltd gained 1.38% and Sonic Healthcare advanced 1.05%.

In Hong Kong, the Hang Seng Index plunged 3.33% or 676.56 points, to close at 19,665, taking cues from Wall Street and other markets in the region amid increasing concerns that the global economic recovery might get derailed. Weaker than expected weekly jobless claims in the world's largest economy, the US, and the increasing sovereign credit concerns dragged European and US markets sharply lower. Commodity prices also slumped in the international market. As many as 41 of the 42 components in the index ended in negative territory.

In South Korea, the KOSPI Index slumped 3.05% or 49.30 points, to close sharply lower at 1,567, as traders resorted to sell-off of shares across the board amid increasing concerns about the strength of global economic recovery.. Sovereign credit concerns in European markets such as Greece, Spain and Portugal and weaker than expected weekly jobless claims triggered panic in the European and US markets dragging the oil and gold prices lower. Weak cues from other markets also impacted negative sentiment in the market.

The Indian market extended the previous session's sharp loss Friday, tracking a global sell-off amid concerns about the pace of job losses in the United States and debt problems in Europe. Closer home, rising inflationary pressures, a burgeoning fiscal deficit and continued selling by foreign investors also weighed on the market. Meanwhile, positive news flow such as an upgrade of India's FY11 GDP growth by Morgan Stanley and full subscription received for NTPC's follow-on public issue on the last day of the issue failed to lift sentiment. The benchmark Sensex fell as much as 500 points to 15,725 today before finishing at 15,791, down 434 points or 2.68% and the Nifty fell 127 points or 2.61% to 4,719.

Among other major markets open for trading in the region, Indonesia's Jakarta Composite Index declined 74.24 points, or 2.86% to close at 2,519, Taiwan's Weighted Index plunged 324.21 points, or 4.30% to close at 7,218, Strait Times Index in Singapore lost 61.42 points, or 2.24%, to close at 2,684 and China's Shanghai Composite Index fell 55.91 points, or 1.87%, to close at 2939.

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The major European markets are trading lower for the third straight session on Friday, with the French CAC 40 Index and the German DAX Index moving down 2.71% and 1.30%, respectively, while the U.K.’s FTSE 100 Index is declining 1.64%.

In corporate news, British Airways reported a pre-tax loss of 342 million pounds in the nine months ended December 31 and a loss of 50 million pounds for the third quarter. The company also said it expects to record a loss for the full year. Meanwhile, caterer Compass’ organic revenues fell 1.7% in the first quarter. However, the company said it made a good start to its fiscal year and that its pipeline of businesses remains string.

On the economic front, the French Budget Ministry said France’s budgetary deficit came in at 137.99 billion euros in December compared to a deficit of 56.27 billion euros in the same period last year. State spending rose 5.5% year-over-year, while state revenues declined 18.5%.

Meanwhile, the French Customs Office reported that the nation’s trade balance showed a deficit of 4.26 billion euros in December compared to a deficit of 4.96 billion euros in the previous month. Economists had expected a more modest deficit of 4 billion euros. Exports remained almost flat with last month, while imports edged down 2.12%.

The U.K.’s producer price inflation report showed that the U.K.’s output prices rose 3.8% year-over-year in January following a 3.5% increase in the previous month. Economists had estimated output price inflation of 3.7%. On a monthly basis, output prices rose 0.4%, bigger than the 0.3% increase estimated by economists. Meanwhile, core output price inflation slowed to 2.5% in January from 2.6% in the previous month. Input prices rose at a 8.4% year-over-year rate in January compared to 7.4% in December, faster than the 6.5% increase expected by economists.

U.S. Economic Reports

The Labor Department reported today that the U.S. economy lost 20,000 jobs in January, with the recent month’s job losses taking the total contraction in payroll employment since the recession started in December by 8.4 million. Economists estimated a gain of 15,000 jobs in January.

The change in total non-farm payroll employment for December was revised to –150,000 from the –85,000 estimated earlier. The Labor Department noted that job losses continued in the construction, transportation and warehousing sectors, while employment increased in temporary help services and retail trade.

The unemployment rate based on the household survey fell to 9.7% in January from 10% in December, belying expectations for the rate to have remained unchanged from the December level. Average hourly earnings rose 0.3% in January to result in a 2.5% year-over-year increase.

The U.S. Federal Reserve is expected to release its monthly consumer credit report at 3 PM ET. Consumer credit for December is likely to show a decline of $10 billion.

Consumer credit fell by a record $17.5 billion in November, with revolving credit tied to credit card loans falling by $13.7 billion and non-revolving credit slipping by $3.8 billion. Consumer credit has now been declining for ten straight months.

St. Louis Federal Reserve Bank President James Bullard is slated to speak on monetary policy at Washington University in St. Louis at 5:15 PM.

Earnings

Brooks Automation (BRKS) reported first quarter revenues of $106.2 million, up 44.6% from $73.4 million last year. The company’s net loss on an adjusted basis was 2 cents per share. Analysts estimated break-even results on revenues of $94.11 million for the quarter.

Weyerhaeuser Co. (WY) said its fourth quarter net sales from continuing operations fell to $1.46 billion from $1.78 billion last year. The company reported a loss of 83 cents per share, wider than the loss of $5.73 per share in the year-ago period. On an adjusted basis, the company reported a net loss of 52 cents per share compared to a loss of 99 cents per share last year. Analysts estimate a loss of 38 cents per share on revenues of $1.37 billion.

Beazer Homes (BZH) reported first quarter income from continuing operations of $1.09 per share compared to a loss from continuing operations of $2.05 per share last year, while revenues were almost flat at $218.8 million. Analysts estimated a loss of 90 cents per share on revenues of $200.61 million.

Another homebuilder M.D.C. Holdings (MDC) reported fourth quarter net income of $2.68 per share compared to a net loss of $1.92 per share last year. Total revenues rose to $323.9 million, higher than $296.2 million last year.

Aetna (AET) reported operating earnings per share of 40 cents per share, lower than 96 cents per share in the year-ago period. Revenues, excluding net realized capital gains/losses, rose 9% to $8.70 billion. Analysts estimated earnings of 42 cents per share on revenues of $8.65 billion.

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Air Products (APD) may react to its announcement that it has made an offer to acquire Airgas (ARG) for $60 per share in cash.

Hain Celestial (HAIN) moved higher in Thursday’s after hours session after it said its second quarter sales totaled $241.97 million, lower than $312.22 million last year. The company’s earnings rose to 27 cents per share from 20 cents per share last year, with the recent quarter’s resulting including charges of 4 cents per share. Analysts’ estimates that typically exclude one-time items call for earnings of 31 cents per share on revenues of $253.46 million. The company expects 2010 non-GAAP earnings of $1.05-$1.10 per share and revenues of $920 million to $940 million. The consensus estimates call for earnings of $1.22 per share on revenues of $971.91 million.

Anixter International (AXE) could see some activity after it announced that its board has authorized the buyback of up to 1 million shares.

BioMarin (BMRN) could be in focus after it said it would acquire private and early stage development company Lead Therapeutics. The target company’s lead compound, LT-673, is an inhibitor for the treatment of patients with rate, genetically defined cancers. The terms of the agreement calls for BioMarin to pay Lead Therapeutics stockholders an upfront payment of $18 million, an additional $11 million upon acceptance of IND filing for LT-673, which is expected by the end of 2010, and an additional $68 million for the development and launch milestones for LT-673. Separately, BioMarin announced its 2010 guidance, forecasting revenues of $374 million to $405 million compared to the $398.27 million consensus estimate. For 2010, the company expects non-GAAP net income of $39 million to $49 million.

Qiagen (QGEN) could react to an announcement by Pfizer (PFE) that DxS, a wholly-owned subsidiary of Qiagen, has entered into an agreement with Pfizer to develop a companion diagnostic test kit for PF-04948568, an immunotherapy vaccine for the treatment of gliblastoma multiforme. The companies did not reveal the terms of the agreement.

Dun & Bradstreet (DNB) receded in Thursday’s after hours session after it reported fourth quarter adjusted earnings of $1.75 per share, lower than $1.87 per share last year. Total revenues fell 3% to $463.7 million. Analysts estimated earnings of $1.75 per share on revenues of $459.01 million. The company also raised its quarterly cash dividend to 35 cents per share from 34 cents per share.

Another stock that could be in focus over a dividend announcement is JB Hunt Transport Services (JBHT), which said its board approved an increase in its quarterly cash dividend to 12 cents per share.

Meanwhile, Marriott (MAR) is expected to see some activity after it announced that its board has authorized the resumption of its dividend payment. The board has declared the issuance of a cash dividend in the amount of 4 cents per share on each share of Class A common stock.

FMC Corp. (FMC) may gain ground after it announced that its fourth quarter net income rose to 85 cents per share from 63 cents per share last year. On an adjusted basis, the company reported earnings of 94 cents per share, lower than $1.02 per share in the year-ago period, as revenues fell 2% to $737.7 million. Analysts estimated earnings of 90 cents per share on revenues of $715.47 million. For 2010, the company expects adjusted earnings of $4.35-$4.75 per share compared to the $4.57 per share consensus estimate.

NetSuite (N) may also be in focus after it reported fourth quarter revenues of $43 million. The company’s non-GAAP net income rose to 2 cents per share from 1 cent per share last year. Analysts estimated earnings of 2 cents per share on revenues of $43.03 million.

Sonic (SNIC) could give back some ground after it reported third quarter non-GAAP revenues that remained almost flat at $26.46 million, ahead of the $25.12 million consensus estimate. The company reported a loss of 1 cent per share compared to a loss of $4.27 per share last year. The consensus estimates had called for a loss of 5 cents per share on revenues of $25.12 million.

ResMed (RMD) may rally after it reported that its second quarter revenues rose 23% to $275.1 million. The company’s earnings per share climbed 36% to 60 cents per share. Analysts estimated earnings of 55 cents per share on revenues of $259.04 million.

Con-way (CNW) moved to the downside in Thursday’s after hours session after it reported a net loss applicable to common shareholders of 4 cents per share compared to a loss of 94 cents per share last year. Revenues were almost flat at $1.12 billion. The consensus estimates called for revenues of $1.08 billion.

Fidelity National Information (FIS) may see some strength after it reported that its fourth quarter adjusted revenues rose 2.7% to $1.32 billion. The company reported adjusted net earnings from continuing operations of 44 cents per share. Analysts estimated earnings of 43 cents per share on revenues of $1.30 billion. For 2010, the company expects 2%-4% growth in adjusted revenues and adjusted earnings of $1.91-$2.01 per share. The consensus estimates had called for earnings of $1.97 per share.

Vertex (VRTX) may advance after it reported fourth quarter revenues of $34.05 million, higher than $32.81 million last year. The company’s net loss narrowed to 85 cents per share from a loss of 96 cents per share last year. The non-GAAP net loss was 66 cents per share, narrower than 85 cents per share last year, with the bottom-line results coming in line with expectations.

Edwards Lifesciences (EW) could see weakness after it reported that its fourth quarter adjusted net income rose 6 cents to 84 cents per share, while sales rose 11.9% to $346.7 million. Analysts estimated earnings of 85 cents per share on revenues of $342.95 million. For 2010, the company estimates earnings per share of $3.50-$3.60 on revenues of $1.43 billion to $1.50 billion. The consensus estimates call for earnings of $3.56 per share on revenues of $1.47 billion.

Pitney Bowes (PBI) is likely to see some activity after it reported fourth quarter adjusted earnings from continuing operations of 64 cents per share on a 6% revenue decline to $1.5 billion. The results were ahead of the consensus estimates. The company expects 2010 revenues to be in a range of flat to 3% growth and adjusted earnings per share to be in the range of $2.30-$2.50. Analysts expect a 0.9% increase in revenues and earnings per share of $2.42.

Bebe Stores (BEBE) rallied in Thursday’s after hours session after it reported that its second quarter net sales declined 22.2% to $141.5 million. The company’s earnings per share fell to 3 cents per share from 8 cents per share last year. Analysts estimated earnings of 1 cent per share on revenues of $144.5 million. For the third quarter, the company expects break-even results to earnings of 5 cents per share, while analysts estimate a loss of 3 cents per share.

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