US & World Daily Markets Financial Briefing 06-11-2009

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Weak Jobs Data Likely To Contribute To Lower Open On Wall Street

Stocks are poised to open notably lower on Friday, as a disappointing monthly jobs report has deflated trader sentiment before the opening bell. The major index futures are all in negative territory, with the Dow futures down by 67 points.

Employment fell by more than expected in the month of October, according to a report released by the Labor Department this morning, with the continued decrease in jobs pushing the unemployment rate up to a new twenty-six year high above 10 percent.

Non-farm payroll employment fell by 190,000 jobs in October following a revised decrease of 219,000 jobs in September. Economists had expected a decrease of about 175,000 jobs compared to the loss of 263,000 jobs originally reported for the previous month.

With the continued drop in jobs, the unemployment rate jumped to 10.2 percent in October from an unrevised 9.8 percent in September. The unemployment rate had been expected to show a more modest increase to 9.9 percent.

Also on the economic front, the Commerce Department's wholesale inventories report is due to be released at 10 a.m. ET. Inventories at the end of September are expected to have declined by 1 percent.
The Federal Reserve's consumer credit report for September may also garner some attention as the market looks to see if there has been a slowdown in the decline in outstanding consumer credit. Economists expect consumer credit to shrink by $10 billion. The report is due to be released at 3 p.m. ET.

In earnings news, AIG (AIG) reported third quarter net income of $0.68 cents per share compared with a net loss in the year-ago period, with the profit reflecting the absence of catastrophe losses and a decline in investment losses.

CBS Corp. (CBS) posted adjusted earnings of $0.25 cents per share for its third quarter, ahead of the $0.22 cents per share expected by Wall Street analysts. Revenues fell slightly, coming in at $3.35 billion, but also beat forecasts that averaged $3.20 billion.

Coffee retailer Starbucks (SBUX) reported that its third quarter adjusted earnings rose to $0.24 cents per share from $0.10 cents per share in the year-ago period. Revenues for the quarter were $2.42 billion, slipping from the $2.51 billion in the same quarter last year. Analysts estimated earnings of $0.21 cents per share on revenues of $2.39 billion.

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Jobs Data Could Drag Toronto Stocks Lower

Bay Street stocks could give back some recent gains on Friday morning following disappointing jobs reports from both sides of the border.

Following two months of moderate growth, Statistics Canada said Friday morning that employment decreased by 43,000 in October, all in part time. This drop pushed the unemployment rate up 0.2 percentage points to 8.6%.

Across the border, the Labor Department report showed that US unemployment rose to 10.2% as non-farm payroll employment fell by 190,000 jobs in October following a revised decrease of 219,000 jobs in September.

Energy stocks could come under pressure as crude oil has dropped $2.01 to $77.61 per barrel. Copper is down 2.3 cents to $2.934, while gold has given back most of its early gains, rising $1.50 to $1,090.80.

Suncor  reported third-quarter earnings of C$929 million for the recent quarter, compared to C$815 million last year. On a per share basis, earnings fell to C$0.74 from C$0.86 in the year-ago quarter.
Air Canada reported that its third-quarter net income was C$277 million or C$2.44 per share, compared to a loss of C$132 million or C$1.32 per share in the same quarter last year.

Kingsway Financial Services Inc. reported third quarter net loss of US$118.13 million or US$2.19 per share, compared to net loss of US$17.4 million or US$0.32 per share last year.

CF Industries Holdings announced that its board has rejected Agrium Inc.'s latest revised proposal to acquire all outstanding shares of CF Industries for $92.99 apiece.

Yesterday, the S&P/TSX Composite Index rose 109.5 points or 0.98% to settle at 11,180.70. The market gained for a third straight session to move off of a two-month low.

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The Asian markets latched onto the positive lead from Wall Street and ended higher across the board.

Japan's Nikkei 225 average opened sharply higher and moved sideways in the morning before giving back some of its gains to close up 71.91 points or 0.74% at 9,789.

Technology exporters advanced strongly in the session, while utility, electric machinery, resource, pharma and financial stocks declined. Bank stocks took a hit after reports suggested that financial regulators in major countries would tighten capital adequacy rules for internationally active lenders. Auto stocks closed mixed.

On the economic front, the Japanese leading index rose to 86.4 in September from 83.2 in August, according to a preliminary report from Cabinet Office. The leading index improved for the seventh consecutive month and stood above expected reading of 86.2. At the same time, the coincident index stood at 92.5, up from 91.2 in August, with the reading coming in line with economists' expectations. The preliminary estimate showed that the lagging index climbed 0.3 points to 84.5 in September.

Australia's All Ordinaries index opened higher and saw a sharp spike in early trading, before pulling back slightly till the first hour of trading. Thereafter, the index moved steadily higher to close up 85.20 points or 1.89% at 4,604. The market witnessed broad based buying interest, with energy, financial and material stocks advancing sharply in the session.

The buoyancy was supported by positive commentary on growth by the Reserve Bank of Australia. In its quarterly Monetary Policy Statement, the central bank raised its GDP growth forecast for 2009 to 1.75% from its previous estimate of 0.5% growth. The RBA also upwardly revised its 2010 GDP growth forecast to 3.25% from 2.25%.

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The major European averages opened lower and experienced volatility in early trading. The indexes have dipped into negative territory and are trading lower. While the French CAC 40 Index and the German DAX Index are moving down 0.55% and 0.86%, respectively, while the U.K.'s FTSE 100 Index is advancing 0.20%.

In corporate news, British Airways reported a loss of 208 million pounds for the six months ended September compared to a loss of 42 million pounds in the year-ago period. On a pre-tax basis, the airline reported a loss of 292 million pounds, reversing from a profit of 52 million pounds.

On the economic data, U.K'.s output prices climbed 1.7% year-over-year in October, much bigger than the 0.4% growth seen in September, the Office for National Statistics reported. However, the annual growth rate was smaller than the 1.9% increase expected by economists. On a monthly basis, the output price index rose 0.2% in October, mainly reflecting higher prices for electrical products, transport equipment, alcohol and tobacco and petroleum products. At the same time, the input price index edged up 0.1% compared to the previous year, reversing the 6.2% drop in September.

Meanwhile, the French Customs Office reported that the nation's trade deficit declined to 1.75 billion euros in September from 2.17 billion euros in August. Economists had expected a deficit of 3 billion euros. Exports rose at a faster rate of 2.25% to 29.11 billion euros compared to a 0.69% increase in imports to 30.86 billion euros.

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Starwood Hotels & Resorts may be in focus after it said it has priced its offering of $250 million of 7.150% senior notes due 2019 at a price of 97.559% of principal amount.

Public Storage is likely to see activity after it reported third quarter funds from operations of $1.44 per share, higher than the consensus estimate of $1.25 per share. On an adjusted basis, the company's adjusted funds from operations were $1.30 per share. Revenues rose 4% to $412.9 million.

Fluor Corp. is likely to see buying interest after it said it received three new contracts from the U.S. Army Corp. of Engineers to provide life support services for its personnel and other clients in Iraq. The contracts are valued at $80 million and the scopes of work for all three contracts are expected to be completed by the end of third quarter.

Crocs is likely to see weakness after it said it expects a fourth quarter loss of 15-20 cents per share compared to the 16 cents per share loss expected by analysts. The company also announced third quarter earnings of 1 cent per share compared to a loss of 8 cents per share expected by analysts. Revenues rose 2% to $177.1 million, ahead of the $156.4 million consensus estimate.

CBS Corp. traded lower in Thursday's after hours session despite reporting adjusted earnings of 25 cents per share for its third quarter, ahead of the 22 cents per share consensus estimate. Revenues fell slightly to $3.35 billion, also beating the analysts' estimate of $3.20 billion.

Activision Blizzard could also be in focus after it reported third quarter earnings of 1 cent per share compared to a loss of 8 cents per share last year. The company's adjusted earnings were 4 cents per share on a 1.1% decline in revenues to $703 million. Excluding deferred revenue, revenues were $755 million, below the mean analysts' estimate of $724 million.

Starbucks may gain ground after it reported that its third quarter adjusted earnings rose to 24 cents per share from 10 cents per share in the year-ago period. However, sales fell to $2.4 billion from the year-ago's $2.515 billion. Analysts estimated earnings of 21 cents per share on revenues of $239 billion. For 2010, the company expects non-GAAP earnings growth of 15%-20% and revenue growth in the low to mid-single digits.

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