US & World Daily Markets Financial Briefing 07-04-2010

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Stocks Mixed Amid Lack Of Significant Market Moving News

Stocks are turning in a lackluster performance in mid-morning trading on Wednesday, as the day's light economic calendar has traders unwilling to make substantial moves. The major averages are on opposite sides of the unchanged mark, although by only slim margins.

Market focus is currently on former Federal Reserve Chairman Alan Greenspan as he testifies before the Financial Crisis Inquiry Commission, defending his time in office ahead of the worst economic downturn in decades.

The markets may also look to commentary offered by current Fed Chairman Ben Bernanke, who is scheduled to speak before the Dallas Regional Chamber at 1:30 p.m. ET.

Just ahead of the Fed chief's remarks, the results of the Treasury Department's $21 billion offering of ten-year notes may garner attention, as traders will look to gauge the resiliency of market demand for the influx of securities. The results will be made public at 1:00 p.m. ET.

At 3:00 p.m. ET, the U.S. Federal Reserve will release its monthly consumer credit report for February. Economists expect that consumer credit declined by $0.7 billion during the month after having risen by $5.0 billion in the previous month.

On the corporate front, Family Dollar Stores Inc. (FDO) reported second-quarter net income of $0.81 per share, topping Wall Street estimates that called for earnings of $0.78 per share for the quarter. Net sales for the period came in at $2.09 billion, in-line with forecasts.

Monsanto Co. (MON) reported first quarter net income of $1.60 per share and $1.70 per share on an adjusted basis. The results missed estimates, which called for earnings of $1.73 per share. Net sales of $3.89 billion also fell short of Street projections of $3.93 billion.

In other major corporate news, German car maker Daimler AG (DAI) announced an equity exchange and strategic cooperation agreement with the Renault-Nissan Alliance aimed at increasing scale and cost sharing in development.

The agreement is expected to increase the competitiveness of all the partners with a special focus on small, fuel efficient cars, while individual brand identities will remain unaffected.

The major averages have all seen choppy movement in recent dealing, lingering near the unchanged mark. While the Nasdaq is up 1.76 points or 0.1 percent at 2,438.57, the Dow is down 29.55 points or 0.3 percent at 10,940.44 and the S&P 500 is down 2.25 points or 0.2 percent at 1,187.18.

Sector News

Health insurance stocks are under pressure in mid-morning trading, prompting a 1.2 percent slide by the Morgan Stanley Healthcare Payor Index. The sector is being pulled lower by shares of Health Net Inc. (HNT), which are down by 2.4 percent. With the drop, the stock has set its lowest intraday price in nearly a month.

Railroad, oil and airline stocks are also moving lower, although by more moderate margins, while some of the weakness is being offset by a strong outing in the gold sector. The NYSE Arca Gold Bugs Index is currently up by 2.3 percent, reaching its best intraday level in over two months.

Banking, computer hardware and networking stocks are also on the upside, with the banking sector extending its recent winning streak. The Kbw Bank Index is moving higher for a fifth straight session and has set a fresh seventeen-month intraday high.

Stocks Driven By Analyst Comments

Netflix (NFLX) is moving lower after being downgraded at Barclays from Overweight to Equalweight, based on valuation. The stock has fallen by 1.8 percent, backing off of the historic closing high set on Tuesday.

Parexel (PRXL) is also under pressure following a downgrade by analysts at Wells Fargo to Market Perform. Shares are currently down by 3.4 percent after matching an eighteen-month closing high in the previous session.

On the other hand, Keycorp (KEY) is moving higher after being upgraded at Goldman Sachs to a Buy rating. The stock is currently up by 3.8 percent, breaking out to its best intraday price in nearly a year.

Early Signals Point To A Lower Opening For Bay Street Wednesday

Canadian stocks may continue to move down Wednesday morning amid easing energy prices. Also, lingering worries over the Greece debt situation and a discouraging report on the euro zone economic growth will likely to weigh on sentiment.

On Tuesday, the S&P/TSX Composite Index trimmed 29.64 points or 0.24% to 12,156.74, after settling Monday at a new 18-month high of 12,186.35.

The price of crude oil eased after hitting its 18-month high in the previous session, losing $0.85 to $85.99 a barrel. Meanwhile, the price of gold edged up $1.40 to $1,135.90 an ounce, hovering near its 4-week high.

The Canadian dollar continued to test parity versus the greenback in morning deals.

In corporate news, network business operator Canadian Tire Corp. said it aims to achieve 8% to 10% annual growth in its consolidated operating earnings per share.

Oil and gas explorer One Exploration announced that its fourth-quarter net loss widened to C$0.09 per share compared to a loss of C$0.04 per share prior year.

Oil and gas firm KFG Resources announced that it is withdrawing private placement of up to 30 million units at C$0.065 per unit. 

Metals mining company Lundin Mining announced that it is voluntarily filing a Form 15F with the U.S. SEC to terminate the registration of its common shares.

Mineral properties dealer Khan Resources announced that CNNC Overseas Uranium Holding, China has extended its offer to acquire all of the outstanding common shares of Khan at C$0.96 in cash per share.

Retail property owner and developer Plazacorp Retail Properties posted a flat fourth-quarter funds from operations or FFO of C$0.067 per share.

Airlines operator Air Canada said its system traffic for March increased 9.6% from a year ago to 4.2 billion revenue passenger miles on a capacity increase of 7.7% to 5.2 billion available seat miles system wide.

Electronics equipments maker 5N Plus Inc. reported a lower third quarter net income of C$0.09 per share, compared to C$0.11 per share in the same quarter last year.

Data communications services provider Radiant Communications reported a wider net loss for the fourth quarter at C$0.05 per share, compared to a net loss of C$0.01 per share in the year ago period.

Heating systems maker Sofame Technologies reported wider loss of C$0.0243 per share compared to a loss of C$0.0182 per share last year, despite reporting increase in net sales to C$2.44 million from C$1.69 million prior year.

 In economic news, Statistics Canada said value of building permits edged down 0.5% to $5.7 billion in February on month-on-month, but was 56.7% higher than that of February 2009.

Meanwhile, the second estimates published by the Eurostat on Wednesday revealed that the Euro zone economy was flat in the fourth quarter of 2009, after expanding 0.4% sequentially in the third quarter.

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The markets in Asia ended the trading session in positive territory Wednesday on increasing optimism that the global economic recovery is on the right path and would sustain the pace and momentum going forward. The decision from US Federal Reserve and Bank of Japan to keep the interest rates unchanged and continue the low interest regime for a prolonged period of time lifted the optimism about economic recovery.

In Japan, the benchmark Nikkei-225 Index advanced 10.51 points, or 0.09%, to 11,293, while the broader Topix index of all First Section issues was up 4.75 points, or 0.48%, to 996.

On the economic front, the Bank of Japan, at the end of its two-day policy meeting, revealed that it will maintain its uncollateralized overnight call rate unchanged at 0.10%. The central bank, while withholding announcement on further support measures to tackle deflation, pledged to maintain an extremely accommodative financial environment. The bank retained its assessment of the domestic economy, saying growth is picking up mainly due to various policy measures taken at home and abroad, although there is not yet sufficient momentum to support a self-sustaining recovery in domestic private demand.

Separately, the Ministry of Finance revealed that Japan's official reserves totaled $1.042 trillion by the end of March, down $8.36 billion from February. According to the statement, as of March 31, foreign currency reserves amounted to $990.51 billion, while reserves with the International Monetary Fund stood at $4.03 billion. Gold reserves totaled $27.44 billion, while SDRs were worth $20.31 billion.

Banking stocks led the gains on increasing optimism about economic recovery. Sumitomo Mitsui Financial surged up 4.15%, Mitsubishi UFJ Financial climbed 3.28%, Resona Holdings soared 4.60% and Mizuho Financial gained 1.64%.

Insurance related stocks also advanced. MS&AD Insurance Group Holdings surged up 4.11%, Tokio Marine Holdings climbed 2.71%, T&D Holdings rose 2.45% and NKSJ Holdings advanced 1.43%.

All Nippon Airways gained 1.89% among airline stocks. Among shipping stocks, Nippon Yusen added 0.53% and Kawasaki Kisen Kaisha edged up 0.27%. However, Mitsui OSK Lines ended in negative territory with a marginal loss of 0.30% on profit taking.

Trading companies also ended in positive territory on optimism about global economic recovery. Sumitomo Corp. gained 1.78%, Itochu Corp. climbed 2.02%, Toyota Tsusho Corp. advanced 0.99%, Mitsui & Co., Ltd added 0.43% and Mitsubishi Corp. edged up 0.24%.

In Australia, the bench mark S&P/ASX 200 Index added 7.20 points, or 0.15% to close at 4,961, while the All-Ordinaries Index ended at 4,983, representing a gain of 9.10 points, or 0.18%.

On the economic front, a report released by the Department of Education, Employment and Workplace Relations, or DEEWR, revealed that Australia's leading indicator of employment dropped for the third month in a row in April. According to the report, the index fell to minus 1.099 from minues 1.076 in the previous month. "However, it is still too early to confirm that a slowing in the pace of employment growth below its long-term trend rate of 1.9 per cent per annum is in prospect, because the Indicator has fallen for fewer than six consecutive months," said DEEWR.

A report released by the Australian Federal Chamber of Automotive Industries revealed that sales of new cars in the country increased 25.2% year-on-year in March. This marks a record monthly sales figure for March, eclipsing the previous record set in 2007. As per the report, a total of 94,744 passenger car sales were pushed through during the month.

A statement released by the Australian Bureau of Statistics revealed that short-term visitor arrivals to Australia increased a seasonally adjusted 1.1% month-on-month in February, reversing the 0.9% fall in the previous month. A total of 486,700 arrivals were registered in February, up from 481,600 in January.

Results of a latest survey from Australian Industry Group and Commonwealth Bank revealed the services sector remained weak during March. The Performance of Services Index showed a reading of 48.4 for March, marginally higher than 48.3 recorded in the previous month. A reading below 50 indicates weakness or contraction.

Gold stocks continued their northward march on higher gold prices in bullion market. Lihir Gold climbed 2.37% and Newcrest Mining advanced 1.12%.

Mixed trading was witnessed among mining and mineral stocks. BHP Billiton slipped 0.13%, and Oz Minerals shed 0.40%. Rio Tinto added 0.27%, Gindalbie Metals climbed 1.96%, Iluka Resources gained 0.88%, Mineral Resource edged up 0.13% and Murchison Metals rose 0.38%. Mincor Resources and Fortescue Metals remained unchanged from previous close.

Macarthur Coal declined 5.23% after the company yet again rejected the sweetened offer from Peabody Energy, reiterating the fact that the offer does not offer better value to shareholders.

Oil related stocks ended in negative territory. Woodside Petroleum shed 0.36%, Santos slipped 0.40%, and Oil Search fell 1.16%. However, Origin Energy bucked the trend and ended in positive territory with a gain of 0.41%.

Banks also witnessed mixed trading. ANZ Bank added 0.24%, Commonwealth Bank of Australia advanced 0.40%, investment banker Macquarie Group climbed 2.22% and National Australia Bank edged up 0.21%. However, Westpac Banking bucked the trend and ended in negative territory with a loss of 0.60%.

In Hong Kong, the benchmark Hang Sang Index surged up 1.82% or 391.77 points, to close at 21,929 on increasing optimism about global economic recovery. Positive trading across other markets in the region, retaining interest rates at present levels by both US Federal Reserve and Bank of Japan, also lifted market sentiment. Resource related stocks, banks and property stocks led the gains. As many as 36 of the 42 components in the index ended in positive territory.

In South Korea, the benchmark KOSPI Index ended in positive territory with a marginal gain of 0.51 points, or 0.03% at 1,727, as profit taking following recent gains was more than offset by fresh foreign institutional buying in select technology related stocks amid optimism about sustaining global economic recovery.

The Indian market ended a volatile session flat for a second day in a row Wednesday, as investors continued profit taking amid lack of support from global markets. Business activity among Indian services companies grew at a slower pace in March, down from February's 17-month peak, a survey results showed Wednesday, dampening sentiment to some extent. After hitting a fresh 25-month high of 18,048 in afternoon trading, the 30-share Sensex pared gains and slipped into the red before recovering notably from the day's lows to finish at 17,970, up about 29 points or 0.16%. Likewise, the 50-share Nifty ended up 9 points or 0.16%, at 5,375.

Among the other major markets open for trading, Indonesia's Jakarta Composite Index gained 17.61 points, or 0.61%, and closed at 2,899 and Singapore's Strait Times Index advanced 12.59 points, or 0.42%, to close at 2,988. However, China's Shanghai Composite Index bucked the positive trend and ended in negative territory with a loss of 10.46 points, or 0.33%, at 3,148.

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The major European markets are moving to the downside on Wednesday after the moderate gains posted in the previous session. The French CAC 40 Index and the German DAX Index are moving down 0.52% and 0.40%, respectively, while the U.K.’s FTSE 100 Index is receding 0.24%.

In economic news, service sector purchasing managers’ indexes released today showed a mixed trend. The euro zone’s services sector purchasing managers’ index rose to 54.1 in March, upwardly revised from the flash estimate of 53.7. However, French services sector growth slackened in March. The Markit/CDAF PMI for the service sector fell to 53.8 in March, down from 54.6 in the previous month, marking the lowest reading since last September.

Meanwhile, Markit Economics said the U.K. CIPS service sector PMI fell 1.9 points to 56.5 in March. Levels of new business received by British service providers rose for the ninth straight month in March and at a sharp pace.

Producer prices in the euro zone region declined 0.5% year-over-year in February, slower than the 1.1% drop in the previous month. Economists had expected a 0.4% drop for the month. On a monthly basis, producer prices edged up 0.1% in February compared to the 0.7% growth in the previous month.

The revised euro zone GDP report showed that the euro zone economy stagnated in the fourth quarter compared to the previous quarter, downwardly revised from the 0.1% growth estimated initially. In the third quarter, the economy grew 0.4%.

U.S. Economic Reports

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended April 2nd at 10:30 AM ET.

Crude oil inventories rose by 2.9 million barrels to 354.2 million barrels in the week ended March 26th. Inventories of crude oil remained above the upper limit of the average range for this time of the year.

Gasoline stockpiles edged up by 0.3 million barrels and were above the upper limit of the average range. However, distillate fuel inventories fell by 1.1 million barrels, although they remained above the upper boundary of the average range. Refinery capacity utilization averaged 81.2% over the four weeks ended March 26th compared to 81.1% in the previous week.

Bernanke will deliver a speech titled "Economic Challenges: Past, Present and Future" to the Dallas Regional Chamber at 1 PM ET. A half-hour while later, Kansas City Federal Reserve Bank President Tom Hoenig is scheduled to address a meeting of the Denver branch board of directors meeting in Santa Fe, New Mexico.

The U.S. Federal Reserve is expected to release its monthly consumer credit report at 3 PM ET. Consumer credit for February is likely to edge down by $0.7 billion.

In January, consumer credit rose by 2.4% or $5 billion to $2.456 trillion, with the measure increasing for the first time in 9 months. Non-revolving credit tied mostly to auto loans rose 5% or $6.6 billion, helping to offset a 2.3% or $1.7 billion decline in revolving credit tied to credit card loans.

Earnings

Family Dollar (FDO) reported that its second quarter earnings rose to 81 cents per share from 60 cents per share last year. Sales rose 4.9% to $2.09 billion. Analysts estimated earnings of 78 cents per share on revenues of $2.09 billion. The company expects third quarter earnings per share of 71-76 cents and full year earnings of $2.48-$2.58 per share. The consensus estimates call for earnings of 70 cents per share for the quarter and $2.47 per share for the year.

Greenbrier (GBX) said its second quarter revenues fell to $200 million from the year-ago’s $287.1 million. The company reported a loss of 28 cents per share, narrower than the loss of 45 cents per share reported for the year-ago period. The recent quarter’s results included a charge of 8 cents per share compared to a charge of 3 cents per share in the year-ago period. Analysts’ estimates, which typically exclude one-time items, called for a loss of 23 cents per share on revenues of $178.25 million. The company expects 2010 revenues to show a year-over-year decline, although it expects EBITDA, excluding charges, to be modestly higher than in 2009.

Monsanto (MON) reported second quarter sales of $3.89 billion compared to $4.04 billion in the year-ago period. The company’s ongoing earnings per share fell to $1.70 per share from the year-ago’s $2.16 per share. Analysts estimated earnings of $1.73 per share on revenues of $3.93 billion. The company lowered its 2010 earnings expectations to the low end of its earlier guidance.

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DIRECTV is likely to be in focus after it said it has agreed with John Malone to recapitalize the company’s stock owned by Malone, his wife and two trusts set up for the benefit of his children. The Malones agreed to exchange the 21.81 million Class B shares they hold for 26.55 million shares of Class A common stock. The transaction will reduce the Malones’ voting interest in the company to about 3% from 24.3%. The company also noted that Malone has agreed to resign from the board of DIRECTV. The agreement was struck to satisfy the FCC order in connection with the acquisition by Liberty Media (LINTA) of its interest in DIRECTV in February 2008 from News Corp. (NWS).

Wabash National Corp. (WNC) could see buying interest after it confirmed that it has received a 3-year purchase agreement with refrigerated carrier Prime for supplying 4,000 ArcticLite refrigerated van trailers over the next 34 months.

Coldwater Creek (CWTR) is likely to be in focus after it announced the appointment of James Bell as its Senior Vice President and CFO. Bell will take over from John Heyes III, who has been serving as interim CFO since November 2009.

AMB Property (AMB) may see weakness after it announced that it would offer 12 million shares in a registered offering. The company has also offered the underwriters the option of buying up to an addition1.8 million shares to cover over-allotments. The net proceeds from the offering will be contributed to the company’s operating partnership.

FMC Technologies (FTI) could see some activity after it announced that it has signed an agreement with Total Exploration and Production U.K. Ltd. for the manufacture and supply of subsea production equipment to support the Laggan-Tomore field. The company noted that the contract would contribute $210 million in revenues.

Citigroup (C) may also be in focus after the Financial Industry Regulatory Authority slapped a $650,000 fine on the company for disclosure and supervisory violations.

Earnings

Family Dollar (FDO) reported that its second quarter earnings rose to 81 cents per share from 60 cents per share last year. Sales rose 4.9% to $2.09 billion. Analysts estimated earnings of 78 cents per share on revenues of $2.09 billion. The company expects third quarter earnings per share of 71-76 cents and full year earnings of $2.48-$2.58 per share. The consensus estimates call for earnings of 70 cents per share for the quarter and $2.47 per share for the year.

Greenbrier (GBX) said its second quarter revenues fell to $200 million from the year-ago’s $287.1 million. The company reported a loss of 28 cents per share, narrower than the loss of 45 cents per share reported for the year-ago period. The recent quarter’s results included a charge of 8 cents per share compared to a charge of 3 cents per share in the year-ago period. Analysts’ estimates, which typically exclude one-time items, called for a loss of 23 cents per share on revenues of $178.25 million. The company expects 2010 revenues to show a year-over-year decline, although it expects EBITDA, excluding charges, to be modestly higher than in 2009.

Monsanto (MON) reported second quarter sales of $3.89 billion compared to $4.04 billion in the year-ago period. The company’s ongoing earnings per share fell to $1.70 per share from the year-ago’s $2.16 per share. Analysts estimated earnings of $1.73 per share on revenues of $3.93 billion. The company lowered its 2010 earnings expectations to the low end of its earlier guidance.

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