US & World Daily Markets Financial Briefing 09-04-2010

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Stocks Modestly Higher In Mid-Morning Trading

Stocks are up by modest margins in mid-morning trading on Friday, as some of the optimism from yesterday's session has driven buying amid a light day on the economic front. The major averages are all in positive territory, looking to extend their gains for a sixth straight week.

Amid the day's limited economic news, the Commerce Department reported that wholesale inventories increased by 0.6 percent in February following an upwardly revised 0.1 percent increase in January. Economists had expected inventories to edge up by 0.4 percent compared to the 0.2 percent drop originally reported for the previous month.

Additionally, the Commerce Department said that wholesale sales rose by 0.8 percent in February after a downwardly revised 0.9 percent increase in the previous month.

On the corporate front, the banking sector is in focus today after the Wall Street Journal said this morning that nearly 20 banking firms, including Citigroup (C), Morgan Stanley (MS), Goldman Sachs (GS) and JP Morgan Chase (JPM), subdued their debt obligations just before making them public in order to cover up the amount of risk they undertook over the past year.

In other news from the corporate front, Constellation Brands Inc. (STZ) reported fourth quarter adjusted net income of $0.27 per share, up from the $0.21 per share in the year ago quarter. Analysts forecast the company to report earnings of $0.25 per share for the period.

Net sales for the quarter totaled $708.7 million, down from the $735.1 million recorded in the same period last year. The sales figure fell short of the $733.77 million expected by Wall Street.

Oil giant Chevron Corp. (CVX) said that it expects its first quarter profit to be higher than in the previous quarter due to increased earnings from its exploration and production operations and a turnaround in its refining and marketing business.

Chevron did not provide any specific numbers, but analysts polled by Thomson Reuters currently expect the company to earn $1.69 per share for the first quarter.

The major averages have given back some ground in recent trading but currently remain in positive territory. The Dow is up 32.49 points or 0.3 percent at 10,959.56, the Nasdaq is up 4.48 points or 0.2 percent at 2,441.29 and the S&P 500 is up 3.25 points or 0.3 percent at 1,189.68.

Sector News

Oil stocks are leading the way amid an otherwise lackluster outing for the majority of sectors, with the NYSE Arca Oil Index up by 1 percent. The index is being helped higher by shares of ConocoPhillips (COP) which have risen by 1.3 percent and set a fifteen-month intraday high.

The oil sector is benefiting from a increase in oil prices, with crude for May delivery up by $0.36 at $85.75 a barrel after reaching a seventeen-month high of $86.84 a barrel on Tuesday.

Natural gas, computer hardware and pharmaceutical stocks are also moving higher, helping to buoy the markets, while health insurance stocks have come under pressure.

The Morgan Stanley Healthcare Payor Index is down by 0.7 percent, moving lower for a third straight session. Despite the pullback, the index remains in a range near last month's two-year closing high.

Stocks Driven By Analyst Comments

BJ's Wholesale (BJ) is moving notably higher after being upgraded at Credit Suisse from Underperform to Neutral. The stock has gained 4 percent, rising to a six-month intraday high in earlier dealing.

Cummins (CMI) is also on the upside following an upgrade at UBS from Neutral to Buy. Shares have risen by 1.3 percent, breaking out to their best intraday level in nineteen months.

On the other hand, Alcoa (AA) is down after analysts at JP Morgan Chase lowered their rating on the stock from Overweight to Neutral. Analysts also brought down the target price on shares of the aluminum giant from $21.50 to $16.50. The stock has fallen by 2.8 percent, moving further off of Tuesday's two-month closing high.

TSX May Open Higher On Commodities

Canadian stocks are likely to edge up at open Friday amid recovery in the price of oil and on continued surge in the price of gold.

Also, encouraging retail sales from the U.S., Canada's largest trading partner, and hopes that Greece may soon get help to overcome its debt situation will support sentiment

However, the just released Canadian jobs data, which revealed the economy added jobs for the ninth straight month, may fuel speculation that the Bank of Canada will begin tightening its policy.

On Thursday, the S&P/TSX Composite Index ended flat, adding a marginal 2.63 points or 0.02% to 12,113.53, after dipping below the 12,000-mark in early trading.

The price of oil edged up in morning deals, recovering from its 2 day losses. Crude for May was up $0.61 to $86, yet a shade below its 18-month high hit earlier this week.

The price of gold continued to move higher throughout the week, adding $3.90 to $1,156.80 an ounce.

Meanwhile, the Canadian dollar retreated from parity with its U.S. counterpart, amid jobs report. In corporate news, Shaw Communications reported lower second quarter net income of C$0.32 per share, compared to C$0.36 in the year ago period.

Oil and gas firm Rock Energy announced the promotion of John Van de Pol to President and CFO. John joined Rock in April 2009 after a 15 year career with Northrock Resources where he held the position of Senior Vice President and CFO.

ForceLogix Technologies said Callidus Software has bought a further over 2 million of its common shares at C$0.075 per share, taking the total stake to 12.1%.

Wireless communications services provider Redline Communications Group said that the Ontario Securities Commission and the Autorité Des Marchés Financiers or AMF issued a temporary management cease trade order, which prohibits trading in securities of the company by certain insiders of the company.

Mountain resorts operator Melco China Resorts (Holding) said it privately placed 100 million shares with Wisecord Holdings Ltd for C$15 million. In brokerage update, UBS trimmed its rating on Telus Corp to a 'Neutral' from 'Buy' on valuations.

In economic news, Statistics Canada said Canadian unemployment edged up by 18,000 in March, continuing an upward trend that began in July 2009. Economists were predicting the economy would add 25,000 jobs. The unemployment rate remained unchanged at 8.2%

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Asian Markets End Higher On Wall Street Cues, Recovery Optimism

Expectations of strong earnings for the fourth quarter and positive leads from the global equity markets helped the Indian market bounce back on Friday after a sell-off in the previous session.

Sustained buying across the board helped the benchmark 30-share Sensex close near the day's high at 17,933, up 219 points or 1.23%, while the 50-share Nifty rose by 57 points or 1.08%.

Among the broader indexes, the BSE mid-cap index ended up 0.91% and the small-cap index added 1.27%. Gainers outpaced decliners by 1900 to 996 on the BSE.

Banking stocks outperformed after falling substantially on rate hike fears yesterday. SBI, Allahabad Bank, IDBI Bank, Bank of Baroda, Yes Bank, ICICI Bank, Axis Bank, HDFC Bank and Karnataka Bank rose between 0.6% and 3.3%.

In the capital goods sector, Larsen & Toubro, Siemens, Punj Lloyd, ABB, BHEL and Havells India gained 1%-7%.

Among auto stocks, Tata Motors rallied 4.5% after its Land Rover brand reported its best-ever monthly sales in the U.K. market in March. Mahindra & Mahindra gained 0.59%, and Hero Honda Motors and Ashok Leyland added a little over 2% each.

India's domestic car sales jumped by 25 percent in the last financial year, according to the Society of Indian Automobile Manufacturers (SIAM). Automobile sales are likely to grow by an annual 10-14 percent in 2010-11, SIAM President Pawan Goenka said. Car maker Maruti Suzuki ended down 0.14%.

In the oil/gas sector, heavyweight Reliance Industries advanced 1.78% on reports it is close to signing a deal with U.S.-based Atlas Energy. Cairn India (up 1.48%) and ONGC (up 0.44%) gained after crude oil futures rose in Asian trading Friday, tracking higher regional equities.

Telecom stocks closed mixed after the commencement of the multi-stage bidding process for 3G spectrum licenses. Bharti Airtel fell 1.52% and Idea Cellular eased 1.10%, while Reliance Communication rose almost 2% and Tata Teleservices ended up 0.82%

GVK Power and Infrastructure rose 2.45% on reports it will take management control of Bangalore International Airport. Jaiprakash Associates gained 2.57% on reports it is expecting $120-million revenue from a township project. BGR Energy advanced 0.45% after it signed a pact with the Orissa government to set up a 1,320-MW power plant at an investment of Rs. 6,287 crore.

Shakti Pumps soared 5.54% on winning an order worth Rs 7.06 crore. Tube Investments of India rallied 3.69% after it raised stake in its group company Cholamandalam DBS Finance (CDFL) to 57.41 percent from 30.93 percent. Shares of CDFL also ended up 3.32%.

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The major European markets are advancing solidly on Friday, a day after they succumbed to Greek debt worries and a few disappointing economic reports. The French CAC 40 Index is rising 0.86% compared to a 1.36% gain by the German DAX Index, while the U.K.’s FTSE 100 Index is advancing 0.80%.

On the economic front, the U.K. Office for National Statistics reported that the U.K.’s output price index rose 5% in March compared to the previous year. The output inflation rate marked the highest since November 2008. The output price index rose 0.9% on a monthly basis. The input price index rose 10.1% year-over-year in March compared to a 7.5% increase in February, with the input price inflation rate the highest since October 2008.

Meanwhile, the German Federal Statistical Office reported that Germany’s trade surplus rose to 12.6 billion euros in February compared to a surplus of 8 billion euros in January. On a seasonally and calendar adjusted basis, the trade balance was a surplus of 12.1 billion euros. Exports rose 5.1% month-over-month, marking the biggest increase since June 2009, while import growth slowed to 0.2% from 5.6%.

A survey by the Bank of France showed that business confidence in France improved slightly in March. The confidence indicator rose to 103 in March from 102 in February. The sentiment indicator for the service sector also rose by 1 point to 92.

U.S. Economic Reports

The Commerce Department is due to release its wholesale inventories report at 10 AM ET. Economists expect wholesale inventories at the end of February to show a 0.4% increase.

Wholesale sales rose 1.3% month-over-month in January. Annually, wholesale sales climbed 10.5%. At the same time, inventories held by wholesalers at the end of January were down 0.2% compared to the previous month and were 9.7% lower than in the year-ago period. The inventories to sales ratio fell to 1.10 from 1.35 in the year-ago period.

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Constellation Brands (STZ) is expected to move in reaction to its announcement that its fourth quarter sales fell 4% to $709 million. The company reported profit of 27 cents per share for the fourth quarter loss of 23 cents per share in the year-ago quarter. On an adjusted basis, the company reported earnings of 27 cents per share. The consensus estimates call for earnings of 25 cents per share on revenues of $733.77 million. For fiscal 2011, the company expects earnings on a comparable basis of $1.53-$1.68 per share. The company also announced a $300 million share repurchase program, while analysts estimate earnings of $1.77 per share.

99 Cents Only Stores (NDN) is likely to be in focus after it reported that its fourth quarter sales rose 3.1% to $339.3 million. Analysts estimated sales of $336.61 million. Same store sales were up 3.5%.

Ambac Financial (ABK) is also likely to be in focus after it announced a profit of $1.93 per share for its fourth quarter compared to a loss of $8.14 per share last year. The turnaround came about due to a $472 million tax benefit and reduced loss and loss expenses.

Vulcan Materials (VMC) could be in focus after the company said it received a favorable ruling this week from the 5th circuit court regarding its proposed quarry in Medina County, Texas. The ruling upheld decisions previously made by the Surface Transportation Board and the U.S. Fish and Wildlife Service and denied the Medina County Environmental Action Association’s petition for review.

Wynn Resorts (WYNN) could see activity after it announced the termination of agreements and negotiations with respect to a potential investment in the Foxwoods Casino project in Philadelphia.

McKesson (MCK) is likely to move in reaction to its announcement that it has signed an agreement to sell its McKesson Asia Pacific business to Australian private health services and insurer Medibank Private Ltd. The company expects the deal to close in the second quarter of 2010.

Valero (VLO) may also be in focus after it announced a deal to sell the assets of its terminal operation and discontinued operations in Delaware City to the Delaware City Refining Co. and Delaware Pipeline Co., wholly owned subsidiaries of PBF Energy Partners. In addition to getting a sales price of $220 million for the assets, Valero will retain the de minimis levels of remaining crude oil and refined products inventories that have not yet been liquidated.

Bassett Furniture (BSET) is likely to see some activity after it reported first quarter sales of $52.9 million, down 8.5% year-over-year. The company’s net loss narrowed to 15 cents per share from $1.05 per share last year.

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