US & World Daily Markets Financial Briefing 09-06-2010

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Stocks Posting Moderate Gains In Mid-Morning Trading

Stocks are seeing moderate strength in mid-morning trading on Wednesday, as traders react to the latest wholesale trade numbers on the heels of upbeat economic news from China. The major averages are all in positive territory, offsetting some recent losses.

A short time ago, the Commerce Department reported that wholesale inventories increased by 0.4 percent in April following an upwardly revised 0.7 percent increase in March. With the increase, wholesale inventories rose for the fourth consecutive month.

Economists had expected inventories to increase by 0.5 percent compared to the 0.4 percent growth originally reported for the previous month.

The markets are also fixated on testimony from Federal Reserve Chairman Ben Bernanke, as he continues his remarks on the economy before the House Budget Committee.

Initial strength in the markets came after Reuters cited sources as saying that Chinese exports surged up by about 50 percent in May compared to the same month a year ago. The report on Chinese trade, due to be released on Thursday, had been expected to show a 32.0 year-over-year increase in exports.

The sizable external demand for Chinese goods suggests that another downturn by the global economy is highly unlikely.

At 2:00 p.m. ET, the Federal Reserve will release its Beige Book report, a compilation of economic commentary from the twelve Fed districts. Earlier in the week, Fed Chairman Bernanke said he expects the moderate pace of recovery to continue.

On the corporate front, BP Plc (BP) remains under pressure even after slowing the sizable leak from its well in the Gulf of Mexico. The U.S. government recently criticized the firm for taking too much time to initiate payment on claims filed by residents affected by the spill.

Texas Instruments (TXN) is also in focus today after increasing the low end of its second quarter profit and revenue forecast after the markets closed in the previous session.

The major averages have seen choppy movement since moving off of their session highs. The Dow is currently up 26.15 points or 0.3 percent at 9,966.13, the Nasdaq is up 7.23 points or 0.3 percent at 2,177.80 and the S&P 500 is up 3.30 points or 0.3 percent at 1,065.30.

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Commercial real estate stocks are some of the morning's best performers, resulting in a 1.6 percent advance by the Morgan Stanley REIT Index. The move is lifting the index further off of Monday's three-month closing low.

Railroad stocks are also seeing notable gains, driving the Dow Jones Railroads Index up by 1.6 percent. With the gain, the index is also moving further off of a recent three-month closing low.

Oil service, steel and natural gas stocks are also up by sizable margins following today's news about China, which is seen as indicative of the likelihood of increased demand for resources.

Stocks Driven By Analyst Comments

Equinix (EQIX) is notably higher after being upgraded at Citigroup from Hold to Buy based on projected revenue growth. The stock has gained 6.6 percent, bouncing off of the ten-month closing low set in the previous session.

PulteGroup (PHM) is also seeing a strong upward move after Stifel Nicolaus upgraded the stock from Sell to Hold. Shares are currently up by 1.8 percent, moving further off of a recent five and a half month closing low.

On the other hand F5 Networks (FFIV) is moving lower following a downgrade at Ticonderoga from Buy to Neutral. The stock has lost 0.7 percent, slipping to a two-week intraday low in earlier dealing.

Currency, Commodity Markets

Crude oil futures are rising $1.15 to $73.14 a barrel after advancing $0.55 to $71.99 a barrel on Tuesday. Oil saw a bounce in Asian trading today after the American Petroleum Institute’s oil inventory report showed that crude oil stockpiles fell by 4.5 million barrels in the week ended June 4th.

Gold futures are currently receding $10.30 to $1,235.30 an ounce. In the previous session, the precious metal added $4.80 to $1,245.60 an ounce.

Among currencies, the U.S. dollar is trading at 91.56 yen compared to the 91.46 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1959 compared to yesterday’s $1.2014.

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Asian Markets End Mixed

Mixed trading was witnessed among the markets in Asia n on Wednesday with the markets in Japan, Taiwan, Singapore and South Korea ending in negative territory with minor losses while the other markets ended in positive territory with marginal gains on bargain hunting. Trading was relatively volatile with most of the traders remaining on the side lines awaiting more news and clarity on global economy.

In Japan, the benchmark Nikkei 225 Index slipped 98.8 points, or 1.04%, to a six-month low of 9,439, while the broader Topix index of all First Section issues was down 7.96 points, or 0.93%, at 850.

On the economic front, a report released by the Cabinet Office in Japan revealed that core private sector machinery orders rose sharply for the second straight month in April. As per the report, orders were up 4% in April compared to the previous month, following the 5.4% surge in March. Economists had forecast a 1.7% rise. Compared to a year ago, core private sector machinery orders increased 9.4% compared to the same month in the previous year in April. It followed a 1.2% increase in the prior month. Economists were looking for a 7.3% rise.

Exporters declined following yen's strength against the Euro and the US dollar. TDK Corp. declined 2.14%, Tokyo Electron fell 2.07%, Kyocera Corp. slipped 1.04%, Canon Inc. lost 1.76%, Advantest Corp. plunged 3.23% and Sony Corp. was down 1.69%.

Automakers also ended in negative territory. Honda Motor Co. declined 2.82%, Suzuki Motor shed 3.09%, Toyota Motor shed 1.25%, Nissan Motor Co. plunged 3.59% and Hino Motors slumped 3.93%.

Trading companies also ended in negative territory. Mitsubishi Corp. slipped 1.29%, Itochu Corp. lost 2.20%, Sumitomo Corp. slipped 0.96%, Marubeni Corp., was down 1.23% and Toyota Tsusho Corp. declined 0.41%.

In Australia, the benchmark S&P/ASX200 Index edged up 4.10 points, or 0.09% and closed at 4,385, while the All-Ordinaries Index ended at 4,403, representing a gain of 1.40 points, or 0.03%.

On the economic front, a report revealed that the Westpac-Melbourne Institute consumer confidence index pulled back sharply in June to 101.9 from 108.0 reported for the previous month as consumers were concerned about the deteriorating conditions abroad as well turmoil in the financial markets. A reading above 100 means optimists outnumber pessimists. Westpac chief economist Bill Evans said the decline in confidence reflected a mixture of concerns about deteriorating conditions abroad, financial market turmoil, and uncertainty around the government's proposed resource super profits tax.

Separately, a report released by the Australian Bureau of Statistics revealed that housing finance commitments increased in April from the preceding month. As per the report, the total value of housing finance for owner occupation, excluding alterations & additions, increased a seasonally adjusted 0.8% month-on-month in April to A$21.70 billion. Owner occupied housing commitments grew 0.6%, while investment housing commitments climbed 1.3%.

Stocks of major retailers in the country ended in positive territory as investors turned attention to defensive stocks and consumer staples amid global uncertainty. David Jones added 0.47%, Harvey Norman advanced 0.30%, JB Hi-Fi gained 1.39%, Myer Holdings rose 0.99%, Reject Shop climbed 2.38%, Wesfarmers edged up 0.30% and Woolworths increased 1.30%.

Telecom giant Telstra gained 1.29% while Singapore Telecommunications ended in negative territory with a loss of 1.59%. Among healthcare stocks, Sonic Healthcare climbed 3.44%.

Gold stocks ended in positive territory despite drop in bullion prices. Lihir Gold gained 1.23% and Newcrest Mining advanced 0.93%.

Mixed trading was witnessed among banks and mining stocks as traders booked profit and moved to the sidelines awaiting more cues on global economic recovery.

In Hong Kong, the benchmark Hang Sang Index ended n positive territory with a gain of 133.76 points, or 0.69%, at 19,621, taken cues from Wall Street where the major averages ended in positive territory on bargain hunting. Better than expected economic data from mainland China and positive trading across other markets in the region also helped the market post gains on bargain hunting even as concerns about Europe continue to haunt traders.

After two sessions of sharp declines, the Indian market ended yet another volatile session modestly higher on Wednesday. While a firm trend across Asian and European equities helped lift sentiment, the U.S. stock futures fluctuated, limiting large gains. India's benchmark 30-share Sensex rose to a high of 16,818 before paring its gain and closing 0.25% or 40 points up at 16,658, while the 50-share Nifty rose 13 points or 0.26% to 5,000.

Among the other major markets open for trading, China's Shanghai Composite Index surged up 69.92 points, or 2.78% to close at 2,584, and Indonesia's Jakarta Composite Index advanced 5.81 points, or 0.21% to close at 2,786. However, Singapore's Strait Times Index ended in negative territory with a loss of 0.81 points, or 0.03% at 2,746, and Taiwan's Weighted Index shed 80.32 points or 1.12% to close at 7,072.

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The major European markets are moving to the upside on Wednesday following three straight sessions of losses. The French CAC 40 Index and the German DAX Index are rising 0.79% and 1.26%, respectively, while the U.K.’s FTSE 100 Index is gaining 0.54%.

On the economic front, shop price inflation in the U.K. eased to 1.8% in May from 2% in April, according to a report released by the British Retail Consortium. Food inflation rose to 2.2% from the month-ago’s 2%, while non-food price inflation eased to 1.6% from April’s 2%.

The U.K. Office for National Statistics reported that the U.K.’s goods trade deficit came in at 7.3 billion pounds in April, almost unchanged from March’s deficit. Economists had expected a deficit of 7 billion pounds. The deficit on the trade of goods and services widened to 3.3 billion pounds from 3.2 billion pounds in the month-ago period, while the services surplus fell slightly to 4.1 billion pounds.

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 April to show a 0.5% increase.

Wholesale inventories at the end of the March were up 0.4% compared to the previous month. Wholesale sales rose 2.4% month-over-month, with the inventories to sales ratio fell to 1.13 from 1.39 in the same month a year ago.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended June 4th at 10:30 AM ET.

Crude oil inventories fell by 1.9 million barrels to 363.2 million barrels in the week ended May 28th. Crude oil stockpiles were still above the upper limit the average range for this time of the year.

Gasoline inventories also fell, dropping by 2.6 million barrels, but were still above the upper limit of the average range. On the other hand, distillate inventories rose by 0.5 million barrels and were above the upper boundary of the average range. Refinery capacity utilization averaged 87.9% over the four-weeks ended May 28th compared to 88.4% in the previous week.

The Federal Reserve is due to release its Beige Book, a compilation of anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts, at 2 PM ET. The report is normally released about two weeks before the monetary policy meeting is held.

Federal Reserve Chairman Ben Bernanke is due to testify before the House Budget Committee beginning at 10 am ET. Bernanke is also scheduled to make remarks at a Richmond Federal Reserve Bank forum on employment trends in Richmond at 4 PM ET.

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Allscripts (MDRX) and Eclipsys Corp. (ECLP) are likely to be in focus after the companies announced that they have agreed to merge in an all-stock deal valued at about $1.3 billion. Under the terms of the agreement, Eclipsys stockholders will receive 1.2 shares of Allscripts for each share of Eclipsys. The merger is subject to the completion of a secondary offering of Allscripts shares owned by Misys, the majority shareholder of Allscripts, and the buyback of additional Allscripts shares owned by Misys. The companies expect the deal to be consummated in 4-6 months.

Pall Corp. (PLL) could see some activity after it announced that its third quarter sales rose 10.8% to $616 million. The company’s pro forma earnings rose to 58 cents per share, up 38% from 42 cents per share last year. Analysts estimated earnings of 50 cents per share on revenues of $598.74 million. The company also said, including 7 cents per share of a benefit from currency effects, it expects full year earnings to be at the high end of the range of its previous guidance, excluding discreet items.

NCI Building Systems (NCS) is also likely to move in reaction to its announcement that its second quarter sales fell 10% to $202.34 million. The company reported a net loss of $14.15 per share compared to a loss of $31.22 per share last year, while its adjusted loss narrowed to 86 cents per share from the year-ago’s $2.10 per share. The consensus estimates called for a loss of 54 cents per share on revenues of $203.73 million.

Bob Evans (BOBE) could also be in focus after it announced that its fourth quarter net sales rose 2.7% to $442.7 million. The company’s earnings fell slightly to 68 cents per share from 69 cents per share last year. Analysts estimated earnings of 63 cents per share from $446.07 million.

Microchip Technology (MCHP) is likely to move after the company reaffirmed its earlier issued financial guidance. The company continues to expect non-GAAP earnings of 52 cents per share and sales of $318 million for the June quarter. Analysts estimate earnings of 52 cents per share on revenues of $319.46 million.

Texas Instruments (TXN) may see some activity after it raised the low-end of its guidance for the second quarter. The company now expects earnings of 60-64 cents per share compared to its previous guidance of 56-64 cents per share. The company also lifted the low-end of its revenue guidance to $3.45 billion from its earlier estimate of $3.31 billion, while it maintained the high-end at $3.59 billion. The consensus estimates call for earnings of 61 cents per share on revenues of $3.47 billion.

CenterPoint Energy (CNP) could see some weakness after it announced that it has commenced an underwritten public offering of 22 million shares of its common stock. On the other hand, Bunge (BG) may gain ground after it announced board approval for the repurchase of up to $700 million of its shares through December 31, 2010.

Piedmont Natural Gas (PNY) is also likely to move in reaction to its announcement that its second quarter net income fell to 65 cents per share from 73 cents per share last year. Operating revenues rose 4% to $472.85 million. The results were ahead of expectations. The company reaffirmed its 2010 earnings per guidance at $1.90-$2 per share, while analysts expect earnings of $1.61 per share.

Take-two Interactive Software (TTWO) rose in Tuesday’s after hours session after it reported second quarter revenue growth of 54% to $268 million and an adjusted profit of 34 cents per share. Analysts estimated earnings of 26 cents per share on revenues of $281.3 million. For the third quarter, the company estimates a loss of 10-20 cents per share and revenues of $250 million to $300 million. Analysts estimate a loss of 40 cents per share on revenues of $165.4 million. The company raised its full year guidance to a loss of 10-30 cents per share and revenues to $880 million to $980 million. The consensus estimates call for a loss of 39 cents per share on revenues of $910.5 million.