US & World Daily Markets Financial Briefing 10-06-2010

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Stocks Substantially Higher In Mid-Morning Trading

Stocks are up by notable margins in mid-morning trading on Thursday, as bargain hunting following the steep losses registered in recent sessions is generating buying interest. Meanwhile, the day's largely stagnant data on jobless claims and the trade deficit has had little impact on market sentiment.

On the economic front, the Labor Department reported that first-time claims for the week ended June 5th edged down to 456,000 from the previous week's revised figured of 459,000. Economists had expected jobless claims to slip to 450,000 from the 453,000 originally reported for the previous week.

In a separate report, the Commerce Department said that the U.S. trade deficit widened to $40.3 billion in April from a revised deficit of $40.0 billion in March. The trade deficit had been expected to widen to $41.3 billion from the $40.4 billion originally reported for the previous month.

Later today, the Treasury Department will release its monthly Treasury Budget for May at 2:00 p.m. ET. Economists estimate a deficit of $142.0 billion for May after a shortfall of $189.6 billion in the previous month.

In corporate news, BP Plc (BP) remains in the spotlight today, with shares rebounding sharply from the 15.8 percent drop seen in the previous session. The firm remains under pressure to stop the oil spill in the Gulf of Mexico, for which the cleanup costs are continuing to mount.

Men's Wearhouse Inc. (MW) is also sharply higher after saying that its first quarter profit more than doubled from last year, helped by higher sales and improved margins. The company's quarterly earnings per share handily beat analyst estimates and its own forecasts.

Meanwhile, construction equipment maker Caterpillar Inc. (CAT) named Doug Oberhelman as its Chief Executive Officer and a member of the board, effective July 1st, 2010. Jim Owens, the outgoing CEO will remain as Chairman of the board until October 31.

The major averages have seen choppy movement since coming off of their highs a short time ago. The Dow is up 222.42 points or 2.3 percent at 10,121.67, the Nasdaq is up 41.57 points or 1.9 percent at 2,200.42 and the S&P 500 is up 22.77 points or 2.2 percent at 1,078.46.

Sector News

Oil service stocks are some of the morning's best performers, driving the Philadelphia Oil Service Sector Index up by 4.6 percent. With the gain, the index is moving further away from a more than ten-month closing low set last month.

Most other energy stocks are also moving notably higher, benefiting from a continued increase by the price of oil. Crude for July delivery is currently up $1.70 at $76.08 a barrel after surging up by more than $2 a barrel on Wednesday.

Semiconductor stocks are also posting substantial gains, bumping the Philadelphia Semiconductor Index up by 2.8 percent. The advance is helping the index to recover from the four-month closing low set in the previous session.

Considerable strength is also visible among transportation, steel, defense and electronic storage stocks amid a broad-market rally.

Stocks Driven By Analyst Comments

Advent Software (ADVS) is notably higher in mid-morning trading after being upgraded by analysts at Wedbush from Neutral to Outperform. The broker also raised the target on the stock from $45 to $54. Shares are currently up by 4.1 percent after setting a one-month intraday high in earlier dealing.

Crane (CR) is also on the upside following an upgrade at Keybanc Capital Markets from Hold to Buy. The stock has gained 8.8 percent, bouncing off of the more than four-month closing low set on Wednesday.

On the other hand, AutoZone (AZO) is moving lower after being downgraded at Credit Suisse from Buy to Neutral based on valuation. The broker also lowered its target  from $205 to $198. The stock has fallen by 1 percent, slipping to a two and a half week intraday low.

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Bay Street Stocks Poised For Higher Open Thursday

Toronto stocks are poised for a higher open Thursday amid continued recovery in energy and base metals prices after China reported strong exports growth.

Elsewhere, the European Central Bank and the Bank of England have left their key rates unchanged today. On Wednesday, the S&P/TSX Composite Index lost 66.55 points or 0.58% to 11,450.64, on late selling.

The price of crude oil moved up for a third session Thursday morning after IEA revised up its global oil demand forecast today. Crude for July added $0.40 to $74.78 a barrel.

The price of gold was almost trading flat, with gold for August easing $1.60 to $1,228.30 an ounce.

In corporate news, retail stores operator Lululemon Athletica reported improved first-quarter net income of $0.27 per share, compared to $0.09 per share in the same quarter last year. Analysts were expecting the company to post net profit of $0.21 per share this quarter.

Specialty retailer West 49 Inc.'s  said its first-quarter net loss widened to C$2.64 million from C$2.62 million last year, while loss per share remained unchanged at C$0.04.

Dollarama Inc. reported higher first quarter profit of $0.30 per share compared to $0.26 per share last year.

RBC said on Wednesday that it has issued $1.5 billion of subordinated debentures, bearing 4.35% interest per annum, through its Canadian Medium Term Note Program.

Electricity producer Boralex Inc. said it's subsidiary, 7503679 Canada Inc., has received necessary regulatory clearance for the acquisition of Boralex Power Income Fund.

Oil and gas industry services provider North American Energy Partners reported a much narrower fourth-quarter net loss of C$0.03 per share, compared to a net loss of C$3.80 per share in the year ago quarter.

Oil and gas explorer Bengal Energy reported a wider fourth quarter net loss of $0.08 per share, compared to a net loss of $0.05 per share for the year-ago quarter.

Energy assets focused trust ARC Energy Trust said it will acquire all of the existing and outstanding common shares of oil and gas explorer Storm Exploration for approximately C$680 million.

Precious metals miner Western Copper said it received proceeds of C$2.40 million from the exercise of warrants.

Metallurgical coal producer Western Coal reported lower fourth quarter net income of C$0.04 per share, compared to C$0.23 per share in the year-ago quarter.

Integrated tour operator Transat A.T. Inc. reported lower second-quarter net income of C$0.16 per share, compared to C$1.27 per share in the prior year period.

IP Video solutions provider March Networks reported wider fourth quarter net loss of C$27.46 million or $1.58 per share, compared to a loss of C$0.11 per share last year.

Diagnostic services provider DiagnoCure Inc. reported a narrower second-quarter net loss of C$0.05 per share, compared to C$0.06 per share in the prior year.

China's exports surged by nearly 50% in May surpassing most analysts estimates. Exports rose 48.5%, while imports were up 48.3%, Chinese customs agency said Thursday.

Meanwhile, Statistics Canada said New Housing Price Index rose 0.3% in April, after recording 0.3% in March. On year-over-year basis, the index was up 2.5% in April after recording 1.6% growth in March

In another report, the agency said the country's merchandise exports declined 1.0% and imports fell 2.2% in April even as volumes improved for a third straight month. Meanwhile, Canada's trade balance with the world recorded a surplus of C$175 million in April, recovering from a deficit of C$236 million in the previous month.

From the U.S., the Labor Department said that initial jobless claims edged down to 456,000 from the previous week's revised figured of 459,000. Economists were expecting jobless claims to slip to 450,000 from the 453,000 originally reported for the previous week.

Elsewhere, the U.S. Commerce Department said trade deficit widened to $40.3 billion in April from a revised deficit of $40.0 billion in March. Economists were expecting the deficit to widen to $41.3 billion from the $40.4 billion originally reported for the previous month.

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Asian Markets End In Positive Territory

The Asian markets ended the trading session Thursday in positive territory as investors resorted to bargain hunting on speculation that the global economy would not be derailed after China reported better than expected growth in exports as well as in imports for May. The strengthening of the euro against the US dollar, also lifted market sentiment.

In Japan, the benchmark Nikkei 225 Index advanced 103.52 points, or 1.10%, to 9,543, while the broader Topix index of all First Section issues was up 6.42 points, or 0.75%, to 857.

On the economic front, a report released by the Cabinet Office revealed that Japan's gross domestic product expanded by an annualized 5.0% in the first quarter of 2010. That was better than last month's preliminary reading for a 4.90% gain, and it also topped forecasts for a 4.20 percent revision. On quarter, GDP was unrevised at 1.2% higher, shrugging off forecasts for a 1.0% increase. Nominal GDP was revised up to 1.3% from 1.2%.

In a separate report, the Cabinet Office revealed that consumer sentiment in the country improved for the fifth consecutive month in May. The consumer confidence index rose to 42.7 from 42.1 in April. Households' consumer confidence also improved in May to 42.8 from 42 in April. Economists had expected the index to remain unchanged at 42. The survey was carried out on May 15 among 6,720 households. Within the households' sentiment index, the gauge for overall livelihood rose to 43 from 42.4. Income growth stood at 41.1, up from 40.4 in April. The indicator for employment moved up to 40.1 from 38.3 in April. Meanwhile, willingness to buy durable goods fell to 46.9 from 47.

A report released by the Bank of Japan revealed that an index measuring domestic corporate goods prices rose 0.4% on year in May, which was slightly higher than analysts' expectations for a 0.3% annual increase, following the revised 0.1% decline in April. On a monthly basis, CGPI was up 0.1% - matching expectations after a revised 0.5% increase in April.

Among the major gainers, Inpex Corp. climbed 3.93%.

Trading companies gained on weaker yen and strong data from China. Mitsubishi Corp. gained 2.39%, Itochu Corp. climbed 3.09%, Toyota Tsusho Corp. rose 1.55%, Sumitomo Corp. advanced 1.08% and Marubeni Corp. added 0.21%. However, Mitsui & Co., bucked the trend and ended sharply lower with a loss of 5.75%.

Exporters and machinery stocks ended in positive territory. Fanuc Ltd soared 6.25%, Tokyo Electron rose 2.50%, Kyocera Corp. advanced 0.92%, Canon Inc., added 0.55%, TDK Corp. gained 1.19% and Mitsubishi Electric Corp. rose 1.56%.

Automotive stocks also advanced on bargain hunting at lower levels. Hino Motors surged up 6.82%, Honda Motor edged up 0.08%, Toyota Motor advanced 0.63%, Suzuki Motor Corp. gained 0.73% and Nissan Motor rose 1.30%.

Mixed trading was witnessed among the banking stocks. Mitsubishi UFJ Financial gained 0.97%, Sumitomo Mitsui Financial advanced 0.69% and Mizuho Financial remained unchanged from previous close. However, Resona Holdings bucked the trend and ended in negative territory with a loss of 0.28%.

In Australia, the benchmark S&P/ASX200 Index rose 50.00 points, or 1.14% and closed at 4,435, while the All-Ordinaries Index ended at 4,448, representing a gain of 45.80 points, or 1.04%.

On the economic front, a report released by the Australian Bureau of Statistics revealed that unemployment rate in the country unexpectedly declined in May to a seasonally adjusted 5.2% from 5.4% reported for the previous month. A year ago, the unemployment rate stood at 5.8%. Analysts expected the unemployment rate to remain unchanged from previous month. As per the report, the unemployment rate among males fell to 5% from 5.3%, while that among females slid to 5.3% from 5.5%. Some 600,900 Australians were unemployed by the end of May, a decrease of 25,400 from April. The number of people looking for full-time work decreased by 12,000 to 437,700, while those looking for part-time work decreased by 13,400 to 163,100. At the same time, the total number of employed people increased by 26,900 to 11.06 million - higher than forecasts for a 20,000 increase. Full-time employment increased by 36,400 to 7.78 million, while part-time employment decreased by 9,400 to 3.28 million.

Light sweet crude oil futures for July delivery ended at $74.70 a barrel in electronic trading, up $0.32 per barrel from previous close at $74.38 a barrel in New York on Wednesday.

Resource stocks led the gains on higher commodity prices in the international market and optimism about further growth after China revealed that imports surged 48.3% and exports rose 48.5% in the country during May.

BHP Billiton gained 1.35%, Rio Tinto rose 2.24%, Fortescue Metals advanced 1.28%, Gindalbie Metals added 0.98%, Macarthur Coal surged up 3.95%, Mineral Resource was up 1.66%, Murchison Metals climbed 2.84% and Oz Minerals edged up 0.50%.

Gold stocks also ended in positive territory. Lihir Gold advanced 0.97% and Newcrest Mining rose 1.07%.

Oil stocks also advanced on higher crude oil prices in the international market. Woodside Petroleum gained 2.43%, Santos also gained 2.43%, Oil Search Ltd climbed 3.57% and Origin Energy rose 1.84%. ROC Oil Co. remained unchanged from previous close.

The unexpected drop in unemployment rate in the country lifted retail stocks on anticipation of higher demand for products. David Jones surged up 3.29%, Harvey Norman climbed 2.70%, JB Hi-Fi Ltd rose 1.79%, Myer Holdings added 0.33%, Pacific Brands soared 5.17%, Reject Shop was up 3.55%, Wesfarmers edged up 0.28% and Woolworths gained 1.03%.

Banks also ended in positive territory. ANZ Bank gained 1.62%, Commonwealth Bank of Australia rose 1.30%, National Australia Bank advanced 0.91% and Westpac Banking added 0.78%. Investment banking company Macquarie Group climbed 1.97%.

In Hong Kong, the Hang Seng index ended in positive territory with minor gains of 11.46 points, or 0.06%, and closed at 19,633, as profit taking in late trading session and weak cues from European markets limited the gains made in early trading. Positive economic data from China related to exports and imports, and strengthening of the euro against the dollar impacted market sentiment.


The Indian market rose sharply on Thursday, extending its rise for a second straight session, helped by positive cues from the rest of Asia and Europe, after the release of better-than-expected economic reports from China, Japan and Australia offset ongoing worries over Europe's debt crisis. A firm trend in oil and metal prices, the euro's rise against the dollar on the back of supportive comments from the head of China's national pension fund, and a significant increase in the U.S. stock futures ahead of the customary weekly jobless claims report due later in the day also buoyed up investor sentiment to a notable extent. The benchmark BSE Sensex gained as much as 265 points or about 1.6% to close at 16,922, while the 50-share Nifty rose by 78 points or 1.57% to 5,079.

Among the other major markets open for trading, China's Shanghai Composite Index slipped 21.29 points, or 0.82% to close at 2,563, and Indonesia's Jakarta Composite Index declined 15.01 points, or 0.54% to close at 2,771. However, Singapore's Strait Times Index ended in positive territory with a gain of 33.78 points, or 1.23% at 2,780, and Taiwan's Weighted Index surged up 110.10 points or 1.56% to close at 7,182.

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The major European averages opened Thursday’s session higher and legged up further by the mid-session. Since then they have given back some gains and are trading on a mixed note. The French CAC 40 Index and the German DAX Index are moving up 0.70% and 0.22%, respectively, while the U.K.’s FTSE 100 Index is receding 0.17%.

On the economic front, German Federal Statistical Office reported that Germany’s consumer prices rose 1.2%year-over-year in May, marking the seventh straight month of increase. In April, consumer prices rose 1%.

Meanwhile, French manufacturing output rose 0.4% month-over-month in April, according to a report released by French statistical agency INSEE. The increase was in line with expectations.

The Bank of England announced that it is maintaining its key interest rate at a record low 0.5%, while also opting to maintain the size of asset purchase scheme at 200 billion pounds. The decision was in line with expectations.

The European Central Bank also left its interest rates unchanged at 1% for the thirteenth straight month. The decision was in line with economists' expectations. The last change in the key interest rate was in May 2009, when the bank cut the rate by 25 basis points to the current level of 1%. The bank has lowered the key interest rate by a total of three and a quarter percentage points since early October 2008.

U.S. Economic Reports

With the value of exports decreasing at a faster pace than the value of imports, the Commerce Department released a report showing that the U.S. trade deficit in April was slightly wider than the trade deficit in March.

The report showed that the trade deficit widened to $40.3 billion in April from a revised deficit of $40.0 billion in March. The trade deficit had been expected to widen to $41.3 billion from the $40.4 billion originally reported for the previous month.

First-time claims for unemployment benefits saw a modest decrease in the week ended June 5th, according to a report released by the Labor Department, although claims came in above estimates due to an upward revision to the previous week's data.

The report showed that initial jobless claims edged down to 456,000 from the previous week's revised figured of 459,000. Economists had expected jobless claims to slip to 450,000 from the 453,000 originally reported for the previous week.

The Treasury Budget, a monthly account of the surplus or deficit of the federal government is due to be released at 2 PM ET. The budget is considered an indicator of budgetary trends and the thrust of fiscal policy. Economists estimate a deficit of $1402 billion for May.

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CenterPoint Energy (CNP) saw modest weakness in Wednesday’s after hours session after it announced that it has priced its offering of 22 million shares at $12.90 per share. The stock closed Wednesday’s session at the same level.

AAR (AIR) may be in focus after it updated its outlook for the fourth quarter. The company now expects revenues to slightly exceed the top of its previously disclosed range of $355 million to $365 million. The company also raised its earnings per share forecast to the upper end of its previous guidance of 25-30 cents per share. Analysts estimate earnings of 29 cents per share on revenues of $340.83 million. For 2011, the company estimates earnings of $1.25-$1.40 per share on revenues of $1.5 billion to $1.6 billion. The consensus estimates call for earnings of $1.16 per share on revenues of $1.32 billion.

C.R. Bard (BCR) could gain ground after it announced that its board has approved a 6% increase in its quarterly dividend to 18 cents per share. Separately, the company also said its board has authorized a $500 million share repurchase plan.

International Rectifier (IRF) is expected to see some activity after it said its fourth quarter revenues are tracking at the high end of its previous guidance range of $255 million to $260 million. Analysts estimate revenues of $257.30 million for the June quarter. The company also sounded upbeat about its September quarter, saying that its backlog for the quarter is trending higher and product mix is improving relative to its June quarter.

Shuffle Master (SHFL) could also be in focus after it said its second quarter revenues rose 12% to $50.8 million. The company’s GAAP earnings rose to 15 cents per share from the year-ago’s 8 cents per share. Analysts’ estimates, which typically exclude one-time items, called for earnings of 10 cents per share on revenues of $47.64 million.

Men’s Wearhouse (MW) is likely to move in reaction to its announcement that its first quarter sales rose 2% to $473.5 million. The company’s net earnings climbed to 26 cents per share from 10 cents per share last year. The consensus estimates had called for earnings of 14 cents per share on revenues of $458 million. For the second quarter, the company estimates earnings of 75-78 cents per share.

Caterpillar (CAT), which recently announced a cent-increase in its dividend as well as an updated strategy to all its stakeholders, may once again be in focus after it said its board has elected Doug Oberhelman as its CEO, effective July 1st, replacing outgoing CEO Jim Owens. Owens will continue to serve as chairman until late October.