US & World Daily Markets Financial Briefing 11-02-2010

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Stocks Showing A Lack Of Direction In Mid-Morning Trading

Stocks have recovered from their initial weakness and are little changed in mid-morning trading on Thursday, despite data showing an improvement in the labor market and news of forthcoming aid for debt-embattled Greece. The major averages are seeing choppy movement for another session after recovering from three-month closing lows earlier in the week.

The markets received a positive sign from the beleaguered labor market this morning, as the U.S. Labor Department released a report showing that initial jobless claims for the week ended February 6th fell to 440,000 from the previous week's revised figure of 483,000.

Economists had been expecting jobless claims to slip to 465,000 from the 480,000 originally reported for the previous week.

Market sentiment was also boosted by news that a number of key European officials agreed on a package to aid debt-ridden Greece. Details of the plan will be worked out among euro zone finance ministers in the next few days, with details expected on Monday.

As earnings season continues to wind down, PepsiCo Inc. (PEP) reported fourth quarter net income of $0.90 per share, just short of the $0.91 per share forecast by analysts. Net revenues came in at $13.30 billion topping the projected $13.26 billion for the quarter.

Entertainment giant Viacom Inc. (VIA) said its fourth quarter adjusted earnings rose to $1.09 per share, firmly beating the $0.87 per share expected by Wall Street analysts. Revenues for the quarter declined 3 percent to $4.10 billion and failed to meet estimates of $4.23 billion for the quarter.

Swiss banking giant Credit Suisse Group (CS) showed a profit for the fourth quarter compared to a loss last year. The company said that strong client activity at the beginning of the quarter and strong net inflows across most businesses helped to boost quarterly results.

Additionally, property and casualty insurer Allstate Corp. (ALL) swung to a profit in the fourth quarter, helped by revenues which surged up 22.7 percent from the year-ago quarter.

The major averages are currently posting modest losses, well off their worst levels of the day. The Dow is currently down 13.07 points or 0.1 percent at 10,025.31, the Nasdaq is down 3.69 points or 0.2 percent at 2,144.18 and the S&P 500 is down 2.66 points or 0.3 percent at 1,065.47.

Sector News

Despite the lack of conviction being shown by the broader markets, some networking stocks are posting steep losses, dragging the NYSE Arca Networking Index down by 1.3 percent. Nonetheless, the index remains stuck in a recent trading range.

The sector is being led lower by telecommunications equipment provider Alcatel-Lucent (ALU), which is under pressure after lowering its outlook for 2010. The stock has lost 11.4 percent, dropping to its lowest intraday level in over six months.

Utility, software, and defense are also seeing some weakness, although selling pressure has waned from earlier in the session.

On the other hand, railroad stocks are some of the market's strongest performers, with the Dow Jones Railroads Index posting a 2.3 percent gain. The advance is helping to lift the index further off of the more than three month closing low set on Monday.

Airline, gold, and tobacco stocks have also shown notable moves to the upside, helping to lift the major averages well off their lows.

Stocks Driven By Analyst Comments

Scripps Networks Interactive (SNI) is moving notably lower in mid-morning trading after being downgraded at Deutsche Bank from Buy to Hold. The stock has lost 5 percent, falling to its lowest intraday price in over three months.

Dean Foods (DF) is also moving to the downside following a downgrade by Deutsche Bank from Buy to Hold. The broker also lowered its target price on the stock from $26 to $17. Shares are down sharply for a second straight session, posting a loss of 4.3 percent. With the decline, the stock has dropped to its worst intraday level in over a year.

On the other hand, Palm (PALM) is on the rise after being upgraded at Citigroup from Sell to Hold with a price target of $10. The stock has jumped by 4.3 percent, moving further off of Tuesday's ten-month closing low.

TSX Poised For Higher Open On Greece Bail-out, Commodities

Canadian stocks may move higher Thursday on news that European Union has agreed to an aid-package for debt-stricken Greece and on rising commodities prices.

Further, a better than expected jobs number from across the border will also likely to help lift sentiment. The main index closed almost flat in the previous session, after a decent run-up in the earlier session.

The S&P/TSX Composite Index edged up 12.09 points or 0.11% to 11,286.33 Wednesday amid choppy trades. The price of oil edged up $0.38 to $74.90 a barrel and the price of bullion rose $7.70 to $1,083.50.

In corporate news, oil and natural gas explorer EnCana Corp. reported lower fourth-quarter net earnings of $0.85 per share, compared to $1.43 per share in the same quarter last year.

Forest product company Canfor Corp. reported fourth quarter net loss of C$0.12 per share, down from C$1.61 per share reported in the year ago period.

Multiple goods retailer Canadian Tire reported lower fourth quarter earnings of $1.18 per share, comparted to C$1.24 in the year ago period.
 
Insurance provider Sun Life Financial said its quarterly profits more than doubled.

Wireless network operator Sierra Wireless slipped into the red reporting a fourth-quarter net loss $0.09 per share compared to profit of $1.12 per share last year.

Natural resources explorer Genco Resources announced that Leslie Goodman will replace Robert Gardner as Acting Chief Executive Officer, effective Wednesday.

Bio-pharmaceutical company Transition Therapeutics reported second quarter net loss of C$0.26 per share, compared to a loss of C$0.21 per share in the previous year quarter.

Information technology service provider JDS Uniphase Canada said it will acquire the network solutions business of Agilent Technologies Inc. for $165 million in cash.

Gold miner Kirkland Lake Gold announced the appointment of Mark Stephen Tessier as COO and John Sidney Thomson as chief financial officer.

In economic news from across the border, the U.S. Labor Department said that initial jobless claims fell to 440,000 from the previous week's revised figure of 483,000. Economists had been expecting jobless claims to slip to 465,000.

Commodity, Currency Markets

Crude oil futures are trading up $0.37 at $74.89 a barrel after advancing $0.77 to $74.52 a barrel on Wednesday. Gold futures are trading at $1,084 an ounce, up $7.70 from the New York session close of $1,076.30 an ounce on Wednesday. In the previous session, the precious metal edged down $0.90.

On the currency front, the U.S. dollar is trading at 89.766 yen compared to the 89.9405 yen it fetched at the close of New York trading on Wednesday. The dollar is currently valued at $1.3690 versus the euro.

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Asian Markets End In Positive Territory

The markets across Asia, except Japan and Taiwan that are closed for holidays, ended in positive territory on Thursday, on increasing optimism that some solution would be found for solving the urgent sovereign debt crisis in Greece and other countries in the Europe . A surprisingly strong employment report from Australia and weaker than expected inflation data from China also lifted sentiment.

In Japan, the market is closed for a holiday.

In Australia, the benchmark S&P/ASX 200 Index advanced 40.90 points, or 0.91% to close at 4,554, while the All-Ordinaries Index ended at 4,576, representing a gain of 42.80 points, or 0.94%.

On the economic front, a report released by the Australian Bureau of Statistics revealed that the unemployment rate in the country unexpectedly declined to a seasonally adjusted 5.3% in January, contrary to economists expectations of a 5.6% unemployment rate. The unemployment rate among males declined 0.3% during the month to 5.2%, while female unemployment rate declined 0.1% to 5.3%, the report noted. The report further noted that total employment in the country increased by 52,700 during the month to 10,966,300. Economists expected a modest 15,000 rise in employment for the month. Of the total increase in employment during the month, full-time employment increased by 15,900 while part-time employment increased by 36,900.

Separately, results of a latest survey on consumer inflationary expectations conducted by the Melbourne Institute revealed that the consumer inflationary expectations declined to 3.2% in February from 3.5% in January.
 
Light sweet crude oil futures for March delivery ended at $74.72 a barrel in electronic trading, down $0.20 per barrel from previous close at $74.52 a barrel in New York on Wednesday.

Banks led the gains following surprise drop in unemployment rate in January. ANZ Bank gained 2.72%, Commonwealth Bank of Australia rose 2.26%, National Australia Bank added 0.57%, and Westpac Banking Corp. advanced 1.01%. Investment banker Macquarie Group climbed 1.88%.

Mining giant Rio Tinto is scheduled to report the results later in the day. Speculation that the third largest mining company in the world will follow BHP Billiton's route and report stronger results attracted interest in the stock, lifting it by 2.62%.

Among other mining and metal stocks, BHP Billiton advanced 1.18%, Fortescue Metals climbed 2.37%, Gindalbie Metals surged up 4.97%, Iluka Resources rose 2.28%, Macarthur Coal soared 7.73%, Minara Resources surged up 6.84%, Murchison Metals ascended 7.76% and Oz Minerals advanced 1.97%..

Gold stocks also advanced on higher bullion prices in the market. Lihir Gold gained 1.42% and Newcrest Mining climbed 1.98%.

Oil stocks ended in positive territory on higher crude oil prices. Woodside Petroleum climbed 3.22%, Santos gained 1.61%, Oil Search rose 1.95% and Origin Energy advanced 1.12%.

Retail stocks also gained on unexpected drop in unemployment rate in the country. David Jones rose 1.89%, Harvey Norman advanced 1.07%, JB Hi-Fi added 0.77% and Wesfarmers gained 1.47%. However, Woolworths bucked the trend and ended in negative territory with a loss of 0.47%.

In Hong Kong, the Hang Seng Index ended sharply higher with a gain of 1.85% or 385.47 points, at 20,291, on increasing optimism that Greece will be provided assistance by the other EU countries. Unexpected drop in employment rate in Australia, as well as weaker than expected inflation report for January from mainland China also lifted market sentiment. Banks, resource stocks and china-related stocks led the gains during the session with 40 out of 42 components in the index posting gains.
 
In South Korea, the KOSPI Index ended in positive territory with a gain of 27.69 points, or 1.76%, at 1,598, as traders evinced fresh buying interest in shipping stocks, technology and banking stocks on increasing optimism that the sovereign debt crisis in Greece and the fiscal position in other European countries will be addressed and solution will be found, paving way for sustaining global economic recovery.

After some consolidation in the previous session, the Indian market rose sharply on Thursday, led by auto, oil/gas, realty, metal, banking and IT stocks, thanks to positive global cues and short covering following recent losses. News that the Union Cabinet has eased foreign investment norms also offered some support. The benchmark Sensex finished at 16,153, up 230 points or 1.45% and the Nifty rose by 70 points or 1.46% to 4,827.

Among other major markets open for trading in the region, Indonesia's Jakarta Composite Index advanced 24.31 points, or 0.98% to close at 2,508, Strait Times Index in Singapore added 19.24 points, or 0.70%, to close at 2,754, and China's Shanghai Composite Index edged up 3.00 points, or 0.10%, to close at 2986. The market in Taiwan is closed for a holiday.

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Although early optimism ahead of the European Commission meet sent European stocks higher in early trading on Thursday, they have since then pared back their gains and are trading mixed. The French CAC 40 Index and the German DAX Index are receding 0.18% and 0.22%, respectively, while the U.K.’s FTSE 100 Index is moving up 0.62%.

In corporate news, telecommunication equipment maker Alcatel-Lucent (ALU) reported fourth quarter adjusted earnings of 85 million euros compared to a loss of 1.3 billion euros last year. Sales declined to 3.97 billion euros from the year-ago’s 4.95 billion euros.

French oil giant Total reported that its fourth quarter adjusted earnings fell to 2.08 billion euros from 2.87 billion euros in the year-ago period. On a reported basis, the company reversed to a profit of 2.07 billion euros compared to a loss of 794 million euros last year. Sales slipped 6% year-over-year to 36.23 billion euros.

On the economic front, the German Federal Statistical Office reported that Germany’s wholesale prices rose 1.9% month-over-month in January. The increase was bigger than the 0.2% growth seen in the previous month. On a monthly basis, wholesale prices rose 0.25.

According to the latest survey of industrial investment, business leaders in France forecast a 1% rise in equipment expenditure by the manufacturing sector. Previously in Octobers, business leaders had forecast a 5% decline in investment this year. Investment by the whole industry is estimated to rise 4% this year.

The Spanish economy remained in recession in the final quarter of 2009, data released by the government showed. Spain's gross domestic product decreased 0.1% quarter-on-quarter in the three months through December, with the result coming exactly in line with analyst expectations. The Spanish economy has now contracted for seven consecutive quarters and it remains the last major economy to still be mired in recession.

U.S. Economic Reports

The Labor Department released a report showing that first-time claims for unemployment benefits fell by much more than expected in the week ended February 6th.

The report showed that initial jobless claims fell to 440,000 from the previous week's revised figure of 483,000. Economists had been expecting jobless claims to slip to 465,000 from the 480,000 originally reported for the previous week.

Earnings

AutoNation (AN) reported that its fourth quarter adjusted earnings from continuing operations more than doubled to 29 cents per share from 13 cents per share in the year-ago period. Revenues rose 6% year-over-year to $2.8 billion. Analysts estimated earnings of 27 cents per share on revenues of $2.67 billion.

Marriott International (MAR) said its fourth quarter adjusted income from continuing operations fell 3% to 32 cents per share. Analysts estimated earnings of 26 cents per share on revenues of $3.21 billion. The company estimates adjusted earnings from continuing operations of 82-94 cents per share for full year 2010 and 15-21 cents per share for the first quarter. The consensus estimates call for earnings of 87 cents per share for the year and 18 cents per share for the first quarter.

Viacom (VIA) reported fourth quarter revenues of $4.10 billion, down 3% year-over-year. The company’s adjusted earnings per share from continuing operations rose 43% to $1.09 per share. Analysts estimated earnings of 40 cents per share on revenues of $4.2 billion.

PepsiCo. (PEP) said its fourth quarter net revenues rose 4.5% to $13.30 billion and earnings of 90 cents per share. Analysts estimated earnings of 90 cents per share on revenues of $13.26 billion. For 2010, the company expects core constant currency EPS growth of 11%-13%.

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Boston Scientific (BSX) is likely to see some activity after it reported a loss of 71 cents per share for its fourth quarter compared to a loss of $1.59 per share last year. On an adjusted basis, the company reported earnings of 20 cents per share, ahead of the 13 cents per share consensus estimate. Revenues rose slightly to $2.1 billion. The company expects 2010 adjusted earnings of 62-72 cents per share, ahead of the 57 cents per share consensus estimate. The company also said it would eliminate 8%-10% of its workforce and expects to take a charge of $180 million to $200 million related to the retrenchment.

Amkor Technology (AMKR) receded in Thursday’s after hours session after it reported fourth quarter earnings of 33 cents per share compared to a loss of $3.40 per share in the year-ago quarter. The year-ago results included a charge of $671 million. Revenues increased 8% to $668 million. Analysts’ estimates, which typically exclude one-time items, called for earnings of 20 cents per share. For the first quarter, the company expects a sequential revenue decline of 2%-6% and earnings of 17-22 cents per share. Analysts estimate earnings of 21 cents per share.

Expeditors International (EXPD) could be in focus after it said it has received a statement of objections from the European Commission, initiating proceeding against the company for alleged anti-competitive behavior. The company noted that the allegations are limited to airfreight trade lanes between China/Hong Kong and the European Economic Area.

Protective Life (PL) may see some activity after it reported that its fourth quarter operating income rose to $1.51 per share compared to 80 cents per share last year. Analyst estimates, which typically excludes one-time items, called for earnings of 66 cents per share.

Among other insurer’s Prudential Financial (PRU) reported fourth quarter adjusted operating income of $1.07 per share compared to an adjusted loss on an operating basis of $2.04 per share last year. Analysts estimated a profit of $1.11 per share. Revenues rose 16% to $6.79 billion, missing the $6.86 billion consensus estimate.

Allstate (ALL) reported consolidated revenues of $8.06 billion compared to the year-ago’s $6.57 billion. The company’s operating earnings rose to $1.09 per share from 96 cents per share last year. Analysts estimated a profit of $1.01 per share.

Activision (ATVI) is likely to move in reaction to its announcement that its non-GAAP net revenues for the calendar year fourth quarter were $2.5 billion and non-GAAP earnings were 49 cents per share. Analysts estimated earnings of 43 cents per share on revenues of $2.23 billion. For calendar year 2010, the company expects non-GAAP revenues of $4.4 billion and non-GAAP earnings of 70 cents per share. The consensus estimates call for earnings of 73 cents per share on revenues of $4.8 billion.

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