US & World Daily Markets Financial Briefing 11-06-2010

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Stocks are mostly on the upside in mid-morning trading on Friday, as earlier weakness on the heels of disappointing retail sales figures has been partially offset by buying interest that emerged following a strong reading on consumer sentiment.

Markets were able to stage a partial recovery as consumer sentiment saw a notable improvement in the month of June according to a report released by Reuters and the University of Michigan.

The report showed that the consumer sentiment index rose to a reading of 75.5 in June from the final reading of 73.6 in May. Economists had expected the index to show a more modest increase to a reading of about 74.5. With the increase, the index jumped to its highest level since January of 2008.

Peter Boockvar, equity strategist at Miller Tabak, said, "Consumers continue to show a stiff upper lip to the macro concerns we all obsess about."

The initial weakness came following the release of a Commerce Department report showing an unexpected decline in May retail sales, with the headline figure slipping by 1.2 percent after a revised 0.6 percent increase in April. Economists had expected retail sales to increase by 0.2 percent.

Also today, the Commerce Department released a separate report showing that business inventories increased by 0.4 percent in April following an upwardly revised 0.7 percent increase in March. Economists had expected inventories to increase by 0.5 percent compared to the 0.4 percent growth originally reported for the previous month.

On the corporate front, BP Plc. is trading higher, continuing its rebound from Wednesday's nearly 16 percent plunge. The firm is in process of deciding whether it will suspend its dividend.

After the markets closed for trading in the previous session, chipmaker National Semiconductor Corp. (NSM) said that it swung to a fourth quarter profit, helped by higher sales, improved margins and fewer restructuring charges.

The company's quarterly earnings per share came in above analysts' expectations as did its quarterly sales. National Semiconductor also forecast first quarter sales above analysts' current consensus estimate.

In other news, Philadelphia Federal Reserve president Charles Plosser said in a speech at the Blair County Chamber of Commerce in Pennsylvania that if the Fed does not exit from its accommodative monetary policy in a timely manner, it could be "sowing the seeds" for costly inflation.

The major averages have seen some upside in recent dealing but are currently turning in a mixed performance. While the Nasdaq is up 12.22 points or 0.6 percent at 2,230.93, the Dow is down 11.34 points or 0.1 percent at 10,161.19 and the S&P 500 is down 0.74 points or 0.1 percent at 1,086.10.

Sector News

Biotechnology stocks are some of the morning's best performers, driving the NYSE Arca Biotechnology Index up by 1.6 percent. With the move, the index is moving further off of Wednesday's three and a half month closing low.

Retail stocks has also moved to the upside rebounding from initial weakness prompted by weak retail sales data. The S&P Retail Index is currently posting a modest gain, seeing a further recovery from a recent multi-month closing low.

Airline, networking, railroad and semiconductor stocks are also seeing strong gains, while losses among tobacco, banking and utility stocks are limiting the advance by the broader markets.

Stocks Driven By Analyst Comments

U.S. Steel is notably higher after being upgraded at UBS from Sell to Neutral. The broker also raised its target  on the stock from $40 to $46. The stock has gained 3.1 percent, moving further off of Monday's six and a half month closing low.

Bristol-Myers Squibb is also on the upside after being upgraded by analysts at Citigroup from Hold to Buy. The broker also raised its price target on the stock from $28 to $30. The stock has gained 2.3 percent, reaching its highest intraday price in roughly seven weeks.

On the other hand, Walgreen is moving lower after being downgraded by analyst at Thomas Weisel from Overweight to Market Weight amid a lukewarm sales outlook. The broker also lowered its target on the stock from $45 to $30. Shares are currently down by 2.4 percent, on pace for an eleven-month closing low.

Other Markets

Overseas, stock markets across the Asia-Pacific ended mostly higher on Friday. Honk Kong's Hang Seng Index rose by 1.2 percent, while Japan's benchmark Nikkei 225 Index gained 1.7 percent.

The major European markets are up by varied margins. The French CAC 40 Index and the U.K.'s FTSE 100 Index are up by 1.4 percent and 0.8 percent, respectively, while the German DAX Index is up by 0.2 percent.

In the bond markets, treasuries are moderately higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 3.277 percent, posting a loss of 4.2 basis points.

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Canadian stocks are likely to open mixed Friday amid easing energy prices and after yesterday's large return which could prompt profit taking at higher levels.

Meanwhile, global equities rose for a fourth session on optimism over global economic growth and after encouraging trade data from China, released yesterday. Also, worries over the euro zone appeared to have subsided, at least for now, with the euro gaining strengthen against a basket of currencies for a third day.

U.S. stock futures were pointing to a lower open amid discouraging retail sales data released by the U.S. Commerce Department today morning.

On Thursday, the S&P/TSX Composite Index surged 185.21 points or 1.62% to 11,635.85, supported by firm energy prices and upbeat exports data from China.

The price of oil eased from its 3-week high after China reported lower-than-expected growth in industrial production in May. Crude for July edged down $0.28 to $75.20 a barrel.

China today said its industrial production expanded 16.5% in May from a year ago, compared to a 17.8% growth recorded in April. Economists were expecting China to record 17.0% growth in May.

The price of gold edged up $2.10 to $1,224.30 an ounce.

Communications technology and semiconductor company MOSAID Technologies reported higher fourth quarter net income of C$0.69 per share, compared to C$0.55 per share in the year-ago quarter.

Specialized communications services provider COM DEV International reported lower second-quarter net income of C$0.05 per share, compared to C$0.07 per share in the same quarter last year.

Gold producer Barrick Gold said that Patrick Garver, EVP and General Counsel, will be taking early retirement from the company effective July 31. Patrick has been with Barrick since 1993.

Gold mining company Centerra Gold  said its would spend as much as C$3 billion this year in buying assets to boost production.

Chariot Resources said its common shares are expected to be delisted from the Toronto Stock Exchange within two to three business days, following a plan of arrangement with China Sci-Tech Holdings Ltd.

Bio-pharmaceutical company Helix BioPharma reported third-quarter net loss of $4.20 million, slightly wider than last year's $4.13 million. However, loss per common share narrowed to $0.07 from $0.08 a year ago.

Pharmaceutical industry services provider Patheon Inc. swung to profit in second-quarter, reporting net income of $0.084 per share, compared with a loss of $0.035 per share in the year ago period. Analysts were expecting the company to report net income of $0.03 per share.

Therapeutic products and diagnostic devices company Amorfix Life Sciences reported a narrower fourth-quarter net loss of C$1.25 million compared with C$1.38 million in the same quarter last year. However, net loss per share from operations stood flat at C$0.03.

Mineral resource company Anaconda Mining said it formally begun a share exchange takeover offer for New Island Resources Inc.

In economic news, Statistics Canada said industrial capacity utilization moved up to 74.2% in the first quarter 2010 from 71.3% in the previous quarter. Economists expected capacity utilization to come in 73.4% Utilization rate in the manufacturing industry rose to 75.0% this quarter from 70.7% registered in the fourth quarter 2009.

From the U.S., the Commerce Department said retail sales fell 1.2% in May. Excluding autos sales fell 1.1%. Auto sales were down 1.7%. Economists were expecting retail sales to increase 0.2% for the month following the 0.4% gain in the previous month, while retail sales, excluding autos, to rise by 0.1% during May.

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The Asian markets ended the trading session in positive territory on Friday, the last trading day of the week, taking cues from Wall Street, where the major averages ended with sharp gains in the previous session on bargain hunting at lower levels. Higher commodity prices, and optimism that the global economic recovery might be sustained following positive economic data in US and China also lifted market sentiment.

In Japan, the benchmark Nikkei 225 Index advanced 162.60 points, or 1.70%, to 9,705 while the broader Topix index of all First Section issues was up 9.65 points, or 1.13%, to 866.

Almost all the stocks ended in positive territory on optimism that the global economic recovery will be sustained despite the lingering concerns about the concerns in the Euro region.

Glass and ceramic stocks led the gains in the market. NGK Insulators surged up 3.34%, Asahi Glass climbed 2.65%, TOTO Ltd rose 2.24%, Sumitomo Osaka Cement Co soared 7.32%, Nitto Boseki gained 3.32% and Nippon Sheet Glass was up by 2.59%.

Electric Machinery stocks and exporters advanced on weaker yen. Tokyo Electron surged up 5.04%, Kyocera Corp. gained 2.86%, Fanuc Ltd rose 1.47%, TDK Corp. advanced 2.16%, Panasonic Corp. soared 6.82%, Canon Inc. added 1.92% and Sony Corp. was up by 1.86%.
Trading companies also ended in positive territory. Toyota Tsusho Corp. advanced 0.96%, Mitsubishi Corp. added 0.64%, Marubeni Corp. rose 1.45%, Sojitz Corp. climbed 2.78% and Itochu Corp. added 0.41%.

In Australia, the benchmark S&P/ASX200 Index gained 70.20 points, or 1.58% and closed at 4,505, while the All-Ordinaries Index ended at 4,516, representing a gain of 68.10 points, or 1.53%.

Banks ended in positive territory on optimism about global economic recovery. ANZ Bank gained 1.86%, Commonwealth Bank of Australia rose 2.16%, National Australia Bank advanced 1.35% and Westpac Banking climbed 3.49%. Investment banking company Macquarie Group surged up 3.93%.

Retail stocks also ended in positive territory. David Jones advanced 1.37%, Harvey Norman remained unchanged from previous close, JB Hi-Fi gained 1.65%, Myer Holdings added 0.32%, Pacific Brands rose 0.55%, Reject Shop gained 0.56%, Wesfarmers was up by 1.19% and Woolworths climbed 2.98%.

Resource stocks also advanced on higher commodity prices. BHP Billiton climbed 2.55%, Rio Tinto rose 1.81%, Fortescue Metals surged up 3.79%, Gindalbie Metals soared 3.86%, Iluka Resources added 1.42%, Macarthur Coal edged up 0.09%, Mineral Resource advanced 1.36%, Murchison Metals soared up 7.73% and Oz Minerals was up by 0.99%.

Oil stocks also ended in positive territory. Woodside Petroleum climbed 2.98%, Santos Ltd gained 3.13%, ROC Oil co. rose 4.48%, Oil Search Ltd added 1.38% and Origin Energy was up by 0.19%.

In Hong Kong, the Hang Seng index ended in positive territory with a gain of 239.68 points, or 1.22%, at 19,872, taking cues from Wall Street, where the major averages staged a smart recovery in the previous session on optimism that the economic recovery will not be greatly impacted by the recent crisis in Europe. Positive economic data from China and US also lifted market sentiment with commodity related stocks leading the gains.
Firm global cues and robust industrial output data for April helped the Indian market end higher for a third straight session Friday. The uptrend was led by oil/gas, banking, capital goods, and auto stocks, while healthcare, telecom and realty stocks closed subdued. India's industrial production, measured by index of industrial production, rose by a faster-than-expected 17.6% in April, a seventh consecutive monthly rise and much higher than the upwardly revised 13.9% expansion in March, backed by a strong growth in manufacturing and mining sectors, particularly capital goods, government data released Friday showed. The 30-share Sensex rose 143 points or 0.84% to 17,065, with 21 of its components ending higher, while the 50-share Nifty rose by 41 points or 0.80% to 5,119.

Among the other major markets open for trading, China's Shanghai Composite Index added 7.36 points, or 0.29% to close at 2,570, Indonesia's Jakarta Composite Index advanced 31.11 points, or 1.12% to close at 2,802, Singapore's Strait Times Index rose 16.71 points, or 0.60% to close at 2,796, and Taiwan's Weighted Index surged up 117.72 points or 1.64% to close at 7,299.

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The major European markets opened Friday’s session notably higher, but they surrendered some of their gains and are currently - trading on a mixed note. The French CAC 40 Index is moving up 0.27% compared to a 0.11% drop by the German DAX, while the U.K.’s FTSE 100 Index is rising 0.58%.

On the economic front, French statistical office INSEE reported that French consumer prices edged up 0.1% month-over-month in May following a 0.3% increase in April. Economists expected a 0.2% increase for the month. On a year-over-year basis, consumer prices rose 1.6% compared to the 1.7% increase expected by economists.

Meanwhile, German Federal Statistical Office reported that the German wholesale price index climbed 6.2% year-over-year in May compared to the 6% increase in April, with the latest month’s growth being the highest since August 2008. Economists had expected a slightly lesser 6.1% increase. On a monthly basis, wholesale prices rose by 0.3% in May, slower than the 1.7% increase in April, but the faster than the 0.2% increase expected by economists.

The industrial production report released by the U.K. Office for National Statistics showed that U.K.’s manufacturing output fell by 0.4% month-over-month in April, marking the first decline since January this year. Economists had estimated a 0.5% increase. Industrial output fell 0.4%, reversing all of the 3.7% increase in the previous month. Annually, manufacturing output was 3.4% higher compared to a 3.7% increase in the previous month.

A separate report released by the statistical agency showed that U.K.’s output prices climbed 5.7% year-over-year in May compared to a 5.9% increase in April. Economists had expected an inflation rate of 5.8%. On a monthly basis, the output price inflation eased to 0.3% from a 1.6% rate in April. At the same time, input prices fell 0.6% month-over-month in May, while economists expected a drop of 0.7%.

U.S. Economic Reports

Minneaopolis Federal Reserve Bank President Narayana Kocherlakota is scheduled to speak on entrepreneurship and the economy to the Metropolitan Economic Development Association in Minneapolis.

A Commerce Department report showed that retail sales unexpectedly fell in May, with the decline primarily due to a sharp pullback in sales at building materials and garden equipment stores and lower gasoline sales. Retail sales fell 1.1% month-over-month in May following upwardly revised 0.6% growth in April.

The decline came as a surprise to economists, who had been looking for a 0.2% increase in retail sales for the month. Retail sales, excluding autos fell 1.1% in May following a 0.6% increase last month, also belying expectations for a 0.1% increase.

Building material and garden equipment sales slumped 9.3%, while gasoline sales fell 3.3%. Motor vehicle and parts sales also fell, dropping 1.7% following a 0.6% increase in the previous month. On the other hand, furniture and home furnishing store sales and sales of non-store retailers showed some strength.

The preliminary report of the Reuters/University of Michigan's consumer sentiment survey for June is scheduled to be released at 9.55 AM ET. The consumer sentiment index is expected to rise to 74.5 from May's 73.6.

The Commerce Department is scheduled to release its business inventories report for April at 10 AM ET. The report summarizes the results from the monthly retail trade, wholesale trade and factory goods orders surveys. The report is expected to show a 0.5% increase in business inventories for the month.

In March, business inventories rose 0.4% month-over-month, although they declined 5% compared with the year-ago period. Meanwhile, business sales rose 2.3% on a monthly basis and surged up 11.9% year-over-year. The business inventories to sales ratio was 1.24, lower than 1.46 in the year-ago period.

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National Semiconductor rallied in Thursday's after hours session after it reported fourth quarter sales of $398.5 million, up 42% year-over-year. The company reported earnings of 33 cents per share compared to a loss of 28 cents per share in the year-ago period. Analysts estimated earnings of 28 cents per share on revenues of $384.19 million. For the first quarter, the company expects sequential revenue growth of 3%-5%.

AMR Corp., the parent company of American Airlines, is likely to be in focus after it announced the appointment of Daniel Garton, an American Airline veteran, as the CEO of its regional carrier, American Eagle. The company also said it intends to evaluate possible divestiture of American Eagle.

Dell came under selling pressure in Thursday's after hours session after it said recorded a $100 million liability in its first quarter to set up a reserve for the potential settlement by the company of the previously reported SEC investigation on certain accounting and financial reporting matters. Giving effect to the planned charge, the company lowered its 2011 earnings per share by 5 cents per share, while maintaining its non-GAAP earnings per share unchanged.

Progressive Software could see some activity after it said its expects to meet or exceed its second quarter earnings per share guidance provided in late March. The company said then it expects non-GAAP earnings of 51-54 cents per share. However, the company expects revenues to be slightly below its earlier guidance of $129 million to $133 million in non-GAAP revenues. Analysts estimate earnings of 53 cents per share on revenues of $130.90 million. The company also outlined initiatives to drive long-term growth, including a 7%-9% reduction in its global workforce in its third quarter.

RPM may also be in the focus after it said its performance coatings group has acquired Hummervoll Industribelegg, a supplier and installer of industrial flooring systems based in Bergen, Norway. The target company generated annual sales of more than $11 million. RPM did not divulge the financial terms of the deal, but said it expects the transaction to be accretive to earnings within one year.

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