US & World Daily Markets Financial Briefing 12-02-2010

DO YOU OWN THE RIGHT STOCKS?

Analyze Your Stocks FREE! – Click Here

Stocks Posting Steep Losses On China News, Economic Data

Stocks are showing notable weakness in mid-morning trading on Friday, as news of China tightening credit flows and largely disappointing U.S. economic reports have deflated market sentiment. The major averages are all in negative territory after posting strong gains earlier in the week.

Initial losses came amid news that China has officially scheduled an 0.5 percent increase to its leading reserve requirement in an attempt to cool down its robust economy. The nation's central bank made an announcement that requires Chinese banks to set aside more capital as reserves starting February 25th.

Economic news from the U.S. was also largely disappointing, as Reuters and the University of Michigan reported that consumer sentiment unexpectedly deteriorated in February compared to the previous month.

The consumer sentiment index fell to a reading of 73.7 in February from the final reading of 74.4 in January. The decrease surprised economists, who had expected the index to edge up to a reading of 75.0.

Earlier, the Commerce Department issued a report showing that retail sales increased in line with economist estimates in the month of January, with the data also showing a smaller than previously reported drop in December sales.

Retail sales increased by 0.5 percent in January following a revised 0.1 percent decrease in December. Economists had been expecting sales to increase by 0.5 percent compared to the 0.3 percent decrease originally reported for the previous month.

Separately, the Commerce Department said that business inventories fell 0.2 percent in December following an upwardly revised 0.5 percent increase in November. Inventories had been expected to increase by 0.2 percent compared to the 0.4 percent increase originally reported for the previous month.

Commenting on the unexpected drop in inventories, Peter Boockvar, equity strategist for Miller Tabak, said, "Combining this with the higher than expected Trade Deficit on Wednesday will lead to a reduction in fourth quarter GDP estimates to closer to 5% from the initial reading of 5.7%."

With another earnings season nearly in the books, security software maker McAfee Inc. (MFE) said that its fourth quarter profit rose 20 percent from last year, as revenue increased 24 percent amid strong demand.

The company's earnings per share, excluding items, came in line with analysts' expectations. The firm also announced a $500 million stock buyback program and said its chief CFO Rocky Pimentel will retire later this year.

The major averages have seen some reluctant upside in recent dealing, moving off of their lows of the session. The Dow currently remains down 141.71 points or 1.4 percent at 10,002.48, the Nasdaq is down 21.18 points or 1.0 percent at 2,156.23 and the S&P 500 is down 13.54 points or 1.3 percent at 1,064.93.

Sector News

Health insurance stocks are some of the morning's worst performers, driving the Morgan Stanley Healthcare Payor Index down by 2.4 percent. With the pullback, the index is extending its recent downward move, testing the more than one-month intraday lows set in recent sessions.

Molina Healthcare (MOH) is dragging the sector lower, with shares of the healthcare firm down by 6.6 percent. The drop pulled the stock down to its worst intraday price in over three months in earlier trading.

Oil service, gold, steel and natural gas stocks are also under pressure, reflecting weakness in the resource sector following the news from China.

Banking, defense and trucking stocks are also moving notably lower, among others, while some wireless stocks are bucking the downtrend, with the NYSE Arca Wireless Index up by 0.7 percent.

Stocks Driven By Analyst Comments

Symantec (SYMC) is down in mid-morning trading after being downgraded at Jefferies & Co. from Buy to Hold. The broker also reduced its price target on the stock from $20 to $18. The decline also comes following competitor McAfee's strong fourth quarter report. Shares of Symantec have fallen by 3.5 percent, setting their worst intraday price in three and a half months.

Spartan Stores (SPTN) is also moving lower after a downgrade at Jefferies & Co. from Buy to Hold. The stock's price target was also lowered from $17 to $14. The stock is down by 6.4 percent, sliding to its worst intraday level in roughly five weeks.

On the other hand, Research In Motion (RIMM) is on the rise following an upgrade by RBC Capital Markets from Outperform to Top Pick with a price target of $120. The stock has gained 1.4 percent, rising to its best intraday price in nearly two months.

TSX May Pause Friday After Three-day Rally

Canadian stocks may struggle to sustain gains accumulated in the past three sessions Friday morning on easing commodity prices and worries over the euro zone. Even as traders were awaiting more details on the European rescue plans for the Greece, news that growth in the German economy stalled in the fourth quarter of 2009 may weigh on the sentiment.

The U.S. stock futures also point to a lower opening.

The S&P/TSX Composite Index ended higher for a third session Thursday, adding 149.16 points or 1.32% to 11,435.49, it 2-week high.

Commodity prices slipped Friday morning after China hiked its reserve ratio for banks, for a second time in a month, to cool-off its economy. The price of oil slipped $1.27 to $74.01 a barrel and the price of bullion slipped $13.20 to $1,081.

In corporate news, Oil and natural gas explorer Niko Resources swung to profit, reporting reporting third quarter net income of $0.29 per share, as against a loss of $0.04 in the same quarter last year.

Silver explorer Silver Standard Resources said it would raise approximately $100 million through a public offering of its common shares.
 
Health Science and Technology company Afexa Life Sciences reported that first quarter net earnings surged C$0.06 per share, from C$0.03 per share last year.

Telecommunications service provider TELUS Corp. said its fourth-quarter net income decreased C$0.49 per share from C$0.90 in the prior year quarter.

Contract drilling operator Precision Drilling Trust reported fourth quarter net loss of C$0.09 per unit, compared to net income of C$0.66 per unit last year.

In brokerage updates, Royal Bank of Canada upped its rating on Research In Motion to 'top pick' from an 'outperform'. RBC upped Teck Resources rating to 'outperform' from 'sector perform'

In economic news, Statistics Canada said New Motor Vehicle Sales increased 2.6% to 128,663 units in December, helped by higher sales in North American-built passengers cars.

From the U.S., the Commerce Department said Retails Sales rose by a more-than-expected 0.5% in January, indicating economic growth. Economists were expecting it to grow by 0.3%.

Commodity, Currency Markets

Crude oil futures are edging down $1.27 to $74.01 a barrel after advancing $0.76 to $75.28 a barrel on Thursday. Gold futures, which moved up $18.40 to $1,094.70 an ounce in the previous session, are currently declining $8.60 to $1,086.10 an ounce.

On the currency front, the U.S. dollar is trading at 90.25 yen compared to the 89.7702 yen it fetched at the close of trading on Thursday. Against the euro, the dollar is currently valued at $1.3575.

Watch us trade “Live”! Watch our Top Tier Traders make ($500 - $2000) a day
in “real time” and learn how to easily duplicate the process!  Click Here for more information

Asian Markets End Higher On EU Pledge To Greece

The markets across Asia, except India and Taiwan that are closed for holidays, ended in positive territory on Friday, taking cues from Wall Street, where the major averages ended in positive territory on better than expected economic data and the pledge by the European Union to support Greece.

In Japan, the benchmark Nikkei 225 Index rose 128.20 points, or 1.3%, to 10,092, while the broader Topix index of all First Section issues rose 8.66 points, or 1.0%, to 892.

On the economic front, results of a monthly survey released by the Cabinet Office revealed that consumer confidence rose in January to 39.4 from 37.9 recorded in the previous month. The results further noted that Households' consumer sentiment for January improved to 39 from 37.6 recorded in December.

Light sweet crude oil futures for March delivery ended at $75.09 a barrel in electronic trading, down $0.19 per barrel from previous close at $75.28 a barrel in New York on Thursday.

Resource related stocks led the gains. Mitsui & Co., surged up 5.55%, Mitsubishi Corp. climbed 3.25%, Sumitomo Corp. soared 4.65%, Toyota Tsusho Corp. rose 3.35%, Itochu Corp. ascended 5.15% and Marubeni Corp., gained 3.96%.
 
Glass and ceramic stocks also advanced after analysts said that full year profit outlook of Asahi Glass looks conservative and might surpass the earlier guidance. The stock price of Asahi Glass surged up 6.89% on speculation the company might revise its guidance upwards. Among other stocks in the sector, Tokai Carbon soared 6.92%, NGK Insulators added 1.24%, Nippon Sheet Glass rose 2.17% and Sumitomo Osaka Cement Co climbed 4.41%.

Automotive stocks also advanced on hopes of sustaining global economic recovery. Toyota Motor gained 2.06%, Honda Motor added 0.50%, Suzuki Motor Corp. advanced 0.61%, Mazda Motor gained 0.44% and Mitsubishi Motor rose 0.82%.

Advertising services provider Dentsu climbed 5.52% after Citigroup enhanced the rating for the stock stating that the company is transforming itself into a solutions business and aims to secure broader advertising spending, leading to increase in profitability.

Mixed trading was witnessed among banking stocks. Resona Holdings gained 1.39%, Sumitomo Mitsui Financial edged up 0.03% and Mitsubishi UFJ Financial added 0.22%. However, Mizuho Financial bucked the trend and ended in negative territory with a loss of 0.57%.

In Australia, the benchmark S&P/ASX 200 Index added 7.80 points, or 0.17% to close at 4,562, while the All-Ordinaries Index ended at 4,589, representing a gain of 13.00 points, or 0.28%.

Light sweet crude oil futures for March delivery ended at $75.09 a barrel in electronic trading, down $0.19 per barrel from previous close at $75.28 a barrel in New York on Thursday.

Mining stocks ended in positive territory after Rio Tinto reported better than expected results for the full year 2009. The stock climbed up 3.18%. Among other mining stocks, BHP Billiton advanced 1.16%, Iluka Resources added 0.28%, Minara Resources rose 1.60% and Mincor Resources gained 1.72%. However, Oz Minerals bucked the trend and ended in negative territory with a loss of 0.97%.

Metal stocks also ended higher. Fortescue Metals surged up 3.79%, Gindalbie Metals rose 1.58%, and Murchison Metals climbed 2.97%.

Gold stocks remained steady amid higher bullion prices in the international market. Lihir Gold remained unchanged at previous close while Newcrest Mining advanced 0.74%.

Oil stocks also ended in positive territory. Santos advanced 0.75%, Oil Search gained 1.15% and Origin Energy rose 0.99%. However, Woodside Petroleum bucked the trend and ended in negative territory with a loss of 0.47%.
 
Bank stocks ended in negative territory as traders preferred to move out of the sector to others as part of rotational movement of funds. ANZ Bank shed 0.77%, Commonwealth Bank of Australia lost 1.32% and National Australia Bank fell 1.13%. Investment banker Macquarie Group slipped 0.80%. However, Westpac Banking bucked the trend and ended in positive territory with a gain of 1.00% after the bank announced that it has received approval to form a single authorised deposit-taking institution with wholly owned subsidiary St George Bank.

Telstra Communications declined 3.11% after the telecom major announced a surprise drop in first half profit. The other telecom company Singapore Telecommunications shed 1.23%.

In Hong Kong, the Hang Seng Index ended in negative territory with a marginal loss of 22 points, or 0.11%, at 20,269, as traders preferred to lock in gains from recent rally and move to the sidelines ahead of New Year holidays in mainland China and concerns about hazy picture about the nature of assistance that Greece might get to overcome its sovereign debt crisis.

In South Korea, the KOSPI Index ended in negative territory with a loss of 4.15 points, or 0.26%, at 1,594 as traders preferred to remain away from the markets on the last trading day of the week amid concerns about the nature of assistance EU proposes to extend to Greece. Slew of economic data from the US and profit taking also impacted market sentiment.

The Indian market is closed for a holiday today.

Among other major markets open for trading in the region, Indonesia's Jakarta Composite Index gained 26.36 points, or 1.05% to close at 2,534, Strait Times Index in Singapore edged up 5.27 points, or 0.19%, to close at 2,759, and China's Shanghai Composite Index advanced 32.63 points, or 1.09%, to close at 3,018. The market in Taiwan is closed for a holiday.

DO YOU OWN THE RIGHT STOCKS?

Analyze Your Stocks FREE! – Click Here

The major European averages opened Friday’s session higher and traded higher in early trading on the knowledge that the European Union will not let Greece or any other euro zone nation fail. However, the Chinese central bank announcement led to some weakness in the session and currently, the averages are trading mixed. The French CAC 40 Index and the German DAX Index are rising 0.05% and 0.24%, respectively, while the U.K.’s FTSE 100 Index is gaining 0.25%.

On the economic front, the German Federal Statistical Office reported that Germany’s GDP growth stalled in the fourth quarter following a 0.7% increase in the third quarter. Economists had estimated a 0.2% increase. Real GDP fell at a 1.7% year-over-year pace compared to the 4.7% decline in the previous quarter and the 1.6% drop expected by economists.

However, French statistical agency INSEE reported that French fourth quarter GDP rose 0.6% compared to the previous quarter, faster the 0.5% growth expected by economists. The economy exited recession in the second quarter of 2009 by growing at a 0.3% rate.

Eurostat’s estimates showed that the euro area’s GDP rose at a slower than expected rate of 0.1% in the fourth quarter. Economists had expected GDP to grow by 0.3% compared to the 0.4% growth reported for the third quarter. On a year-over-year basis, GDP fell by 2.1%, slower than the 4% decline in the previous quarter.

Meanwhile, a separate report released by the agency showed that the euro zone’s industrial production fell by a seasonally adjusted 1.7% in December. Economists had expected a modest 0.1% increase for the month on top of a 0.1% increase in November. Annually, industrial production fell 5% compared to the more modest 1.7% decline expected by economists.

U.S. Economic Reports

The January retail sales report showed a 0.5% month-over-month increase in the headline retail sales figure, with the growth coming in line with expectations. Sales had edged down 0.1% in the previous month. Retail sales, excluding autos rose a better than expected 0.6% following a 0.2% drop in the previous month. Annually, retail sales rose 4.7% and sales, excluding autos, improved by 4.6%.

Auto sales remained unchanged compared to the previous month after rising 0.1% in December. Electronics and appliance sales showed a turnaround, rising 1.2% compared to the 3.5% drop in December. However, furniture and home furnishing store sales slipped 1.4%. Building equipment and garden equipment supplies dealers saw a 1.2% drop in sales, adding to the 0.4% decline in the previous month. Gasoline sales rose at a slower rate, rising by 0.4% in January. General merchandise store sales picked up.

The Commerce Department is scheduled to release its business inventories report for December 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 0.3% increase in business inventories for the month.

In November, business inventories report showed a 0.4% gain compared to the previous month, a tad bigger than the 0.3% increase expected by economists. The previous month's gains were revised up to 0.4%. The second straight month of growth following 13 months of declines shows that we may have reached the inflection point. At the same time, business sales rose 2%, pushing the business inventories to sales ratio down to 1.28 compared to 1.30 in the previous month.

The preliminary report of the Reuters/University of Michigan's consumer sentiment survey for February is scheduled to be released at 9.55 AM ET. The consumer sentiment index is expected to rise slightly to 75 from January 74.4. The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended February 5th at 11 AM ET.

The oil inventory report for the week ended January 29th showed a 2.3 million barrel increase in crude oil stockpiles to 329 million barrels. Crude oil stockpiles remained above the upper limit of the average range.

Gasoline inventories decreased by 1.3 million barrels but remained above the upper limit of the average range. Distillate inventories also dropped, falling by 1 million barrels. Inventories of distillate fuel were above the upper boundary of the average range. Refinery capacity utilization averaged 79% over the four-weeks ended January 29th compared to 79.5% in the previous week.

Watch us trade “Live”! Watch our Top Tier Traders make ($500 - $2000) a day
in “real time” and learn how to easily duplicate the process!  Click Here for more information

Motorola (MOT) may be in focus after it detailed its plan to separate into two companies. The company expects to combine its mobile handset and television set-top box businesses and then spin it off into a separate public company. These businesses will be overseen by one of the company’s co-chiefs Sanjay Jha, while the networking businesses and enterprise radio systems business will be led by the other co-chief Greg Brown. The reorganization is expected to be implemented in the first quarter of 2011.

Alcon (ACL) receded in Thursday’s after hours session after it reported that its fourth quarter sales rose 14.5% to $1.72 billion. The company’s non-GAAP adjusted earnings rose 15.1% to $1.61 per share. Analysts estimated earnings of $1.51 per share on revenues of $1.60 billion. For the full year, the company expects 2010 organic sales growth to come in the mid-to-high single digits and full year earnings to be between $7.30 and $7.55 per share. The consensus estimates call for earnings of $7.43 per share on 7.7% revenue growth.

Delphi Financial (DFG) may see some activity after it reported fourth quarter operating earnings of 86 cents per share compared to 35 cents per share last year. Revenues fell to $348.27 million from the year-ago’s $356.80 million. Analysts estimated earnings of 88 cents per share on revenues of $428.79 million.

OfficeMax (OMX) could react to its announcement that its Chairman and CEO Sam Duncan will retire from both positions and as a member of the board on February 28th, 2011. The company also noted that Duncan would remain in the role until a new CEO is in place.

Choice Hotels (CHH) fell in Thursday’s after hours session after it said it expects first quarter earnings of 25 cents per share and full year earnings per share between $1.65 and $1.70. Analysts estimate first quarter earnings of 27 cents per share and full year earnings of $1.67 per share. The company also reported that its fourth quarter adjusted earnings rose to 43 cents per share from 41 cents per share last year, while its revenues fell to $140.70 million from the year-ago’s $154.50 million. Analysts estimated earnings of 41 cents per share on revenues of $138.90 million.

Cheesecake Factory (CAKE) could be in focus after it reported fourth quarter revenues of $400.6 million, flat with last year. When adjusted for one-time items, the company reported earnings of 28 cents per share, higher than 15 cents per share last year. The consensus estimate had called for earnings of 24 cents per share on revenues of $400.67 million.

Cephalon (CEPH) is also expected to see some activity after it reported fourth quarter revenues of $575.12 million, higher than $540.14 million last year, exceeding the consensus estimate. The company reported earnings of $1.23 per share compared to 6 cents per share last year. The company revised its 2010 guidance and is now expecting adjusted earnings of $6.80-$7 per share on revenues of $2.61 billion to $2.69 billion. Analysts estimate earnings of $6.28 per share on revenues of $2.43 billion. The company expects first quarter adjusted earnings of $1.60-$1.70 per share on revenues of $575 million to $595 million.

Republic Service (RSG) is expected to be move in reaction to its announcement that its fourth quarter adjusted net income climbed to 33 cents per share from 26 cents per share last year. Revenues rose to $2 billion from $1.24 million last year. The consensus estimates had called for earnings of 33 cents per share on revenues of $2.05 billion. For 2010, the company expects adjusted earnings of $1.63-$1.67 per share on a 0.5%-2% decline in revenues. The Street estimate earnings of $1.67 per share on a 1.4% revenue drop.

Panera Bread (PNRA) could be in the spotlight after it reported fourth quarter net income of 95 cents per share, including 5 cents per share in charges, compared to 84 cents per share in the year-ago period. Total revenues rose 3% to $366.97 million. The results exceeded the consensus estimates.

Chipotle Mexican Grill (CMG) fell in Thursday’s after hours session despite reporting fourth quarter earnings of 99 cents per share, up 90% year-over-year, and revenues of $387.5 million, up 12.2%. Analysts estimated earnings of 81 cents per share on revenues of $388.15 million.

McAfee (MFE) also saw weakness in the after hours session after it reported fourth quarter revenues of $525.7 million, up 24% year-over-year and ahead of the consensus estimate of $514.81 million. The company’s non-GAAP earnings climbed 20% to 64 cents per share, in line with the mean analysts’ estimate. The company also said its board has authorized the buyback of up to $500 million worth of shares through December 2011. For the first quarter, the company estimates non-GAAP earnings of 60-64 cents per share on revenues of $500 million to $520 million. Analysts estimate earnings of 63 cents per share on revenues of $507.34 million.

Beckman (BEC) saw a modest loss in Thursday’s after hours session after it reported fourth quarter revenues of $989.6 million, higher than $811.3 million last year. The company’s earnings declined to 90 cents per share from the year-ago’s $1.18 per share. However, adjusted earnings per share rose 3 cents to $1.29, exceeding the $1.26 consensus estimate. For 2010, the company expects adjusted earnings of $4.40-$4.55 per share on revenues of $3.8 billion to $3.9 billion. Analysts estimate earnings of $4.50 per share on revenues of $3.78 billion.

DO YOU OWN THE RIGHT STOCKS?

Analyze Your Stocks FREE! – Click Here

Investors Hub Services