US & World Daily Markets Financial Briefing 12-05-2010

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Stocks Posting Strong Gains In Mid-Morning Trading

Stocks are up by significant margins in mid-morning trading on Wednesday, as a batch of strong earnings reports and bargain hunting have driven buying interest. Nonetheless, concerns about the effectiveness of the European bailout plan remain a key overhang for the markets. The major averages are all notably higher, further offsetting last week's losses.

In earnings news this morning, Macy's Inc. (M) reported first-quarter earnings and revenues above analyst estimates. Based on strong sales trends, Macy's increased its full-year 2010 guidance on April 27. However, the company held off on raising annual guidance further due to economic uncertainties.

After the markets closed for trading in the previous session, media and entertainment giant Walt Disney Co. (DIS) unveiled second quarter profit and revenues that also topped forecasts.

Video-game publisher Electronic Arts Inc. (ERTS) reported a fourth quarter profit compared to a year-ago loss, beating profit projections along with its revenues. Looking ahead, Electronic Arts reaffirmed its forecast for the first quarter and fiscal year 2011.

On the economic front, the Commerce Department released a report showing that the U.S. trade deficit widened to $40.4 billion in March from a revised deficit of $39.4 billion in February. Economists had expected the deficit to widen to $40.5 billion compared to the $39.7 billion deficit originally reported for the previous month.

The Treasury Department will release its budget for April at 2:00 p.m. ET. Economists project a deficit of $40 billion after a shortfall of $20.9 billion reported in March.

In news from the embattled banking sector, Morgan Stanley (MS) is under pressure after the Wall Street Journal reported that the firm is under investigation for underwriting financial instruments and subsequently betting against them, much like in the Goldman Sachs (GS) case.

The major averages have given back some ground in the past few minutes, but they currently remain firmly positive. The Dow is up 78.67 points or 0.7 percent at 10,826.93, the Nasdaq is up 25.52 points or 1.1 percent at 2,400.83 and the S&P 500 is up 8.42 points or 0.7 percent at 1,164.21.

Sector News

Airline stocks are some of the morning's strongest performers, with the NYSE Arca Airline Index posting a gain of 2.7 percent, moving further off of Friday's three-month closing low.

Networking, natural gas, semiconductor and railroad stocks are also seeing similar moves to the upside, as the markets continue to bounce back from recent weakness.

Among other sectors seeing gains, gold stocks are turning in an outstanding performance, driving the NYSE Arca Gold Bugs Index up by 1.4 percent to a more than five-month intraday high.

The sector is benefiting from another surge in the price of the precious metal, which jumped to a record intraday high earlier. Gold for June delivery is currently up $16.90 at $1,237.20 an ounce.

Stocks Driven By Analyst Comments

BPZ Energy (BPZ) is moving notably higher after being upgraded by analysts at Jefferies from Underperform to Hold. The stock has gained 2.9 percent, bouncing off of a ten-month closing low set on Tuesday.

Marshall & Ilsley (MI) is also seeing buying interest after being upgraded at Morgan Stanley from Equal weight to Overweight. Shares are currently up by 1.3 percent but remain stuck between a monthly low and a more than one-year high.

On the other hand, NewAlliance Bancshares (NAL) is under pressure following a downgrade at Morgan Stanley from Equal weight to Underweight. The stock is down by 2 percent, moving back towards a two-month closing low set last week.

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TSX May Hold On To Gains As Gold Shines

Bay Street stocks are likely to hold on to their gains Wednesday morning amid surging gold prices and a steady oil price.

Traders were also digesting data showing that Canada's trade surplus narrowed drastically in March. Meanwhile, a mixed bag of earnings reports from a host of Canadian companies will likely to lead to stock specific action during the day.

On Tuesday, the S&P/TSX Composite Index added 52.71 points or 0.44% to 12,000.61, after gaining over 2% in the previous session.

The price of crude oil was trading almost flat at around $76 a barrel.

In corporate news, international gold firm Eldorado Gold said it would acquire all of the outstanding common shares of Brazauro Resources Corp. for total consideration consisting of common shares of Eldorado having a value of around C$122.4 million.

Gold stocks may be in play for a second session after the price of gold rose to a new all-time high. Gold for June delivery was up $17.90 to $1,238.20, after briefly trading at $1,245 in morning deals.


Gold producer Aurizon Mines reported lower first-quarter net earnings of C$0.01 per share, compared to C$0.03 per share in the year earlier period.

Oil and gas producer Talisman Energy said it would spend around $4 billion in capital expenditure next year to boost its oil and gas production by 5% to 10%.

Oil and gas firm Twin Butte Energy turned to profit in first-quarter, reporting net income of C$0.03 per share, compared with a net loss of C$0.10 per share in the prior year period.

Oil and gas industry services provider Wenzel Downhole Tools reported a lower first-quarter net income of C$0.02 per share, compared with C$0.04 per share in the previous year period.

Oil and natural gas firm Vero Energy swung to profit in first-quarter, reporting net earnings of C$0.05 per share, compared with a net loss of C$0.13 per share in the previous year period.

Oil and gas exploring company Storm Exploration reported first quarter net income of C$0.06 per share, compared to C$0.03 per share in the prior year quarter.

Petroleum and natural gas firm Paramount Resources reported a narrower first quarter net loss of C$.20 per share, compared to a net loss of C$0.36 per share in the year-ago quarter.

Water treatment company BioteQ Environmental Technologies reported a narrower first quarter net loss of C$0.01 per share, compared to a net loss of C$0.04 per share in the prior year quarter.

Geothermal and water-sources systems maker WaterFurnace Renewable Energy reported lower first quarter net income of C$0.05 per share, compared to C$0.07 per share in the year-ago quarter. The company increased its dividend payout by C$0.03 per share to C$0.22 per share.

Electrical power plant operator Etrion Corp. reported a wider first-quarter net loss of $0.02 per share, compared to $0.01 per share in the same quarter last year.

Solar cells maker ARISE Technologies reported a narrower first-quarter net loss of C$0.02 per share, compared to net loss of C$0.12 per share last year.

Aircraft and rail transport equipment maker Bombardier Inc.  said it won contracts worth $1.71 billion from SBB.AG, Switzerland's federal railways company.

Commercial forest plantation operator Sino-Forest  reported higher first-quarter net income of $0.18 per share, compared to $0.12 per share in the prior year period. Earlier on Monday, the company said its wholly-owned subsidiary Sino-Capital Global Inc. entered into an agreement to acquire 2.32 billion ordinary shares or 30.3% stake in Greenheart Resources Holdings for about $29 million. The offer price will be satisfied by issuing common shares of Sino-Forest.

Bio-pharmaceutical company Bioniche Life Sciences swung to profit in third-quarter, reporting net income of C$0.06 per share compared with a loss of C$0.04 per share in the prior year period.

Pharmaceutical company Oncolytics Biotech said its first-quarter net loss widened to $4.14 million from $3.96 million a year earlier. However, loss per share for the quarter narrowed to $0.07 from $0.09 in the prior year period.

Medical imaging and treatments systems company Novadaq Technologies reported a wider first-quarter net loss of $2.69 million, compared to $2.47 million in the prior year period. However, loss per share for the quarter stood at $0.10, flat with last year.

Sterilization products maker TSO3 Inc. announced first-quarter net loss of C$2.03 million or C$0.04 per share, compared to a loss of C$1.99 million or C$0.04 per share in the same period last year.

Property and casualty insurance provider Westaim Corp. turned to profit in first quarter, reporting net income of C$0.23 per share for the first quarter, compared to a net loss of C$0.03 per share in the prior year quarter. However, net income of C$24.2 million included an accounting gain of C$23.7 million, as a result of the acquisition of JEVCO Insurance Co., and a gain on the sale and redemption of investments of C$3.2 million.

Mortgage finance provider Equitable Group reported lower first quarter net income of C$0.74 per share, compared to C$0.80 per share in the prior year quarter.

Asset management company Sprott Inc. reported lower first quarter net income of C$0.04 per share, compared to C$0.05 per share in the previous year.

Loyalty management services provider Groupe Aeroplan posted lower first-quarter net earnings of C$0.07 per share, compared with C$0.12 per share in the prior year period.

Building construction services provider Churchill Corp reported higher first quarter net earnings of C$0.39 per share, compared to C$0.26 per share in the prior year quarter.

In economic news, Statistics Canada said the country's merchandise exports declined 0.7% in March, mainly due to a fall in energy prices and imports grew 2.0%. Trade surplus with the world narrowed to C$254 million in March from C$1.2 billion in February.

In another report the agency said the New Housing Price Index rose 0.3% in March, following a 0.1% increase in February. Canadian new home prices rose for an eighth straight month in March, suggesting the recovery in the housing market remains on solid footing.

From the U.S, the Commerce Department said trade deficit widened to $40.4 billion in March from a revised deficit of $39.4 billion in February. Economists were expecting the deficit to widen to $40.5 billion compared to the $39.7 billion deficit originally reported for the previous month.

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Asian Markets End Mixed As EU Debt Concerns Ease

Mixed trading was witnessed across the markets in Asia on Wednesday as concerns about the debt crisis in Euro region has eased off considerably. Positive clues from Wall Street, where the major indices ended in negative territory but well off the lows following late recovery, also lifted market sentiment. While the markets in Australia, China, Hong Kong, India and Indonesia managed to end in positive territory with marginal gains, the markets in Japan, South Korea and and Taiwan ended in negative territory with minor losses.

In Japan, the benchmark Nikkei 225 Index dropped 17.07 points, or 0.16% to 10,394, while the broader Topix index of all First Section issues was up 0.73 point, or 0.08%, to 933.

On the economic front, a preliminary report released by the Cabinet Office revealed that the country's leading index rose to 102.8 in March from 98.4 reported in February. The index climbed for the 13th straight month and came in line with the economists' expectations. The report further noted that the coincident index for March came in at 101.1, up from 100 in the prior month. But the index stood below the consensus forecast of 101.6. The lagging index, at the same time, rose to 85.4 from 84.2 in the prior month.

Light sweet crude oil futures for June delivery ended at $75.52 a barrel in electronic trading, down $0.87 per barrel from previous close at $76.37 a barrel in New York on Tuesday.

Automotive stocks ended in positive territory. Toyota Motor gained 2.57%, Honda Motor advanced 1.03%, Nissan Motor rose 1.09%, Hino Motors climbed 5.63% and Isuzu Motors surged up 6.34%.

Mixed trading was witnessed among large banks. Resona Holdings managed to end in positive territory with a gain of 0.09%. However, Sumitomo Mitsui Financial slipped 0.60%, Mizuho Financial plunged 3.59% and Mitsubishi UFJ Financial declined 2.39%.

Securities stocks ended in negative territory. Daiwa Securities shed 0.93%, Matsui Securities slipped 0.91%, Mizuho Securities fell 3.12% and Nomura Holdings lost 1.82%.

In Australia, the benchmark S&P/ASX200 Index advanced 25.00 points, or 0.55% to 4,573, while the All-Ordinaries Index ended at 4,600, representing a gain of 26.50 points, or 0.58%.

On economic front, a report released by the Department of Education, Employment and Workplace Relations revealed that the country's leading employment index improved in May after declining for four consecutive months. As per the report, the leading employment index rose to minus 1.029 in May from minus 1.129 in April.

Separately, the Australian Office of Financial Management stated that the Treasury Bond issuance in 2010-11 is expected to be around A$56 billion. After accounting for maturities of A$18.8 billion, this represents a net growth of A$37 billion in the face value amount of Treasury Bonds on issue.

Light sweet crude oil futures for June delivery ended at $75.52 a barrel in electronic trading, down $0.87 per barrel from previous close at $76.37 a barrel in New York on Tuesday.

Gold stocks led the gains following sharp rise in gold prices in the international market. Lihir Gold surged up 4.36% on huge volumes, and Newcrest Mining climbed 3.85%.

Banking stocks also advanced. ANZ Bank advanced 0.98%, National Australia Bank added 0.78% and Westpac Banking edged up 0.16%. However, Commonwealth Bank of Australia ended in negative territory with a loss of 1.00%.


Mixed trading was witnessed among mining and metal stocks. BHP Billiton edged up 0.05%, Fortescue Metals advanced 0.96%, Gindalbie Metals rose 1.75%, Iluka Resources climbed 3.26%, and Oz Minerals gained 1.90%. However, Rio Tinto bucked the trend and ended in negative territory with a loss of 0.12%, and Mineral Resource slipped 0.41%.

Oil stocks ended in positive territory. Woodside Petroleum advanced 1.85%, Santos added 1.02%, ROC Oil firm. climbed 3.85%, Oil Search added 0.36% and Origin Energy rose 1.90%.

In Hong Kong, the benchmark Hang Sang Index ended in positive territory with a modest gain of 65.98 points, or 0.33%, at 20,212, as concerns about the debt crisis in Europe eased and the market in the U.S recovered sharply in late trading session. Bargain hunting at lower levels on select stocks has led to gains in the market with most of the markets showing signs of stability. However, traders exercised caution awaiting more cues on global economy, especially from mainland China, where rising inflation numbers might warrant another round of tightening measures to cool off the growing economy.

The Indian market ended a volatile session modestly higher on Wednesday, as gains in index heavyweights like Reliance Industries, HDFC Bank, Infosys, DLF, Hero Honda Motors, Tata Steel and Tata Motors offset steep losses in the telecom sector. The market, which slipped into the red after a firm start, recovered soon despite a weaker-than-expected report on March's industrial production. The 30-share Sensex average finished at 17,196, up 54 points or 0.32%, while the 50-share Nifty ended up 21 points or 0.40% at 5,157.

Among the other major markets open for trading, China's Shanghai Composite Index advanced 8.14 points, or 0.31%, to close at 2,656, Indonesia's Jakarta Composite gained 34.73 points or 1.23% to close at 2,848, and Singapore's Strait Times Index rose 22.66 points, or 0.79%, to close at 2,880. However, Taiwan's Weighted Index bucked the trend and ended in negative territory with a loss of 5.74 points, or 0.08%, at 7,603.

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The major European markets are trading higher on Wednesday after the previous session’s pullback. The French CAC 40 Index and the German DAX Index are rising 1.04% and 1.91%, respectively, while the U.K.’s FTSE 100 Index is rising 0.44%.

The U.K. Office for National Statistics reported that U.K. industrial output rose 2% month-over-month in March, with growth exceeding the 0.9% growth estimated by economists. Manufacturing output climbed 2.3%.

GDP data released by the German Federal Statistical Office showed that the German economy grew at a 0.2% sequential rate in the first quarter following an upwardly revised 0.2% increase in the previous quarter. Economists had expected GDP to have remained unchanged in the first quarter. Annually, GDP rose 1.7%, reversing the 1.5% drop in the previous quarter.

However, data released by French statistical office INSEE showed that French economic growth slackened to a 0.1% rate in the first quarter, softer than the 0.3% growth expected by economists. The slower than expected growth was mainly due to a slowdown in consumer spending, which remained unchanged from the previous quarter, and softer government spending.

Consumer price inflation data released by INSEE showed a 1.7% annual inflation rate for France in April, faster than the 1.6% growth in the previous month. On a monthly basis, the consumer price index rose 0.3%, slower than the 0.5% growth in March.

Meanwhile, Eurostat reported that the euro area’s GDP rose 0.2% quarter-over-quarter in the first quarter. The GDP growth was slower than the 0.5% growth expected by economists. On a year-over-year basis, GDP rose 0.5% following a 2.2% contraction in the previous quarter.

Industrial output in the euro zone region rose 1.3% month-over-month, a separate report released by Eurostat revealed. Economists had expected a 1% increase. Annually, industrial output climbed 6.9% compared to the 3.9% growth seen in the previous month.

U.S. Economic Reports

A report released by the Commerce Department reported that the trade deficit for March widened to $40.4 billion from the downwardly revised deficit of $39.4 billion for the previous month. Economists estimated a deficit of $40.5 billion, wider than the deficit of $39.7 billion estimated initially for February.

Imports rose by $5.6 billion to $188.3 billion, while exports increased by $4.6 billion to $147.9 billion. The goods deficit rose $1.8 billion, while the surplus on the trade in services declined by $0.8 billion.

Boston Federal Reserve Bank President Eric Rosengren will moderate a discussion on macroprudential supervision at the Atlanta Fed's annual Financial Markets Conference in Atlanta at 10:15 AM ET.

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

The inventory report for the week ended April 30th showed a 2.8 million barrel increase in crude oil stockpiles. With the increase, crude oil inventories remained above the upper limit of the average range.

Gasoline stockpiles rose by 1.2 million barrels, remaining above the upper limit of the average range. Distillate fuel inventories also increased, rising by 0.6 million barrels. Inventories of distillate fuel remained above the upper boundary of the average range. Refinery capacity utilization averaged 87.5% over the four weeks ended April 30th compared to 86.2% in the previous week.

St. Louis Federal Reserve Bank President James Bullard will give an economic update to the Tennessee Department of Financial Institutions in Nashville at 1:15 PM ET.

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 $40 billion for April.

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Disney is likely to be in focus after it reported that its second quarter earnings rose to 48 cents per share from 33 cents per share in the year-ago quarter.

On an adjusted basis, the company reported earnings of 48 cents per share. Revenues rose 6.1% to $8.58 billion. Analysts estimated earnings of 46 cents per share on revenues of $8.39 billion.

Electric Scientific Industries may also be in focus after it reported fourth quarter revenues of $59.6 million. On a non-GAAP basis, the company reported earnings of 16 cents per share.

Analysts estimated earnings of 5 cents per share on revenues of $53 million. For the first quarter, the company expects revenues to be in the low to mid-$50 million range and expects non-GAAP earnings per share of 1-6 cents per share.

Electronic Arts is expected to move in reaction to its announcement that its fourth quarter non-GAAP revenues rose to $850 million from the year-ago’s $609 million. The company reported non-GAAP earnings of 7 cents per share compared to a loss of 37 cents per share last year.

The results were ahead of the consensus estimates. For the first quarter, Electronic Arts expects a non-GAAP loss of 35-40 cents per share on revenues of $460 million to $500 million. Analysts estimate a loss of 33 cents per share on revenues of $515.84 million.

The company expects non-GAAP earnings of 50-70 cents per share and revenues of $3.65 billion to $3.90 billion. The consensus estimates call for earnings of 64 cents per share on revenues of $3.80billion.

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