US & World Daily Markets Financial Briefing 14-04-2010

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Stocks Moderately Higher As Markets Continue To Digest Data

Stocks are posting moderate gains in mid-morning trading on Wednesday as the markets continue to digest largely upbeat retail sales data and tame inflation figures while paying close attention to commentary from the Federal Reserve. The major averages are all in positive territory, although buying is somewhat subdued.

The markets are currently focused on Fed chief Ben Bernanke as he is testifying before the Joint Economic Committee in Washington on the central bank's economic outlook in the wake of recent economic data.

A short time ago, the Commerce Department released data showing that business inventories rose by 0.5 percent in February following an upwardly revised 0.2 percent increase in January. The increase in inventories marked the fastest pace of growth since July of 2008.

Economists had expected inventories to increase by 0.4 percent after inventories for the previous month were originally shown as unchanged.

An hour before the opening bell, the Commerce Department reported that retail sales surged up by 1.6 percent in March following an upwardly revised 0.5 percent increase in February. Economists had expected sales to increase by 1.1 percent compared to the 0.3 percent growth originally reported for the previous month.

Excluding a 6.7 percent increase in sales by motor vehicle and parts dealers, retail sales increased by a more modest 0.6 percent compared to a 1.0 percent increase in the previous month. The increase in ex-auto sales still exceeded economist estimates for 0.5 percent growth.

In a separate report, the Labor Department said that inflation remained docile, showing that its consumer price index edged up by 0.1 percent in March after coming in unchanged in February. The modest increase came in line with economist estimates.

Excluding food and energy prices, the core consumer price index was unchanged in March following a 0.1 percent increase in the previous month. Economists had been expecting core prices to edge up by about 0.1 percent.

Boosting initial sentiment were first quarter earnings from JPMorgan Chase (JPM), which came in at $3.33 billion compared to $2.14 billion in the same period last year. On a per share basis, the firm reported earnings of $0.74, beating consensus estimates that called for $0.64 per share.

JP Morgan said its net revenues for the quarter totaled $27.67 billion, up from $25.03 billion in the prior year quarter and above the $26.47 billion projected on Wall Street.

Market optimism was also helped by corporate results released after the close of trading yesterday, as Intel (INTC) reported first quarter net income of $2.4 billion or $0.43 per share compared to $629 million or $0.11 per share in the year-ago quarter. Net revenue rose to $10.3 billion from $7.1 billion in the prior year quarter.

Wall Street analysts expected the company to report earnings of $0.38 per share on revenue of $9.83 billion for the quarter. Additionally, the company forecast second quarter revenue above analysts' current consensus estimate and raised its gross margin outlook for full year 2010.

The major averages have all seen choppy movement in recent dealing, hovering near their session highs. The Dow is up 51.24 points or 0.5 percent at 11,070.66, the Nasdaq is up 18.66 points or 0.8 percent at 2,484.65 and the S&P 500 is up 5.73 points or 0.5 percent at 1,203.03.

Sector News

Semiconductor stocks are some of the morning's strongest performers on a percentage basis, lifting the Philadelphia Semiconductor Index up by 2.9 percent. With the move, the index has risen to its best intraday level in nearly two years as Intel's strong quarterly results boosted buying interest in chip and tech-related stocks.

Electronic storage, computer hardware and networking stocks are also moving higher, while banking stocks are some of the best performers outside of the tech sector. The Kbw Bank Index is up by 2.1 percent, reaching its highest intraday level in nearly eighteen months.

Housing, railroad and steel stocks are also seeing considerable strength, while some weakness is visible among health insurance stocks. The Morgan Stanley Healthcare Payor Index is down by 1.1 percent, falling for the fifth time in six sessions.

Stocks Driven By Analyst Comments

Advance Auto Parts Inc. (AAP) is on the rise in mid-morning trading after being upgraded at BB&T Capital Markets from Hold to Buy. Shares have risen 4.6 percent, setting an eight-month intraday high.

Protective Life Corp. (PL) is also moving higher after being upgraded at UBS from Neutral to Buy. The broker also raised its target price on the stock from $20 to $31. The stock is currently up by 6.2 percent, setting an eighteen-month intraday high.

TSX Looks To Open Higher Amid Commodities Recovery, US Retail Sales

Bay Street bulls may take charge Wednesday morning amid recovering commodities prices and upbeat earnings reports from chip maker Intel and JP Morgan Chase. Also, just released retail sales numbers and inflation data from across the border will help lift sentiment.

On Tuesday, the S&P/TSX Composite Index lost 47.15 points or 0.39% to 12,101.52, however, settled above the 12,100-mark for the past eight sessions.

The price of crude oil snapped its 5-day losing streak, edging up $0.85 to $84.90 a barrel. The price of gold recovered after losing in the past two session. Gold for June moved up $7.70 to $1,161.10 in morning deals.

Meanwhile, the Canadian dollar was retesting its parity with the U.S. dollar in morning deals.

Financial stocks may be in play after JP Morgan Chase & Co reported first quarter net income of $0.74 per share, widely beating consensus estimates for a earnings of $0.64 per share.

Technology stocks will likely attract buyers after an encouraging earnings report from chip-maker Intel, which said after the market close yesterday that its first-quarter net income jumped to $0.43 per share from $0.11 per share reported in the year-ago period. Analysts were expecting the company to report net income of $0.38 per share.

In corporate news from Canada, blackberry maker Research In Motion will pay $200 million in cash to acquire QNX Software, Harman International disclosed the terms in a regulatory filing.

Gold miner Nova Gold Resources posted a narrower first-quarter net loss of C$0.10 per share, compared to C$0.20 per share in the same quarter last year.

Gold explorer Osisko Mining said it is commencing a friendly offer to acquire precious metals explorer Brett Resources (BBR.V). Brett shareholders will receive 0.34 of an Osisko common share and C$0.0001 in cash for each common share of Brett..

Gold and diamond explorer Etruscan Resources turned to profit in the first quarter, reporting net income of $0.01 per share, compared to a loss of $0.23 per share in the year-ago quarter.

Media and entertainment company Corus Entertainment reported 50% decline in its second-quarter net income at C$0.18 per share compared to C$0.36 per share in the prior year period. Analyst were expecting the company to report C$0.32 a share. While revenues were up 6% this quarter, beating estimates, net income declined due to one-time items.

Media company Score Media reported a break-even in the second quarter, compared to a loss of C$0.01 per share prior year.

Luxury housing services provider Amica Mature Lifestyles slipped in to the red, reporting third quarter net loss of C$0.22 per share, compared to net income of C$0.01 per share for the year-ago quarter. However, the company declared a quarterly dividend of C$0.06 per share.

Ailing international media company Canwest Global Communications reported a narrower net loss of C$0.26 per share in second quarter, down from C$8.08 per share last year.

Biotechnology company Stem Cell Therapeutics posted fiscal 2009 net loss of C$0.03 per share, narrower than C$0.05 per share in the prior year period.

Apparels maker Naturally Advanced Technologies reported fiscal 2009 net loss of $0.12 per share compared to a loss of $0.12 per share for 2008.

Oil and gas firm Strategic Oil & Gas reported fiscal 2009 net loss of C$0.10 per share, wider than C$0.01 per share in the year-ago period.

Oil and gas investment company Brownstone Ventures said it raised C$11 million through a non-brokered private placement financing, issuing an aggregate of 20 million units at C$0.55 per unit.

In economic news from across the border, the U.S. Labor Department said its consumer price index edged up by 0.1% in March, in line with estimates, after coming in unchanged in February.

In other report, the U.S. Commerce Department said retail sales surged by 1.6% in March following an upwardly revised 0.5% increase in February. Economists were expecting sales to increase by 1.1% compared to the 0.3% growth originally reported for the previous month.

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Asian Markets End In Positive Territory On Intel Results

The markets in Asia, except India which is closed for a holiday, ended the session Wednesday in positive territory with marginal gains as traders viewed the upbeat results from chipmaker Intel as a barometer for the global technology sector and expected revival in tech spending across the world. However, the gains were limited as traders preferred to adopt a cautious approach ahead of more earnings from the US apart from a slew of economic data that might decide the pace and magnitude of the global economic recovery.

In Japan, the benchmark Nikkei-225 Index advanced 43.67 points, or 0.39%, to 11,205, while the broader Topix index of all First Section issues rose 2.66 points, or 0.27%, to 991

Light sweet crude oil futures for May delivery ended at $84.39 a barrel in electronic trading, up $0.34 per barrel from previous close at $84.05 a barrel in New York on Tuesday.

High tech stocks led the gains following upbeat earnings from chipmaker Intel, which is widely perceived as a barometer for the technology sector globally. Tokyo Electron surged up 3.62%, Advantest Corp. advanced 1.40%, TDK Corp. added 0.32%. Kyocera Corp. rose 1.49% and Fanuc Ltd gained 1.46%.

Exporters also advanced following weakness in the local currency against the dollar. Canon Inc. climbed 2.22%, Sharp Corp. surged up 3.17%, Panasonic added 0.21% and Toshiba Corp. advanced 0.81%.

Airline company All Nippon Airways climbed 2.42%.

Real estate stocks also ended in positive territory. Mitsui Fudosan gained 1.66%, Sumitomo Realty & Development climbed 2.60%, Mitsubishi Estate advanced 0.89%, Tokyu Land Corp. rose 1.61% and Heiwa Real Estate increased 1.35%.

Steel stocks ended in negative territory on profit taking. JFE Holdings lost 1.63%, Pacific Metals Co., fell 1.35%, Nippon Steel Corp. shed 1.39% and Kobe Steel slipped 1.42%.

In Australia, the bench mark S&P/ASX 200 Index gained 43.10 points, or 0.87% to close at 4,995, while the All-Ordinaries Index ended at 5,018, representing a gain of 39.50 points, or 0.79%.

On the economic front, a statement released by the Melbourne Institute and Westpac Bank revealed that Australian consumers remained unperturbed by the Reserve Bank of Australia's aggressive monetary policy. Survey results of the Westpac-Melbourne Institute consumer confidence index declined 1% in April to 116.1 from 117.3 reported in the previous month. A reading above 100 means optimists outnumber pessimists.

Separately, a report released by the Australian Bureau of Statistics revealed that the value of building work done in the country increased a seasonally adjusted 3.6% quarter-on-quarter in the December quarter to A$18.89 billion, following the 0.6% increase in the September quarter. According to the report, the value of new residential work done fell 2.5% to A$8.83 billion. Work done on new houses fell 1.1% to A$6.24 billion, while new other residential building fell 5.8% to A$2.59 billion.

Light sweet crude oil futures for May delivery ended at $84.39 a barrel in electronic trading, up $0.34 per barrel from previous close at $84.05 a barrel in New York on Tuesday.

Mining and mineral stocks advanced following positive comments and outlook for the sector. BHP Billiton added 0.34%, Rio Tinto advanced 0.75%, Fortescue Metals climbed 2.50%, Iluka Resources rose 2.93%, Mineral Resource gained 2.83% and Oz Minerals increased 0.41%.

Oil related stocks also gained. Oil Search added 0.17%, Origin Energy advanced 0.30% and Santos climbed 1.09%. However, Woodside Petroleum bucked the trend and ended in negative territory with a modest loss of 0.32%.

Mixed trading was witnessed among gold stocks. While Lihir Gold added 0.26%, Newcrest Mining ended in negative territory with a loss of 0.52%.

Banks ended in positive territory on increasing optimism about economic recovery. ANZ Bank climbed 1.93%, Commonwealth Bank of Australia gained 1.95%, National Australia Bank advanced 1.38% and Westpac Banking rose 1.65%.

Investment banking company Macquarie Group announced that it had agreed to acquire 53 aircraft for $US1.987 ($2.12) billion from International Lease Finance Corporation, a unit of American International Group. Following the news, the company's shares were up 0.80%.

Among the major losers, Telstra shed 0.31% after the telecom company revealed that negotiations in connection with its involvement in the national broadband network were not over.

In Hong Kong, the benchmark Hang Sang Index ended in positive territory with a marginal gain of 17.90 points, or 0.08%, at 22,121, taking cues from other markets in the region which had ended in positive territory with cautious optimism ahead of more earnings from major corporates in the US in addition to a slew of economic data. Resource stocks and China related stocks ended weaker on profit taking while property stocks ended in the green with modest gains,

 In South Korea, the benchmark KOSPI Index ended in positive territory with a gain of 24.74 points, or 1.45%, to 1,753, led by technology stocks and banks, Better than expected results from chipmaker Intel (INTC) in the US after the markets closed in the previous session raised speculation that IT spending will get revived across the globe, taking cues from Intel's results and outlook. Positive trading across other markets in the region also lifted market sentiment.

The Indian market is closed for a public holiday.

Among the other major markets open for trading, Indonesia's Jakarta Composite Index ended flat with a marginal increase of 0.31 points or 0.01% at 2,885, China's Shanghai Composite Index added 4.93 points, or 0.16%, to close at 3,166, Singapore's Strait Times Index climbed 48.14 points, or 1.62%, to close at 3,019, and Taiwan's Weighted Index surged up 67.40 points, or 0.84%, to 8,097.

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The major European markets opened Wednesday’s session higher and are seen consolidating their gains. The French CAC 40 Index is currently up 0.62% compared to a 0.74% advance by the German DAX Index, while the U.K.’s FTSE 100 Index is firming up by 0.70%.

In corporate news, Dutch semiconductor equipment maker ASML Holdings (ASML) reported a first quarter profit of 107 million euros compared to a net loss of 117 million euros in the year-ago period. Sales rose to 742 million euros. Citing the prolonged growth expected for the semiconductor industry, the company expects record sales for the year.

On the economic front, Eurostat reported that the euro area’s industrial output rose by 0.9% month-over-month in February. This represents a slowdown from the 1.6% growth in the previous month. Annually, industrial output climbed 4.1%.

U.S. Economic Reports

On the economic front, the Labor Department said its consumer price index rose 0.1% month-over-month in March following an unchanged reading in February, with the latest month’s reading coming in line with expectations. The core consumer price index was unchanged, tamer than the 0.1% growth expected by economists.

Food prices rose 0.2%, with the cost of eating at home rising by 0.5%. Energy prices remained unchanged, reflecting a 1.3% decline in prices of energy commodities. Shelter costs, which have a significant weighing in the headline number, edged down 0.1%. Annually, on an unadjusted basis, consumer prices rose 2.3% in March.

Retail sales of food and retail companies with one or more establishments that sell merchandise and associated services to final consumers rose 1.6% month-over-month in March, better than the 1.1% growth expected by economists. Annually, retail sales were 7.6% higher.

Excluding a 6.7% rise in sales by motor vehicle and parts dealers, sales increased by a more modest 0.6% in March compared to a 1% increase in the previous month. Economists had expected ex-auto sales to edge up by 0.5%.

Cleveland Federal Reserve Bank President Sandra Pianalto is scheduled to speak to the 19th Annual Hyman P. Minsky Conference on the State of the U.S. and World Economies, in New York at 9:30 AM ET.

The Commerce Department is scheduled to release its business inventories report for February 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 0.4% increase in business inventories for the month.

Business sales rose 0.6% month-over-month in January, while business inventories remained unchanged compared to expectations for a 0.1% increase. The business inventories to sales ratio fell to 1.25 in January from 1.46 in the year-ago period and 1.26 in December 2009, with the January 2010 reading marking the lowest since November 2007.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended April 9th at 10:30 AM ET.

Crude oil inventories rose by 2 million barrels to 356.2 million barrels in the week ended April 2nd, 2010. Inventories remained above the upper limit of the average range. Distillate fuel inventories increased by 1.1 million barrels, remaining above the upper boundary of the average range. Meanwhile, gasoline stockpiles fell by 2.5 million barrels, but inventories are still above the upper limit of the average range. Refinery capacity utilization averaged 82.2% over the four weeks ended April 2nd compared to 81.2% in the previous week.

Federal Reserve Chairman Bernanke is scheduled to testify before the Congressional Joint Economic Committee at 10 AM ET. Richmond Federal Reserve Bank President Jeffrey Lacker will speak to West Virginia University economics students in Morgantown, West Virginia, at 11 AM ET.

Also scheduled to speak on the day will be Federal Reserve Governor Kevin Warsh and Dallas Federal Reserve President Richard Fisher, who will speak to the 19th Annual Hyman Minsky Conference at the Levy Economics Institute of Bard College, New York, at 12:15 PM ET and 1 PM, respectively.

The Federal Reserve is due to release its Beige Book, which is a compilation of anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts, at 2 PM ET. The report is normally released about two weeks before the monetary policy meeting is held.

The New York Fed’s Brian Sack is due to lecture on the Fed and the financial crisis to the University of Vermont alumni group in New York at 7 PM ET.

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JPMorgan Chase (JPM) is expected to be in the spotlight after it reported first quarter net income of 74 cents per share compared to 40 cents per share last year. Total net revenue rose 19% year-over-year to $27.67 million. Analysts estimated earnings of 64 cents per share on revenues of $26.74 million.

Adtran (ADTN) may see some activity after it said its first quarter sales rose 15% year-over-year to $127.03 million. The company’s earnings rose to 29 cents per share from 24 cents per share last year. Analysts estimated earnings of 26 cents per share on revenues of $120.98 million.

Railroad operator CSX (CSX) may gain ground after it reported that its first quarter earnings from continuing operations rose to 78 cents per share from 64 cents per share last year. Revenues climbed 11% to $2.5 billion. The consensus estimates called for earnings of 69 cents per share on revenues of $2.38 billion.

Intel (INTC) rallied in Tuesday’s after hours session after it reported that its first quarter revenues rose 44% year-over-year to $10.3 billion. The company reported that its earnings climbed to 43 cents per share from 32 cents per share last year. Analysts estimated earnings of 38 cents per share on revenues of $9.83 billion. The company expects second quarter revenues of $10.2 million, plus or minus $400 million, while the consensus estimate is at $9.69 billion.

Healthcare Services Group (HCSG) declined sharply in Tuesday’s after hours session after it reported that its March quarter revenues rose 15% year-over-year to $183.80 million. The company reported earnings of 17 cents per share compared to 18 cents per share in the year-ago period. The results trailed the consensus estimates that called for earnings of 21 cents per share on revenues of $186.13 million.

Linear Technology (LLTC) may move to the upside after it reported that its third quarter revenues rose 21% year-over-year to $200.9 million. The company’s earnings climbed to 44 cents per share from 22 cents in the year-ago period. Analysts estimated earnings of 39 cents per share on revenues of $279.14 million. For the fourth quarter, the company estimates 7%-10% revenue growth.

GenCorp. (GY) is likely to be in focus after its unit Aerojet said the NASA Glenn Research Center has awarded the company a 5-year indefinite-delivery, indefinite-quantity contract to provide NASA with its space propulsion system technologies, including cryogenic and electric propulsion for spacecraft. The company noted that Aerojet is among 5 companies to be awarded the contract, which is valued up to $50 million.

HCC Insurance Holdings (HCC) could react to its announcement that it estimates an after-tax loss of $13 million from first quarter catastrophes. The company expects the loss to reduce its first quarter earnings by 11 cents per share.

Kulicke & Soffa (KLIC) jumped in Tuesday’s after hours session after it reported second quarter revenues of $153 million, ahead of the $146.40 million consensus estimate. Additionally, the company said it expects its third quarter revenues to be about $205 million, also exceeding the mean analysts’ estimate of $143.09 million. The company also said customer demand trends remain strong.

RPM (RPM) is expected to move in reaction to its announcement that its CFO Kelly Tompkins will resign, effective April 30th, 2010 to accept a position at Cliffs Natural Resources (CLF). RPM also said its former CFO Robert Matejka has been named to replace Tompkins.

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