US & World Daily Markets Financial Briefing 14-05-2010

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Stocks Posting Notable Losses Despite Upbeat Economic Data

Stocks are down by substantial margins in mid-morning trading on Friday, as the markets have largely shrugged off continued improvements on the economic front in the U.S. as the European debt crisis remains a chief concern. The major averages are all firmly in negative territory, adding to yesterday's losses.

A short time ago, Reuters and the University of Michigan released their preliminary report on consumer sentiment in the month of May, showing that sentiment improved roughly in line with estimates compared to the previous month.

Reuters and the University of Michigan said that their consumer sentiment index rose to 73.3 in May from a final reading of 72.2 in April. Economists had been expecting the consumer sentiment index to increase to a reading of 73.5.

In other economic news released recently, the Commerce Department reported that business inventories increased by 0.4 percent in March following a 0.5 percent increase in February. The increase in inventories came in line with economist estimates.

Before the opening bell, the Commerce Department released a separate report showing that retail sales edged up by 0.4 percent in April following an upwardly revised 2.1 percent increase in March. Economists had expected retail sales to increase by 0.5 percent compared to the 1.6 percent growth originally reported for the previous month.

Also on the economic front, the Federal Reserve said that industrial production increased by 0.8 percent in April following an upwardly revised 0.2 percent increase in March. The increase in production came in line with economist estimates, while the growth seen in the previous month was revised from the previously reported 0.1 percent increase.

The report also showed that capacity utilization rose to 73.7 percent in April from a downwardly revised 73.1 percent in the previous month. Economists had expected capacity utilization to increase to 73.9 percent compared to the 73.2 percent originally reported for March.

The major averages have seen choppy movement since moving off of their session lows. The Dow is currently down 148.58 points or 1.4 percent at 10,634.37, the Nasdaq is down 45.64 points or 1.9 percent at 2,348.72 and the S&P 500 is down 19.06 points or 1.7 percent at 1,138.37.

Sector News

Steel stocks are some of the morning's worst performers, with the NYSE Arca Steel Index down by 3.9 percent. With the move, the index is moving back down towards a recent two and a half month closing low.

Semiconductor, banking, housing and networking stocks are also down by substantial margins, spearheading a market-wide sell-off.

Further weakness among software, oil, defense and commercial real estate stocks is also weighing on the broader markets.

Stocks Driven By Analyst Comments

Netflix (NFLX) is moving lower after being downgraded at Citigroup from Buy to Hold based on recent valuation. The stock has lost 6.6 percent, pulling back sharply off of the historic closing high set in the previous session.

Bank of Hawaii (BOH) is also under pressure after being downgraded by analysts at Credit Suisse from Outperform to Neutral also based on valuation. Shares are currently down by 2.9 percent, moving further off of recent more than one-year highs.

On the other hand, Pozen Inc. (POZN) is on the rise following an upgrade at Jefferies from Underperform to Hold. The stock has gained 1.8 percent but remains rangebound.

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Bay Street Poised For A Soft Open

Canadian stocks may open lower Friday amid easing energy prices and on lingering worries that fiscal austerity in some euro nations might cripple economic growth.

Meanwhile, a mixed bag of earnings reports from a host of Canadian companies will likely to lead to stock specific action during the day. Gold stocks may be in play as the price of bullion was near its all-time high.

On Thursday, the S&P/TSX Composite Index lost 79.38 points or 0.65% to 12,116.59, snapping its three-day rally.

The price of crude oil continued to drift lower for a fourth session, with crude for June delivery shedding $1.06 to $73.34 a barrel.

The price of gold jumped back near its all-time, with gold for June was up $17.80 to $1,247 an ounce.

In corporate news, toys and stationery maker MEGA Brands swung to profit in first-quarter, reporting net earnings of $2.28 per share, compared to net loss of $0.71 per share last year.

Oil and natural gas explorer Petrobank Energy swung to profit in first quarter, reporting C$0.76 per share, compared to a loss of C$0.02 in the year ago period. Analysts were expecting the company to post C$0.54 per share this quarter.


Energy company Provident Energy Trust reported a wider first-quarter net loss of C$0.23 per unit compared to a loss of C$0.16 per unit last year.

Exploration and production company Bankers Petroleum swung to profit in first-quarter, reporting net income $0.002 versus a loss of $0.014 in the year-ago period.

Oil and gas explorer Pacific Rubiales Energy reported higher funds flow from operations of $0.60 per share for the first quarter, compared to $0.15 per share in the prior year quarter.

Oil and gas firm Nuvista Energy reported lower funds from operations of $0.60 per share for the first quarter, compared to $0.72 per share in the prior year quarter.

Oil and gas industry services provider Flint Energy Services reported first quarter net earnings of C$0.38 per share, compared to C$0.40 per share in the same quarter last year.

Oil and natural gas explorer Galleon Energy swung to profit in first quarter, reporting net income of C$0.15 per share, compared to a net loss of C$0.07 per share in the same quarter last year.

Hydrocarbon drilling and fracturing fluids company Enerchem International swung to profit in first quarter, reporting net income of C$0.30 per share, compared to a net loss of C$0.02 per share in the prior year quarter.

Mineral properties explorer International Tower Hill Mines announced plans to undertake a spin-out transaction to segregate its assets into two separate companies. ITH will retain all assets relating to the Livengood gold project in Alaska. Corvus Gold Inc. will hold all of ITH's other existing Alaska and Nevada assets.

Clearwater Seafoods Limited Partnership slipped into the red in first-quarter, reporting net loss of C$0.12 per share compared with a profit of C$0.32 per share in the prior year period.

Bio-technology development company Allon Therapeutics reported a wider net loss of C$0.04 per share for the first quarter, compared to a net loss of C$0.03 per share in the prior year quarter.

Forest products company Ainsworth Lumber turned to profit in first quarter, reporting net income of C$0.15 per share, compared to a net loss of C$0.54 per share in the same quarter last year.


Insurance solutions provider Kingsway Financial Services turned to profit in first-quarter, reporting net income of $0.46 per share, compared to net loss of $1.06 per share last year.

In economic news, Statistics Canada said Manufacturing shipments advanced 1.2% to $44.50 billion in March. Economists were expecting manufacturing sales to rise 1%.

In another report the agency said new motor vehicle sales decreased 4.2% to 132,867 units in March. Sales of new trucks slipped 5.7% to 67,960 units and passenger cars sales dipped 2.5% to 64,907 units.

From the U.S., the Commerce Department said retail sales edged up 0.4% in April following an upwardly revised 2.1% increase in March. Economists were expecting retail sales to increase by 0.5% compared to the 1.6% growth originally reported for the previous month.

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Asian Markets Slump On Global Economic Concerns

The markets across Asia ended the last trading session of the week in negative territory, taking cues from Wall Street where the major averages witnessed sell-off in late trading session amid concerns about the debt crisis in Europe, notwithstanding positive economic data on jobs. Most of the traders preferred to offload shares and move to sidelines awaiting more cues on developments in Europe and economic data related to retail sales and consumer sentiment later in the U.S.

In Japan, the benchmark Nikkei 225 Index closed down 158.04 points, or 1.5%, to 10,463, while the broader Topix index of all First Section issues fell 11.45 points, or 1.2%, to 936.

As many as 29 sectors of the 33 sectors in the index ended in negative territory as traders turned jittery after Sony Corp. provided a weaker-than-expected forecast for the year that led to sell-off in shares. Weak cues from other markets and continued worries on Eurozone recovery also hampered market sentiment as traders preferred to unwind positions ahead of weekend and move to sidelines awaitng more cues about global economy. Sony Corp. shares plunged 6.79%. .

In Australia, the benchmark S&P/ASX200 Index declined 41.70 points, or 0.90% to 4,611, while the All-Ordinaries Index ended at 4,643, representing a loss of 36.50 points, or 0.78%.

Light sweet crude oil futures for June delivery ended at $73.72 a barrel in electronic trading, down $0.56 per barrel from previous close at $74.40 a barrel in New York on Thursday.


Banks led the declines in the market on increasing concerns about the debt crisis in Europe. Weak closing for banks on Wall Street in the previous session impacted market sentiment. ANZ Bank declined 2.06%, Commonwealth Bank of Australia lost 2.24%, National Australia Bank also fell 2.24% and Westpac Banking slipped 1.54%. Investment banker Macquarie Group was down by 0.72%.

Mixed trading was witnessed among gold stocks as traders resorted to profit taking following recent gains. Lihir Gold shed 0.24%, while Newcrest Mining managed to end in positive territory with a gain of 0.03%.

Oil stocks ended in negative territory on lower crude oil prices in the international market. Woodside Petroleum edged down 0.02%, Santos lost 0.23%, Origin Energy fell 2.54% and Oil Search slipped 0.53%.

Mixed trading was witnessed among Mining and metal stocks. BHP Billiton shed 0.46%, Rio Tinto slipped 0.42%, Fortescue Metals fell 0.92%, Gindalbie Metals plunged 8.62%, and Mincor Resources lost 1.43%. However, Iluka Resources gained 2.51%, Macarthur Coal advanced 1.43%, Murchison Metals rose 3.60% and Oz Minerals added 0.93%.

Mixed trading was also witnessed among retailers. David Jones fell 1.12%, JB Hi-Fi Ltd shed 1.28%, Reject Shop slipped 0.62%, and Woolworths declined 0.69%. However, Harvey Norman ended in positive territory with a gain of 0.58%, Myer Holdings added 0.32% and Wesfarmers edged up 0.20%.

In Hong Kong, the benchmark Hang Sang Index ended in negative territory with a loss of 277.03 points, or 1.36%, at 20,145, on weak cues from Wall Street that ended in negative territory in the previous session on late sell-off. Weak trading across other markets in the region on increasing concerns about sustaining global economic recovery also impacted market sentiment.

Profit taking amid a fresh sell-off in European stocks on concerns that Europe's austerity measures may slow global economic growth dragged the Indian market sharply lower on Friday. Despite some easing, April inflation stood well above the RBI's comfort zone, adding pressure on the central bank to deliver more rate hikes in the coming months, albeit in a "calibrated" manner. The benchmark 30-share Sensex ended down 271 points or 1.57% below the 17,000 mark, at 16,995, with 26 of its components ending in the red. The 50-share Nifty also fell by 85 points or 1.65% to 5,093.

Among the other major markets open for trading, China's Shanghai Composite Index slipped 13.88 points, or 0.51%, to close at 2,697, and Singapore's Strait Times Index ended in negative territory with a loss of 12.71 points, or 0.44%, at 2,855. However, Taiwan's Weighted Index managed to end flat with a gain of 1.56 points or 0.02% at 7,772 and Indonesia's Jakarta Composite Index added 10.76 points, or 0.38% at 2,858.

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The major European averages are trading sharply lower on Friday, with the French CAC 40 Index and the German DAX Index moving down 2.56% and 1.32%, respectively, while the U.K.’s FTSE 100 Index is declining 1.69%.

U.S. Economic Reports
On the economic front, the Commerce Department reported that retail sales rose 0.4% month-over-month in April compared to the 2.1% growth in the previous month. Economists expected a mere 0.2% increase. Annually, retail sales were 8.8% higher.

Excluding a 0.5% rise in sales by motor vehicle and parts dealers, sales increased by a 0.4% in April compared to a 1.2% increase in the previous month. Economists had expected ex-auto sales to edge up by 0.5%.

The industrial production report of the Federal Reserve is due out at 9:15 AM ET. Economists estimate a 0.8% increase in industrial production in April, while capacity utilization is expected to come in at 73.9%.

In March, industrial production showed a mere 0.1% month-over-month increase compared to expectations for a 0.7% climb. Some of the weakness was offset by a 0.2 point-upward revision to the previous month’s growth. Utility output served as a drag, dropping 6.4%. However, manufacturing output was up a solid 0.9%, helped by strong gains in auto and machinery production. Capacity utilization edged up to 73.2% from February’s 73%.

The preliminary report on the Reuters/University of Michigan’s consumer sentiment survey for May is scheduled to be released at 9.55 AM ET. The consumer sentiment index is expected to rise to 73.5 from April’s 72.2.

The Commerce Department is scheduled to release its business inventories report for March 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 inventories at the end of February were 0.5% higher compared to the previous month, slightly higher than estimates for 0.4% growth. Business sales rose 0.3% month-over-month and were 6.8% higher than in the year-ago period. The business inventories to sales ratio was at 1.27 compared to 1.46 in the year-ago period.

Chicago Federal Reserve Bank President Charles Evans is due to speak to the Illinois Wesleyan University Associates luncheon in Bloomington at 1:40 PM ET

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Nvidia (NVDA) could be in focus after it said its first quarter revenues rose 51% year-over-year to $664.2 million. The company reported earnings of 23 cents per share compared to a loss of 37 cents per share in the year-ago quarter.

Analysts estimated earnings of 21 cents per share on revenues of $986.2 million. For the second quarter, the company expects revenues to rise 3%-5% sequentially.

CA, Inc. (CA) is expected to see some activity after it reported that its fourth quarter revenue rose 7% to $1.1 billion. The company reported non-GAAP net income of 34 cents per share, higher than 31 cents per share last year.

The consensus estimates called for earnings of 36 cents per share on revenues of $1.13 billion. The company also announced the resignation of president and COO Michael Christenson, while it also said its board has approved a new stock buyback plan worth $500 million.

For the full year, the company expects revenues of $4.5 billion to $4.6 billion and non-GAAP earnings of $1.87-$1.95 per share. Analysts estimate earnings of $1.84 per share on revenues of $4.59 billion.