US & World Daily Markets Financial Briefing 15-04-2010

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Stocks Mostly Higher Following Upbeat Manufacturing Data - U.S. Commentary

Stocks are mostly higher in mid-morning trading on Thursday, as the markets are digesting largely positive manufacturing data, while labor market figures proved to be worse than expected. The major averages have all climbed into positive territory, but buying interest remains subdued.

A short time ago, the Federal Reserve Bank of Philadelphia released its report on regional manufacturing activity in the month of April, showing that the expansion in the manufacturing sector is continuing for the eighth consecutive month.

The Philly Fed said its index of activity in the manufacturing sector rose to 20.2 in April from 18.9 in March, with a positive reading indicating growth in the sector. With the increase, the index came in slightly above economist estimates for a reading of 20.0.

A separate report released by the New York Federal Reserve said its general business conditions index jumped to 31.9 in April from 22.9 in March, with a positive reading indicating growth in the manufacturing sector. Economists had been expecting a much more modest increase to a reading of 24.0.

Meanwhile, the Labor Department reported that first-time jobless claims for the week ended April 10th jumped to 484,000 from the previous week's unrevised figure of 460,000. Economists had expected jobless claims to fall to 440,000, marking the second consecutive week that jobless claims increased unexpectedly.

The Federal Reserve also released a report showing that industrial production edged up by 0.1 percent in March following an upwardly revised 0.3 percent increase in February. Production had been expected to increase by 0.7 percent compared to the 0.1 percent growth originally reported for the previous month.

In corporate news, United Parcel Service, Inc. (UPS) pre-announced its first quarter results, reporting a 33 percent increase in earnings. The earnings growth reflected a 7 percent increase in revenues, which was due to international volume gains, increased yields in the U.S. and growth in Forwarding and Logistics.

Additionally, UPS raised its full year earnings guidance as a result of the strong first quarter results and an improved outlook for the remainder of the year.

The major averages are currently posting modest gains, although the Dow is only just above the unchanged line. The Dow is up 1.28 points or less than 0.1 percent at 11,124.39, the Nasdaq is up 8.58 points or 0.3 percent at 2,513.44 and the S&P 500 is up 1.37 points or 0.1 percent at 1,212.02.

Sector News

Trucking stocks are some of the market's strongest performers, with the Dow Jones Trucking Index posting a 3.3 percent gain, rising to its best intraday level in over eighteen months.

The sector is being helped higher by a surge in shares of YRC Worldwide Inc. (YRCW), which have shot up by 13.6 percent, attempting to recover from a recent plunge.

Electronic storage stocks are also moving notably higher, with the NYSE Arca Disk Drive Index up by 2.4 percent. The index has set a fresh three-month high with today's upward move.

Banking, semiconductor and oil service stocks are also moving to the upside, while notable weakness is visible among commercial real estate stocks. The Morgan Stanley REIT Index is down by 1.2 percent, pulling back off of the fresh one and a half year high set on Tuesday.

Health insurance, tobacco and gold stocks are also moving lower, partly offsetting the strength visible in the other market segments.

Stocks Driven By Analyst Comments

American Superconductor (AMSC) is on the rise after being upgraded at Deutsche Bank from Hold to Buy. The broker cited the likelihood of the firm issuing upbeat near-term guidance as a reason for the upgrade. The stock has gained 7 percent, setting its best intraday level in nearly six weeks.

On the other hand, Sybase (SY) is moving lower following a downgrade at Jefferies from Buy to Hold. Shares are currently down by 2.4 percent, slipping to its worst intraday price in nearly six weeks in earlier dealing.

Aruba Networks (ARUN) is also under pressure after being downgraded at BMO Capital Markets from Outperform to Market Perform based on valuation. The stock is down by 2.6 percent, backing off of yesterday's more than two-year closing high.

Bay Street Traders Likely To Turn Cautious Amid Mixed Clues

Canadian stocks may witness narrow movements Thursday after rising to a fresh 18-month high in the previous session. While commodities prices were leveling off, the just released economic data from across the border were sending mixed signals.

Strong quarterly GDP numbers from China also raised speculation that Beijing will tighten its monetary policy, which could negatively impact commodities prices overall.

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

On Wednesday, the S&P/TSX Composite Index gained 102.90 points or 0.85% to 12,204.51, its new 18-month high.

The price oil edged down in morning deals, with crude for June shedding $0.11 to $85.73 a barrel. The price of gold eased $6.20 to $1,152.80 an ounce.

Mining stocks may be in focus after global miner Rio Tinto upped its production guidance for iron ore. The company expects to produce about 234 million tons of iron ore this year from mines in Australia and Canada.

In corporate news from Canada, aircraft manufacturer Bombardier Aerospace said it clinched additional orders from Pluna Lineas Aereas Uruguayas S.A., which could increase the total contract value to $370 million from the present $120 million.

Merchant banking company Pinetree Capital said Wednesday that it has acquired ownership of about 2.74 million common shares and about 1.37 million common share purchase warrants of Brownstone Ventures Inc.

Communications and media company Rogers Communications said it will start offering Apple Inc's iPad by next month.

Optical components maker Enablence Technologies said it will acquire Israel based Teledata Networks Ltd., in a cash and stock deal.

Residential and commercial building constructor Boyuan Construction Group said it has received a conditional approval to list its common shares and debentures on the Toronto Stock Exchange in the coming weeks.

Oil and gas firm Universal Power announced that Maria Elliott has been appointed as the Company's Vice-President, Finance and Chief Financial Officer.

In economic news from the U.S., the Labor Department said initial jobless claims increased to 484,000 from the previous week's unrevised figure of 460,000. Economists were expecting jobless claims to fall to 440,000. Claims rose unexpectedly for a second week.

Meanwhile in other report, the Federal Reserve Bank of New York said its general business conditions index jumped to 31.9 in April from 22.9 in March, with a positive reading indicating growth in the manufacturing sector. Economists were expecting a much more modest increase to a reading of 24.0.

Earlier today, China reported 11.9% growth in its first quarter GDP, beating economists' expectations for 11.7% growth.

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Asian Markets End Mixed On Profit Taking, Cautious Trading

The markets in Asia ended the trading session mixed on Thursday with markets in India, China and Singapore ending in negative territory, while the markets in Australia, Japan, Hong Kong, Indonesia, South Korea and Taiwan ending in positive territory, but off the day's high, as traders preferred to lock in profits and adopt a wait-and-watch attitude ahead of key economic data and earnings in the US.

In Japan, the benchmark Nikkei-225 Index rose 68.89 points, or 0.6%, to 11,274, while the broader Topix index of all First Section issues gained 7.80 points, or 0.8%, to 999.

On the economic front, a statement released by Japan's Ministry of Economy, Trade and Industry revealed that the industrial production slid a seasonally adjusted 0.6% month-on-month in February, lower than the preliminary estimate of a 0.9% decline month-over-month revealed earlier. The statement further noted that industrial production, on a yearly basis, surged up 31.2%.

Steel stocks advanced on optimism that demand for the product will further increase following stronger GDP growth in China for the first quarter. JFE Holdings advanced 0.83%, Pacific Metals surged up 2.67%, Kobe Steel soared 6.70% on huge volumes, Nippon Steel Corp. gained 1.41% and Nisshin Steel Co., rose 2.08%.

Shipping stocks also ended higher on optimism about increase in traffic and freight. Mitsui OSK Lines surged up 5.11%, Nippon Yusen rose 2.67% and Kawasaki Kisen Kaisha gained 4.07%.

Property stocks also gained on speculation that domestic recovery will also follow suit. Mitsubishi Estate climbed 2.59%, Sumitomo Realty & Development rose 1.94%, Mitsui Fudosan advanced 0.61% and Tokyu Land Corp. gained 1.65%.

Banking stocks also ended in positive territory taking cues from the results of JP Morgan Chase released in the U.S yesterday. Sumitomo Mitsui Financial gained 1.68%, Resona Holdings rose 1.67%, Mitsubishi UFJ Financial advanced 1.57% and Mizuho Financial increased 1.60%.

Trading companies also ended higher on hopes of economic recovery. Itochu Corp. gained 2.14%, Sumitomo Corp. rose 1.60%, Mitsui & Co., advanced 1.05%, Marubeni Corp. climbed 1.86% and Mitsubishi Corp. added 0.32%.

In Australia, the bench mark S&P/ASX 200 Index advanced 7.20 points, or 0.14% to close at 5,002, while the All-Ordinaries Index ended at 5,024, representing a modest gain of 6.20 points, or 0.12%.

On the economic front, a statement released by the Melbourne Institute revealed that Australian consumer inflationary expectation jumped to 4.1% in April from 3.2% in March. According to the statement, the proportion of consumers expecting inflation to be within the RBA's 2-3% target range declined for the second straight month, reaching 15.9% in April from 18.6% in March.

Banks ended in positive territory on optimism about sustaining global economic recovery. ANZ Bank added 0.23%, Commonwealth Bank of Australia edged up 0.10%, National Australia Bank climbed 1.86% and Westpac Banking inched higher by 0.14%. Investment banking company Macquarie Group surged up 2.68%.

Mixed trading was witnessed among mineral and metal stocks on profit taking. BHP Billiton slipped 0.23%, Rio Tinto edged down 0.06%, Iluka Resources fell 1.93% and Macarthur Coal, which yet again rejected another sweetened bid from New Hope, fell 1.42%. Among the gainers, Fortescue Metals advanced 0.75%, Gindalbie Metals climbed 1.79%, Mineral Resource gained 1.25%, Mincor Resources added 0.90% and Oz Minerals surged up 3.69%.

Gold stocks also ended mixed. While Lihir Gold added 0.25%, Newcrest Mining edged down 0.23%.

Mixed trading was witnessed in oil stocks as well. Woodside Petroleum advanced 1.39%. However, Santos shed 0.88%, Oil Search fell 1.12% and Origin Energy declined 0.65%.

Retail stocks ended weaker on profit taking. David Jones plunged 2.99%, Harvey Norman edged down 0.28%, JB Hi-Fi Ltd slipped 0.72%, Myer Holdings fell 0.92%, Reject Shop shed 0.24% and Woolworths fell 1.26%. However, Wesfarmers bucked the trend and ended in positive territory with a gain of 0.15%.

In Hong Kong, the benchmark Hang Sang Index ended in positive territory with a gain of 36.39 points, or 0.16%, at 22,158, off the day's high of 22,338, as traders preferred to lock in profits from recent gains and move to sidelines ahead of more economic data and earnings results from the U.S. Positive closing on Wall Street in the previous session with upbeat results from JP Morgan and Intel and encouraging economic data lifted market sentiment.

In South Korea, the benchmark KOSPI Index ended in positive territory with a gain of 8.58 points, or 0.49%, at 1,744, on optimism about economic recovery. Profit taking capped the gains in the market in early trading session while select buying in blue-chip technology stocks and banks in late trading session lifted the index into green with modest gains.

Heavy profit taking in oil/gas, capital goods and FMCG stocks and continued selling in banking stocks ahead of next week's rate-setting meeting dragged the Indian market sharply lower on Thursday. India's annual rate of inflation, based on the wholesale prices, increased slightly to 9.9% in March from 9.89% a week earlier, government data released Thursday showed. That was well below the expectations of a 10%-10.5% rise. After moving up over 150 points in early trading, the 30-share Sensex pared gains steadily and slipped into the red before finally ending near the day's low at 17,639, down about 183 points or 1.03%, while the 50-share Nifty ended down 49 points or 0.93% at 5,274.

Among the other major markets open for trading, Indonesia's Jakarta Composite Index gained 15.52 points or 0.54% at 2,901, and Taiwan's Weighted Index rose 74.81 points, or 0.92%, to 8,172. However, China's Shanghai Composite Index ended in negative territory with a loss of 1.22 points, or 0.04%, at 3,165 and Singapore's Strait Times Index declined 2.80 points, or 0.09%, at 3,017.

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After showing some strength in early trading and volatility thereafter, the major European markets have moved back into positive territory on Thursday. The French CAC 40 Index and the German DAX Index are trading down 0.01% and 0.05%, respectively, while the U.K.’s FTSE 100 Index is rising 0.04%.

The U.K.’s Nationwide Building Society reported that its index measuring consumer confidence fell to 72 in March from 81 in February. Economists had expected the reading to have remained unchanged at 81.

In corporate news, Rio Tinto (RTP) raised its iron ore production guidance for 2010 to 234 million metric tons from its previous guidance of 230 million metric tons. In its operational update, the company said its first quarter iron ore production rose 39% year-over-year to 43.4 million metric tons. In the year-ago period, the company’s production was hit by rain disruptions at its mines.

U.S. Economic Reports

With conditions for New York State manufacturers improving at a rapid pace in April, the Federal Reserve Bank of New York released a report showing that its regional index of activity in the sector rose by much more than economists had expected.

The New York Fed said its general business conditions index jumped to 31.9 in April from 22.9 in March, with a positive reading indicating growth in the manufacturing sector. Economists had been expecting a much more modest increase to a reading of 24.0.

First-time claims for unemployment benefits showed another unexpected increase in the week ended April 10th, according to a report released by the Labor Department, with the data likely to lead to renewed concerns about the outlook for the labor market.

The report showed that initial jobless claims jumped to 484,000 from the previous week's unrevised figure of 460,000. Economists had expected jobless claims to fall to 440,000, marking the second consecutive week that jobless claims increased unexpectedly.

The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for February at 9 AM ET. Economists estimate the net long-term flows to be $50 billion for the month.

The industrial production report from the Federal Reserve is due out at 9:15 AM ET. Economists estimate a 0.7% increase in industrial production in March, while capacity utilization is expected to come in at 73.3%.

In February, industrial production unexpectedly rose 0.1% compared to the 0.1% decline expected by economists. Capacity utilization was at 72.7%, higher than 72.5% in January, although below its long-term average of 80%. Output by manufacturing industries fell 0.2%, dragged down by a 4.4% decline in motor vehicle output.

The results of the Philadelphia Federal Reserve's manufacturing survey are due out at 10 AM ET. Economists expect the diffusion index of current activity to show a reading of 20 for April.

The regional manufacturing index came in at 18.9 in March compared to 17.6 in February. While the new index orders declined to 9.3 from 22.7, the orders backlog index rose by 2.6 points. The employment index rose a point to 8.4, its highest level since August 2007, while the inventories component retreated back into negative territory, dropping to -11 from 3.2 in the previous month.

St. Louis Federal Reserve Bank President James Bullard will address the 19th Annual Hyman Minsky Conference at the Levy Economics Institute of Bard College, New York, NY. He will speak on "Containing Risks in the New Global Financial Landscape" at 12:15 PM ET. Atlanta Federal Reserve Bank President Dennis Lockhart is due to speak to the Pensacola Suburban West Rotary Club at 1:40 PM ET.

Richmond Federal Reserve President Jeffrey Lacker will speak to the Richmond Federal Reserve Bank's Credit Markets in Transition: Positioning for Recovery conference at 10:30 AM ET. Lacker is due to speak again in Charlotte, North Carolina, at 3:15 PM ET.

The National Association of Homebuilders is scheduled to release the results of its March survey on homebuilders' confidence at 1 PM ET.

The housing market index measuring confidence among builders fell 2 points to 15 in March. The present conditions and the future expectations index as well as the component measuring prospective buyers also declined. The NAHB attributed the lackluster reading to poor weather conditions and distressed property sales.

San Francisco Federal Reserve President Janet Yellen is due to speak to Financial Executives International about the economic outlook in San Francisco at 8:30 PM ET.

Earnings

Fairchild Semiconductor (FCS) reported that its first quarter sales rose 7% year-over-year to $378 million. The company reported an adjusted profit of 25 cents per share compared to a loss of 32 cents per share last year. Analysts estimated earnings of 24 cents per share on revenues of $371.55 million. The company expects second quarter sales to come in at $395 million to $400 million, while analysts estimate revenues of $371.55 million.

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United Parcel Service (UPS) surged up in Wednesday’s after hours session after it reported that its first quarter adjusted earnings rose to 71 cents per share from 52 cents per share last year. Consolidated revenues rose 7% year-over-year. The consensus estimates called for earnings of 58 cents per share on revenues of $11.55 billion. The company also raised its full year earnings guidance to $3.05-$3.30 per share, while analysts estimate earnings of $2.95 per share.

JB Hunt Transport Services (JBHT) is also expected to see buying interest after it reported that its first quarter earnings rose to 29 cents per share from 24 cents per share last year. Total operating revenue rose 17% to $845 million. Analysts estimated earnings of 27 cents per share on revenues of $792.74 million.

Yum Brands (YUM) could be in focus after it reported that its adjusted first quarter earnings rose 23% to 59 cents per share and said its total revenues climbed 6% to $2.35 billion. Analysts estimated earnings of 53 cents per share on revenues of $2.26 billion. The company expects full year earnings per share growth of at least 10%.

Dollar General (DG) could be in focus after it said it has priced its underwritten secondary public offering of 26 million shares at $27 per share, slightly below its Wednesday close of $27.52. The company clarified that all shares were sold by certain existing shareholders and that it will not receive any proceeds from the offering.

Beckman Coulter (BEC) is likely to see some activity after it announced that it has signed agreements with Premier, Inc.’s purchasing group to supply a full range of core laboratory systems and supplies.

Century Aluminum (CENX) could be in focus after it announced that its subsidiary Century Aluminum of Kentucky and the United Steelworkers have agreed to a second extension of the labor contract covering the Hawesville Kentucky smelter operations. The agreement was originally scheduled to expire by March 31st, 2010.

Kilroy (KRC) could come under selling pressure after it announced the commencement of a public offering of 5.5 million shares. The company said it plans to contribute the net proceeds from the offering to Kilroy Realty, its operating partnership.

Macerich (MAC) receded sharply in Wednesday’s after hours session after it announced public offering of 18.5 million shares. The company said it intends to use the net proceeds to repay indebt and for general corporate purposes. Separately, the company said it is lowered its 2010 funds from operations guidance to $2.70-$2.90 per share from its earlier estimate of $2.90-$3.10 per share, giving effect to the proposed common stock offering.

PC makers are likely to be in the spotlight after market research firms IDC and Gartner released the results of their quarterly PC market survey. Gartner’s research showed that worldwide PC market shipments rose 27.4% year-over-year to 84.3 million units. Hewlett-Packard (HPQ) continued to be the leader, cornering 18.2% of the market, although it saw a 1.1 point drop in its market share. Taiwan’s Acer consolidated its second position, boasting a 14.2% share. Dell was in the third spot, with a 12.1% share of the market.

Meanwhile, according to IDC, worldwide PC shipments rose 24.2% in the first quarter, with Hewlett-Packard accounting for 19.9% of the market. Lenovo, the fourth ranked player, posted the strongest year-over-year growth.

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