US & World Daily Markets Financial Briefing 15-05-2009

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The major averages have moved to the upside in recent trading and are currently all in positive territory. The Dow is currently up 46.68 at 8,378.00, the Nasdaq is up 12.90 at 1,702.11, and the S&P 500 is up 2.60 at 895.67.

The major U.S. index futures are pointing to a modestly lower opening on Friday. The announcement regarding the Treasury approving TARP funding to insurers should give a boost to insurance stocks. Meanwhile, on an encouraging note, the New York Fed’s manufacturing survey showed an improvement in the recessionary conditions in the manufacturing sector. Commodity prices are moving to the downside, with crude oil prices poised to extend their losses.

Sentiment over the course of the session is likely to be dictated by the industrial production report to be released a short while from now.

Ignoring a lackluster weekly jobs report, U.S. stocks opened Thursday’s session higher, as traders picked up beaten down financial and technology stocks. The major averages moved steadily higher amid some volatility before ending the session with notable gains, snapping a 2-session losing streak.

The Dow Industrials ended the session up 46.43 points or 0.56% at 8,331 and the S&P 500 Index rallied 9.5 points or 1.04% to close at 893, while the Nasdaq Composite Index advanced 25.02 points or 1.50% at 1,698.

Nineteen of the thirty Dow components ended the session higher, with Citigroup and JP Morgan Chase leading the rebound with gains of 4.11% and 4.38%, respectively. American Express, Bank of America, Hewlett-Packard , Intel and Coca-Cola advanced by more than 2% each. On the other hand, General Motors slipped 4.96% and Wal-Mart lost 1.86% in reaction to its quarterly results.

Among the sector indexes, the Amex Securities Broker/Dealer Index and the KBW Bank Index gained 2.29% and 3.74%, respectively. While the Amex Airline Index moved up 3.03%, the Dow Jones Transportation Average, the Amex Biotechnology Index, the Amex Gold Bugs Index and the Philadelphia Housing Sector Index rose over 1% each.

In the technology space, the Philadelphia Semiconductor Index surged up 3.20%, while the Amex Disk Drive Index and the Amex Hardware Index gaining 2.62% and 1.38%, respectively. Networking, software and Internet stocks also showed some strength.

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Bay Street Stocks Look To Build On Yesterday's Rally

Toronto stocks will look to build on sharp gains from the previous session on Friday morning as traders looked ahead to three-day holiday weekend. Canadian markets will be closed on Monday for Victoria Day.

Energy stocks could see weakness with oil prices heading lower in early trading. Crude oil has lost 65 cents to $57.97 per barrel. Copper prices are also slightly lower and again testing the key $2 per barrel mark. Meanwhile, gold is up slightly.

Silvercorp Metals reported a fourth quarter net income of US$1.2 million or US$0.01 per share, compared to US$10.9 million or US$0.07 per share in the previous year quarter.

GLG Life Tech, a refiner and producer of a natural sweetener reported a net loss for the quarter of C$1.5 million or C$0.02 per share, compared to a net loss of C$0.93 million or C$0.01 per share in the previous year.

Molson Coors Brewing Co said its Board of Directors has approved a 20% increase in the quarterly dividend rate on its Class A and Class B common shares from US$0.20 per share to US$0.24 per share, payable June 15, to shareholders of record on May 29.

Quebecor World reported first quarter net loss of US$125.9 million or US$0.64 per share, compared to a loss of US$190.0 million or US$1.04 per share in the prior year quarter.
 
New Gold and Western Goldfields Inc. announced shareholders of both companies have approvced. Yesterday, the Transaction was also approved at a special meeting of New Gold shareholders.

On the corporate front, Statistics Canada reported on Friday that manufacturing sales dropped 2.7% in March, erasing gains from the previous month.

Across the border, the Labor Department said its consumer price index was unchanged in April after edging down by an unrevised 0.1 percent in March. The lack of growth in consumer prices came in line with the expectations of economists.

At the same time, the report showed that the core consumer price index, which excludes food and energy prices, rose 0.3 percent in April after rising 0.2 percent in each of the three previous months. Economists had expected core prices to edge up 0.1 percent.

Thursday, the S&P/TSX Composite Index climbed 139.69 points or 1.43% to 9,849.20. Before the rebound, Bay Street's main index had lost more than 500 points from last Friday's seven-month high.

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Bargain hunting helped Asian stocks recover on Friday following sharp losses in the previous session. Better-than-expected March machinery orders in Japan, strong cues from Wall Street overnight and renewed optimism about an early economic revival offered some support. However, the gains were modest as investors looked forward to a slew of economic data, including U.S. industrial output data and euro-zone gross domestic product data due out later in the day, as well as Japan GDP figures and U.S. housing data due next week.

The Japanese market rose sharply, boosted by a stable yen and better-than-expected machinery order data for March. The Nikkei 225 index closed near the day's high at 9,265, up 171 points or 1.88% and the broader Topix index of all First Section issues on the Tokyo Stock Exchange rose 19 points or 2.22% to 882. Turnover was moderate at about 2.4 billion shares.

Financials closed stronger following gains among their U.S. peers overnight. Mizuho Financial Group closed up 2.16%, shrugging off concerns about equity dilution. According to reports, Mizuho would sell new shares worth up to 600 billion yen to bolster its finances, as it reported a big net loss of 588.8 billion yen for the year to March

Among technology stocks, Sony rallied 5.11% on forecasting a smaller-than-expected loss for the year ending March 2010. Advantest closed up 0.38%, Tokyo Electron surged up 7.84%, Fanuc rose 2.11%, Fujitsu edged up 0.41% and Canon soared 5.08%. Tokyo Electron expects its orders in April-June to improve by 30-50% from the previous quarter. Shipping and machinery stocks also advanced.

Core machinery orders in Japan were down 1.3% to 727.9 billion yen in March compared to the previous month, the Cabinet Office said on Friday. Economists had expected a 4.6% decline. On an annual basis, core machinery orders dropped 22.2%, which was smaller than the 27.7% drop expected by economists.

The Australian market closed sharply higher, led by big miners and cyclical stocks. The benchmark S&P/ASX200 index closed at 3,773, up 50 points or 1.34% and the broader All Ordinaries index rose 48 points or 1.3% to 3,759.

Big-miner Rio Tinto surged up 7.43% on reiterating its commitment to a planned $19.5 billion tie-up with Chinese metals firm Chinalco. Its rival BHP Billiton also advanced 3.22%, but Iluka Resources ended down 1.85%

Retailer Woolworths said that it is acquiring a 25 percent stake in Western Australian-based brewer Gage Roads for about A$1.9 million. The stock closed up 1.45%. David Jones rose 1.37% and Wesfarmers, which owns Coles, closed up 1.54%, while Harvey Norman closed unchanged.

Banking stocks closed mostly higher. Commonwealth Bank closed up 0.99%, National Australia Bank rose 1.37%, Westpac Banking added 1.24% and investment bank Macquarie Group gained 3.25%, but ANZ slipped 0.65%

The South Korean market closed modestly higher on bargain hunting following a steep loss in the previous session. The benchmark KOSPI closed at 1,392, up 11 points or 0.78%. Volume was significant at 677.5 million shares worth 6.64 trillion won and gainers outnumbered losers by 474 to 341.

Banks led the gainers after correcting sharply in the previous session. Shipbuilder Hyundai Heavy Industries closed up 0.65% after creditors of Hyundai Corp. rejected a bid by Hyundai Heavy to buy the local trading company after the bidding price fell short of creditors' expectations. However, Samsung Heavy Industries slipped 0.69% and Daewoo Shipbuilding fell 3.21%. Technology stocks closed on a mixed note.

Meanwhile, the benchmark for the Indian market, the Sensex ended near the day's high at 12,173, up 301 points or 2.53% over the previous close. Among the other markets in the region, China's Shanghai Composite index closed up 0.20%, Hong Kong's Hang Seng index rose 1.51%, Singapore's STI Straits Times index edged up 0.83% and Taiwan's TWII Weighed index moved up 1.96%.

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The major European markets are trading on a mixed note on Friday. The French CAC 40 Index is rising 0.05%, while the German DAX Index is receding 0.53% and the U.K.’s FTSE 100 Index is moving down 0.63%.

The markets are reacting to a slew of economic reports released from the region. The German Federal Statistical Office reported that Germany’s GDP dropped 3.8% quarter-on-quarter in the first three months of the year after declining by a revised 2.2% rate in the fourth quarter. The GDP was forecast to fall 3% in the first quarter. Thus, the economy extended its contraction that begun in the second quarter of 2008.

Meanwhile, the INSEE reported that the French economy contracted by 1.2% in the first quarter from the previous quarter, slightly better than the 1.3% decline expected by economists. The quarterly GDP decline follows a 1.5% contraction in the fourth quarter and a 0.2% decline in the third quarter. Annually, the French economy contracted 3.2%.

Flash estimates released by Eurostat showed that the euro zone region’s first quarter GDP fell 2.5% quarter-over-quarter. Economists had expected a 2% GDP decline for the quarter. Annually, GDP fell 4.6%. Meanwhile, another report released by the agency showed that annual inflation in the euro area remained unchanged at 0.6% in April. On a monthly basis, consumer prices rose 0.45%, in line with economists' expectations.

U.S. Economic Reports

On the economic front, consumer prices remained unchanged in April compared to the previous month following a 0.1% decline in March. Core consumer prices, excluding food and energy, rose 0.3%, faster than the 0.2% increase in the previous month. The consensus estimates call for an unchanged reading for the consumer price index and a 0.1% rise in the core consumer price index that excludes food and energy.

Transportation prices and cost of recreation fell by 0.4% each, while food prices were down 0.2%. On the other hand, medical care costs rose by 0.4%.

Manufacturing conditions in New York worsened modestly in May, with the general business conditions index climbing 10 points to –4.6. Economists expected a modest improvement in the index to -12.

The new orders index fell several points and remained below ‘0’, while the shipment index edged up into positive territory. The employment indexes remained negative and deteriorated from the month-ago levels, while the inventories index also remained negative. The future indexes improved significantly, with the future general business conditions index rising 11 points to its highest level since September.

The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for March at 9 AM ET.

The industrial production report of the Federal Reserve is due out at 9:15 AM ET. Economists estimate that industrial production declined 0.6% in April, while capacity utilization is expected to come in at 68.8%.

Industrial production showed a bigger-than-expected drop in March. Machinery production fell by 4.2%, computers/electronics output declined by 2.5% and mining output contracted by 3.2%, which together offset the impact of a 1.5% rise in auto and parts production and a 1.8% increase in utilities output. Capacity utilization dipped to 69.3% from 70.3% in the previous month, with the recent month's reading marking a record low.

The Reuters/University of Michigan's preliminary report on the consumer sentiment index for May is scheduled to be released at 10 AM ET on Friday. Consumer confidence is expected to improve modestly in the month, with economists forecasting a rise in the index to 67 from 65.1 in the previous month.

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Gold Little-Changed Near Six-Week High

Gold was little-changed in early trading Friday after closing the previous session at a fresh six-week high. Prices finished in the green in three of four sessions this week.

June-stamped gold futures moved to $927.90, down 40 cents on the session. Gold hit as low as $924.10 and as high as $930.90 in early trading.

Gold is up about $13 for this week, adding to the rally of more than $27 last week. If the gains hold, the metal will finish higher for the third time in four weeks.

The U.S. dollar rebounded further against the euro and touched a weekly high - after hitting a seven-week low earlier in the week. The buck was slightly lower amid uncertain trading versus the sterling and yen. Because traders turn to gold as a hedge investment, the precious metal usually moves opposite the dollar.
 
In economic news, the Labor Department said its consumer price index was unchanged in April after edging down by an unrevised 0.1 percent in March. The lack of growth in consumer prices came in line with the expectations of economists.

At the same time, the report showed that the core consumer price index, which excludes food and energy prices, rose 0.3 percent in April after rising 0.2 percent in each of the three previous months. Economists had expected core prices to edge up 0.1 percent.

Dallas Federal Reserve Bank Branch President Richard Fisher said Friday the efforts of the Federal Reserve to restore stability to financial markets are showing signs of success, although positive growth will not likely resume until 2010.

June gold finished Thursday's session at $928.40 per ounce, a gain of $2.50 for the session.

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Compuware may be in focus after it reported that its fourth quarter earnings declined to 20 cents per share from 23 cents per share last year. Revenues were down 25% to $253.4 million.

Agilent Technologies is expected to move in reaction to its announcement that its revenues fell 25% to $1.09 billion.

The company reported a loss of 29 cents per share compared to a profit of 47 cents per share last year. On an adjusted basis, the company’s earnings were 13 cents per share.

he consensus estimates had called for earnings of 13 cents per share on revenues of $4.48 billion.

Nordstrom is likely to gain ground after it raised its full year earnings estimate for the year to $1.25-$1.50 per share from its earlier estimate of $1.10-$1.40 per share.

The company reported first quarter earnings of 37 cents per share, significantly lower than 54 cents per share last year. On an adjusted basis, the company reported earnings of 31 cents per share, ahead of the consensus estimate of 26 cents per share.

Revenues fell 9% to $1.71 billion, yet came in above the mean analysts’ estimate of $1.69 billion.

Abercrombie & Fitch could see weakness after it reported a first quarter loss of 31 cents per share compared to a profit of 69 cents per share last year. Net sales fell 24% to $612.1 million. Analysts estimated a loss of 14 cents per share on net sales of $616.5 million.

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