US & World Daily Markets Financial Briefing 15-06-2010

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Stocks Showing Significant Gains In Mid-Morning Trading

Stocks are up by notable margins in mid-morning trading on Tuesday, as a combination of bargain hunting and reaction to relatively upbeat manufacturing activity data out of New York State is driving upside thus far in today's session.

This morning, the Federal Reserve Bank of New York's Empire State Manufacturing Survey showed that general business conditions index rose to 19.57 in June from 19.11 in May, with a positive reading indicating growth in the manufacturing sector. Economists had expected the index to show a more substantial increase to 20.0.

Separately, the Labor Department released a report showing that U.S. import prices fell 0.6 percent in May, after a 1.1 percent advance in April and a 0.4 percent rise in March. This was the largest one-month drop in ten months.

Excluding a drop in fuel prices, import prices advanced 0.5 percent, continuing a string of advances. The last time the core figure showed a decline was July of last year.

Export prices were up 0.7 percent in May, adding to increases of 1.2 percent in April and 0.7 percent in March. Export prices have been up or flat for seven out of the last eight months.

At 1:00 p.m. ET, the National Association of Homebuilders will release the results of its June survey on homebuilders' confidence. Economists expect that the index remain unchanged at 22 for the month.


On the corporate front, BP Plc remains in focus today after it saw its credit rating cut by the Fitch ratings agency to 'BBB' from 'AA'. The firm continues to struggle to cap the oil leak in the Gulf of Mexico with cleanup costs ballooning by the hour.

In related news, the House of Representatives Committee on Energy and Environment is holding hearings today featuring executives from Exxon Mobil Corp. Chevron Corp. and ConocoPhillips among others, including BP.

The Dow is up by 87.14 points or 0.9 percent at 10,278.03, the Nasdaq is up by 27.30 points or 1.2 percent at 2,271.63 and the S&P 500 is up by 10.10 points or 0.9 percent at 1,099.73.

Sector News

Semiconductor stocks are some of the morning's best performers, driving the Philadelphia Semiconductor Index up by 3.1 percent. The index remains rangebound as it continues its recovery from last week's four-month closing low.

Airline stocks are also seeing substantial gains, with the NYSE Arca Airline Index up by 3.2 percent. The advance has lifted the index to its best intraday price in two months.

ains among oil service, wireless, computer hardware and networking stocks are helping the broader markets higher amid the day's widespread strength.

Stock Driven By Analyst Comments

Finish Line is higher after being upgraded at Citigroup from Hold to Buy. The broker also raised its price target on the stock from $18 to $20. The stock has gained 4 percent, setting a two-week intraday high.

T. Rowe Price is also seeing a strong upward move following an upgrade at Wells Fargo to Outperform from Market Perform. Shares are currently up by 1.7 percent, setting its best intraday price in nearly three weeks.

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TSX May Edge Up At Open Amid Mixed Economic Data

Bay Street stocks may open marginally higher Tuesday supported by firm energy prices and positive cues from the global equity markets.

Spain and Belgium sold government debt and Ireland auctioned bonds, which have eased investors worries, at least for now, over the euro zone debt situation. Further, global markets were mostly higher Tuesday morning, with European equities hovering near their four-week high.

On Monday, the S&P/TSX Composite Index ended flat, adding 0.43 points to 11,667.34, after being solidly in the green most of the day. Stocks succumbed to selling pressure in the late session after Moody's downgraded its rating on Greece bonds by four notches.

The price of oil moved up $0.74 to $75.80 a barrel ahead of weekly inventories data from the U.S. The price of gold edged up $2.8 to $1,227.30 an ounce.

In corporate news, Canada's fifth biggest bank CIBC said it would acquire a C$2.1-billion credit card portfolio from Citigroup Inc.'s Canadian MasterCard business.


Oil and gas firm Pacific Rubilaes Energy said it received approval from its state-owned partner, Ecopetrol SA, for commercial expansion of its fields in Colombia.

Insurance services provider Kingsway Financial Services announced its intention to sell its wholly owned subsidiary, Mendota Insurance Co., a non-standard insurance writer in the U.S.

Blackberry maker Research In Motion is testing new touch-screen smart-phone with a slide-out keyboard and also a tablet device to serve as a larger-screen companion to its Blackberry phone, the Wall Street Journal reported citing people familiar with company's plans.

ConjuChem Biotechnologies reported a narrower second-quarter net loss of C$0.01 per share, compared to C$0.02 per share in the prior year quarter.

Resource exploration company Spider Resources said it received a superior cash take-over offer from Cliffs Natural Resources Inc., which increased its offer to C$0.165 per share from the earlier C$0.13 per share.

In economic news, Statistics Canada said manufacturing sales advanced 0.2% to C$44.50 billion in April, mainly on higher primary metals and petroleum and coal products.

Separately, the agency said labor productivity in Canadian businesses were up 0.7% in the first quarter 2010, after gaining 1.2% in the previous quarter. Economists were looking for productivity to increase 1.3%, following the 1.4% increase initially reported for the fourth quarter of 2009

From the U.S., the Labor Department said imports prices fell 0.6% in May, after advancing 1.1% in April and 0.4% in March. However excluding fuel, import prices advanced 0.5%.

The New York Empire State manufacturing index edged up to 19.6 in June, up from May's reading of 19.1. Economists were expecting the headline general business conditions index rise to 20.0 from 19.11 reported for May.

Elsewhere, data revealed that German investors' confidence fell to its lowest level in more than a year in June. The ZEW institute's index, which tracks investors' expectations for the next six months, fallen sharply to 28.7 points in June from 45.8 in May.

Meanwhile, U.K. consumer price inflation eased to 3.4% in May from 3.7% in April.

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Asian Markets End In The Green Cautiously

The Asian markets ended the trading session in positive territory with modest gains in lackluster trading Tuesday characterized by lower than normal volumes, awaiting more cues on global economic recovery. Weaker closing on Wall Street in the previous session on Moody's downgrade of Greece's debt rating impacted early session while optimism about global economic recovery helped recoup some of the losses at end. The market in China is closed for the day.

In Japan, the benchmark Nikkei 225 Index rose 8.04 points, or 0.08 percent, to 9,888, while the broader Topix index of all First Section issues was up 0.27 point, or 0.03%, to 879.

On the economic front, the Bank of Japan, at the conlusion of its policy board meeting, decided to leave the uncollataralized overnight call rate unchanged at 0.1%.. The Bank stated that it would aim to maintain the extremely accommodative financial environment. The Bank further noted that it would provide loans to financial institutions to support strengthening the foundations for economic growth. As a temporary measure, BoJ decided to introduce a new fund-provisioning framework to support, from the financial side, private financial institutions' efforts of their own accord toward strengthening the foundations for economic growth. This temporary measure will supply long-term funds at a low interest rate against eligible collateral to financial institutions. The central bank will make necessary arrangements so as to be able to start providing funds by around the end of August, 2010. The total amount of loans will not exceed 3 trillion yen and the maximum amount to each counterparty will be 150 billion yen.

The gainers in the market, characterized by lackluster trading and weak volumes, included securities stocks. Among the gainers, Nomura Holdings gained 1.88%, Mizuho Securities climbed 4.09% and Daiwa Securities Group rose 1.77%.

All Nippon Airways was also among the gainers, with a gain of 2.84%.

In Australia, the benchmark S&P/ASX200 Index slipped 0.50 points, or 0.01% and closed at 4,505, while the All-Ordinaries Index ended at 4,518, representing a gain of 1.10 points, or 0.02%.

On the economic front, a report released by the Australian Bureau of Statistics revealed that housing finance for owner occupation, excluding alterations & additions, rose a seasonally adjusted 0.6% month-on-month in April to A$13.71 billion. At the same time, commercial finance rose 5.6% to A$31.64 billion, while personal finance decreased 0.6% to A$6.81 billion. Lease finance dropped 8% to A$353 million.

Minutes of the June 1 policy meeting released by the Reserve Bank of Australia revealed that the central bank officials felt that the nation's economy was growing and the employment picture was "solid.". At that meeting, the central bank decided to leave Official Cash Rate unchanged at 4.50 percent. "Most indicators suggested that the economy was continuing to expand and employment growth had been solid," the minutes said. Policy board members noted that the economic picture could still be subject to a changing economic picture overseas. "While the international environment facing the Australian economy had become more uncertain, members noted that the medium-term outlook remained positive," the minutes said. "While recent data for prices and wages suggested that the disinflationary forces in the economy were not quite as strong as previously expected, global events could also have implications for the inflation outlook in the medium term."

Mixed trading was witnessed among the resource stocks in listless trading session amid thin volumes. BHP Billiton slipped 0.49%, Gindalbie Metals shed 0.47%, Iluka Resources fell 2.20% and Murchison Metals lost 0.26%. However, Fortescue Metals gained 0.73%, Macarthur Coal climbed 2.59%, Mineral Resource rose 3.62%, Oz Minerals advanced 1.47% and Rio Tinto was up by 0.46%.

Oil related stocks also ended the session mixed. Woodside Petroleum shed 1.24%, Santos Ltd slipped 0.74% and Origin Energy was down 0.39%. However, Oil Search ended in positive territory with a gain of 0.34% and ROC Oil Co. remained unchanged from previous close.

Gold stocks ended in negative territory on weak bullion prices. Lihir Gold was down 0.24% and Newcrest Mining shed declined 0.38%.

Banks also witnessed mixed trading amid weak volumes. ANZ Bank slipped 0.13%, Commonwealth Bank of Australia declined 0.57% and Westpac Banking declined 0.55%. However, National Australia Bank bucked the trend and ended in positive territory with a gain of 0.73%.

In Hong Kong, the Hang Seng index ended in positive territory with a modest gain of 10.24 points, or 0.05%, at 20,062, taking cues from other markets in the neighboring region. Weak closing on Wall Street in the previous session on Moody's downgrading of Greece's debt impacted market sentiment in the early session. However, a slight recovery in Euro and optimism about economic recovery ahead of key economic data kept traders in tenterhooks. Lack of cues from mainland China as well as global markets also limited market gains.

Modest gains across Asian and European markets and positive news flow on the first-quarter advance tax payments by top blue-chip companies helped the Indian market end higher for a fifth consecutive session on Tuesday. However, the underlying mood remained cautious owing to uncertainty over the eurozone after rating agency Moody's cut Greece's debt rating to junk status. After moving choppily in a range of 17,442- 17,249, the 30-share BSE Sensex closed up 75 points or 0.43% at 17,413, while the 50-share Nifty rose by 25 points or 0.47% to 5,222.
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Among the other major markets open for trading, Indonesia's Jakarta Composite Index added 3.34 points, or 0.12% to close at 2,830, Singapore's Strait Times Index remained flat with a gain of 0.14 points, or 0.00% at 2,818, and Taiwan's Weighted Index gained 66.66 points or 0.90% to close at 7,454. The stock market in China was closed for the second day on the eve of Dragon Boat Festival holidays.

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After showing some weakness in the morning, the major markets in Europe have recovered and are advancing on Tuesday, marking the fifth straight session of gains. The French CAC 40 Index and the German DAX Index are moving up 0.74% and 0.55%, respectively, while the U.K.’s FTSE 100 Index is rising 0.50%.

In economic news, the Mannheim-based Centre for European Economic Research reported that the economic sentiment indicator for Germany fell to 28.7 in June from 45.8 in May, marking the lowest since April 2009. The weakness was attributed the uncertainty about future developments of the debt crisis and the perspective of necessary cuts in public expenditure in EU member countries.

Meanwhile, Eurostat reported that the euro area’s trade surplus fell to 1.8 billion euros from 4.5 billion euros in the previous month. Economists had expected a surplus of 2.8 billion euros. Export growth slowed to 18% from 23% in the previous month, while the import growth slowed to 19% from 20%.

U.S. Economic Reports

Conditions for New York manufacturers improved in June, according to the results of the latest survey of the New York Federal Reserve showed. The general business conditions index rose to 19.6 in June from 19.1 in May. The sector has been expanding for eleven straight months. Economists had expected the index to come in at 20.

The new orders and shipment indexes improved from the month-ago levels and were in positive territory, while the inventories index remained near zero for the second straight month. Meanwhile, allaying inflationary fears, the inventories index fell 17.5 points to 27.2. The future general business conditions, though remaining above the ‘zero’ level, fell from the relatively high level of the previous month.

A separate report released by the Labor Department showed that U.S. import prices fell 0.6% month-over-month in May following a 1.1% increase in the previous month. The decline in import prices was due to a 4.9% drop in prices of fuel imports.

On the other hand, export prices rose 0.7%, helped by a 1.4% increase in agricultural export prices and a 0.6% increase in non-agricultural export prices.

The Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for April at 9 AM ET. Economists estimate the net foreign purchases of U.S. securities to be $10.5 billion for the month.

The National Association of Homebuilders is scheduled to release the results of its June survey on homebuilders' confidence at 1 PM ET. The index is widely expected to remain at 22.

Unperturbed by the expiry of the first time homebuyers' tax credit, builder confidence improved in May. The National Association of Home Builders' housing market index rose 3 points to 22, its highest level since August 2007. The index of prospective buyer traffic rose 2 points to 16.

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Best Buy (BBY) is receding sharply in pre-market trading after it reported first quarter revenues fell to $10.79 billion from the year-ago’s $10.1 billion. The company’s adjusted earnings also declined to 36 cents per share from 42 cents per share in the year-ago period. Analysts estimated earnings of 50 cents per share on revenues of $10.94 billion.

La-Z-Boy (LZB) is expected to move in reaction to its announcement that its fourth quarter sales rose to $310.7 million from the year-ago’s $284.5 million. The company’s GAAP earnings rose to 26 cents per share from the year-ago’s 10 cents per share, while non-GAAP earnings came in at 24 cents per share. Analysts estimated earnings of 23 cents per share on revenues of $307.7 million.

Lincoln National (LNC) may be in focus after it announced that it has priced a public offering of 12.29 million shares at an offer price of $27.25 per share. Lincoln shares closed at $27.41 on Monday.

KB Home (KBH) is likely to see some activity after rating agency Fitch reaffirmed its issuer default rating and senior unsecured debt rating at ‘BB-‘, while it revised its outlook to ‘Stable’ from ‘Negative.’ The rating agency attributed the action to reflect the company’s healthy liquidity position, improved operating results and moderately stronger prospects for the housing sector this year.

Polo Ralph Lauren (RL) could also be in focus after it announced that it has commenced an underwritten secondary public offering of Class A common stock pursuant to a shelf registration. The company’s principal shareholder Ralph Lauren will offer 9 million shares and will grant the underwriters a 30-day option to purchase up to an additional 1.35 million shares.

ConAgra Foods (CAG) is likely to move in reaction to its announcement that it has agreed to buy the assets of American Pie LLC, which manufactures frozen fruit pies etc. The company did not disclose the financial terms of the deal. The deal is expected to close within 30 days.

Cincinnati Financial (CINF) may see some activity after it said it estimates incurred second quarter pre-tax catastrophe losses from severe weather at about $65 million for its property casualty insurance operations. The company said if no further catastrophe losses are incurred beyond what was estimated through June 10th, second quarter storm losses will stand at 9 percentage points compared to the average of 7.7 percentage points over the past 10 years.

Tenet Healthcare (THC) may see some strength after it raised its 2010 adjusted EBITDA outlook by $50 million to $1.035 billion to $1.10 billion, translating to earnings per share of 27-40 cents. The company attributed the potential upside to cost efficiencies. Analysts estimate earnings of 30 cents per share.