US & World Daily Markets Financial Briefing 15-09-2009

You can now manage your positions directly from your web browser, whether you use PC or Mac.  Test-drive VT Trader™ Web with your free practice account! Click Here

Positive Data May Allay Fears Over Overbought Conditions

The major U.S. index futures are pointing to a higher opening on Tuesday, with sentiment reversing following the release of economic reports that showed a bigger than expected increase in retail sales for August and a bigger-than-expected expansion in the manufacturing activity in the New York region. The positive data points may aid a positive opening by the markets, although recent gains may make traders wary of further upside.

Crude oil futures are up after two straight sessions of declines. Earnings from consumer electronics retailer Best Buy (BBY) came in below forecast, although it painted a more optimistic picture for the future.

After opening lower on Monday, U.S. stocks recouped most of their losses by the mid-session and began moving sideways. Thereafter, firm buying interest emerged, helping the major averages to climb firmly into positive territory.

The Dow Industrials ended up 21.39 points or 0.22% at 9,627 and the S&P 500 Index climbed 6.61 points or 0.63% to end at 1,049, while the Nasdaq Composite advanced 10.88 points or 0.52% to 2,092.

The breadth among the Dow components was nearly even, with 16 stocks ending higher, while the rest closed in negative territory. General Electric (GE) (up 4.64%), JP Morgan Chase (JPM) (up 2.94%), DuPont (DD) (up 1.48%), Coca-Cola (KO) (up 1.26%), Merck & Co. (MRK) (up 1.08%) and Travelers Co. (TRV) (up 1.20%) were among the notable gainers. On the other hand, Disney (DIS) and Cisco Systems (CSCO) fell over 1% each and American Express (AXP), Boeing (BA), Hewlett-Packard (HPQ), Intel (INTC), United Technologies (UTX) and Wal-Mart (WMT) ended down about 0.70% each.

Among the sector indexes, the NYSE Arca Airline Index rose 3.18% and the Dow Jones Utility Average advanced 1.66%. The Philadelphia Oil Service Index rose 1.04% and the Dow Jones U.S. Basic Materials Index gained 1.69%, while the NYSE Arca Gold Bugs Index receded 1.53%. The NYSE Arca Biotechnology Index moved up 2.43%, while the NYSE Arca Securities Broker/Dealer Index and the KBW Bank Index gained 2.11% and 0.81%, respectively. The Philadelphia Housing Sector Index rose 1.15% compared to a 1.52% advance by the NYSE Arca Disk Drive Index.

The NYSE Arca Airline Index has been seeing a strong run up since it hit a low in early March. That said, the recent upward move by the index is dwarfed by the steep decline that was seen between January 2007 and July 2008, when the index lost about 80% of its value. Thereafter, the index began basing for about 8 months and has taken off since then.

Technically, the relative strength index of the airline index is in overbought territory, although the index recently saw a bullish cross over, which is a positive signal. A key upside resistance level to watch for is around 28.25.

Fundamentally, are airline stocks sound enough to continue to attract investment dollars? Crude oil prices of course have come off from the stratospheric level they had reached in July 2008 and this should be a relief for airline stocks, which spend roughly 20%-30% of their costs on fuel. That said, passenger travel hadn’t picked up due to its close correlation to GDP growth. The U.S. economy is still battling to emerge clearly out of recession and a sustainable recovery is not in the offing, although a near-term return to positive growth is foreseen.

However, airlines have reacted very prudently to the constraints by sprucing up operations, forming alliances and reducing capacities. Reports suggest that capacity at six of the largest U.S. airlines will be trimmed by 6.8% in 2009 from the year-ago levels. Recently, Delta Airlines (DAL) reported a 0.9 percentage point improvement in its load factor for August, as capacity and traffic declined 2.2% and 3.2%, respectively. Although it’s too early to see clear skies ahead, the improving sentiment towards airlines stocks reflects hopes that a turnaround may be in sight.

Get our Daily Trade Signals and Grain Newsletter along with a copy of the CBOT Introduction to Agricultural Futures and Options Book for Free! The grain trading professionals at MF Global can guide you in the right direction with your trading. Click here to Get your Free Grain Trading Kit Today

Toronto Stocks Look To Continue Rally

Canadian stocks will look to extend its rally to a multi-month high in early trading on Tuesday. The market could receive a boost by some encouraging economic data from both sides of the border.

According to Stats Canada, the number of new motor vehicles sold in July climbed 5.3% to 126,665 units, reflecting especially strong sales in Ontario. Sales of both passenger cars and trucks were up. Sales slipped a revised 0.5% in June.

Meanwhile, the U.S. Labor Department revealed Tuesday that producer prices jumped 1.7 percent in
August. This followed a drop of 0.9 percent in the previous month.

On the corporate front, Imperial Metals Corp. (III.TO) announced that has reached an agreement to acquire Selkirk Metals Corp. Each holder of common shares of Selkirk may elect to receive either $0.12 cash for every share of Selkirk held, or one common share of Imperial for every 30 shares of Selkirk held.
 
Kirkland Lake Gold (KGI.TO) reported first-quarter net income of C$1.62 million or C$0.03 per share, compared to a loss of C$3.35 million or C$0.06 per share a year ago.

Among commodities, crude oil has added 64 cents to $69.50 per barrel and copper has gained 2.95 cents to $2.834 a pound. Gold lost $1.60 to $999.50.

On Monday, the S&P/TSX Composite Index rose 78.81 points or 0.7% to settle at 11,332.04. The gain was the eighth in nine sessions for the market.

Gold Prices Slip Below $1,000

Gold prices saw moderate weakness on Tuesday morning as encouraging economic data reduced the need to turn to the hedge investment. A stronger dollar cut into the metal's safety value.

December gold lost $4 to move at $997.00. Prices hit as low as $993.00 after earlier hitting as high as $1,003.50.

A Commerce Department report showed that retail sales jumped 2.7 percent in August following a revised 0.2 percent decrease in July. Economists had been expecting a more modest increase in sales of about 1.9 percent compared to the 0.1 percent drop originally reported for the previous month.

The U.S. Labor Department revealed Tuesday that producer prices jumped 1.7 percent in August. This followed a drop of 0.9 percent in the previous month. Economists had expected the measure to rise by 1.0 percent.
 
Core prices, which exclude the volatile food and energy sectors, climbed by 0.2 percent. This advance was a little sharper than the 0.1 percent increase that economists had projected.

And, the New York Fed said the general business conditions index rose to 18.9 in September from 12.1 in August, with a positive reading indicating growth in the manufacturing sector. Economists had been expecting the index to edge up to a reading of 15.0.

The dollar inched away from a nine-month low against the euro and climbed to a weekly high versus the pound. Gold usually moves opposite the dollar because of the precious metal's hedge appeal.

On Monday, gold lost $5.30 to finish at $1,001.10 per ounce. Gold reached as high as $1,010.80. The metal closed above $1,000 for the first time since February, finishing at a record $1,006.40. However, when adjusted for inflation, gold moved near $2,000 in 1980.

Click Here

Asian Markets End In Positive Territory Amid Cautious Trade

The Asian markets, except Hong Kong, ended in positive territory on Tuesday. Having opening higher in early trading on Wall Street cues, most markets pared early gains amid choppy trading and thin volumes ahead of key economic data in the US but managed to end in the green.

In Japan, the benchmark Nikkei 225 Index ended at 10,218, representing a modest gain of 15.56 points, or 0.15%, while the broader Topix index of all first section stocks declined 1.53 points, or 0.16%, to close at 933.

Pharmaceutical stocks ended in positive territory. Shionogi & Co., surged up 4.76%, Dainippon Sumitomo Pharma rose 2.96% and Chugai Pharmaceutical advanced 1.02%.

Machinery maker Daikin Industries gained 5.02% after Credit Suisse Group upgraded the compnay which announced that a new air purifier that is effective against H1N1 influenza virus.

Electric power companies also ended in positive territory. Chubu Electric Power added 0.70%, and The Tokyo Electric Power Co., edged up 0.21%.

Consumer finance companies dragged the indices sharply lower on concerns about the nature of global financial crisis. Aiful slumped 8.4% and Takefuji Corp. fell 3.8%.
 
Among the banks, Mitsubishi UFJ Financial fell 1.30%, Mizuho Financial declined 1.026%, Resona Holdings shed 0.82% and Sumitomo Mitsui Financial lost 0.82%.

In Australia, the benchmark S&P/ASX200 Index added 0.20% or 9.20 points to close at 4,540, while the All-Ordinaries Index ended at 4,547, representing a gain of 11.10 points, or 0.24%.

On the economic front, minutes of the RBA meeting released today revealed that the Reserve Bank of Australia felt the Australian economy and the global economy were improving, but the recovery was not sufficiently entrenched to begin raising interest rates. As per the minutes, the Board members noted that the global economy was improving, but that "an important question" remained as to whether the improvement would be sustained or whether it was a temporary effect of fiscal and monetary stimulus from central banks and governments.

Separately, a report released by the Australian Bureau of Statistics revealed that the number of construction starts on new homes dropped in the second quarter. The statistical agency said that total dwelling commencements amounted to a seasonally adjusted 30,411 in the second quarter, down 3.7% from 31,566 dwelling starts in the first quarter.

Most stocks opened higher and surged ahead in early trade taking cues from Wall Street where the major averages finished in positive territory with moderate gains on late buying. However, the stocks pared most of its gains but managed to end in positive territory after the Government announced fresh set of reforms which will lead to the separation of Telstra's wholesale and retail businesses, by voluntary or forcible means. Following the news, the communication giant's shares slumped 4.31% on huge volume of nearly 297 million shares.

Metals and mining stocks ended in positive territory. BHP Billiton gained 1.08%, Gindalbie Metals added 1.06%, Minara Resources gained 0.59%, and Rio Tinto rose 1.60%.

Among oil stocks, Woodside Petroleum remained unchanged from previous close and Origin Energy added 0.47%. However, Santos edged down 0.33% and Oil Search slipped 0.95%.

Mixed trading was witnessed among the banking stocks. ANZ Bank added 0.36% and National Australia Bank edged up 0.18%. However, Westpac Banking lost 1.20% and Commonwealth Bank of Australia slipped 0.34%.

Gold stocks ended weaker following drop in bullion prices in the international market. Lihir Gold edged down 0.33%, Newcrest Mining lost 1.36% and Sino Gold Mining fell 2.51%.
 
In Hong Kong, the Hang Seng Index ended in negative territory with a loss of 65.83 points, or 0.31% at 20,866. The market was closed for half-a-day on storm threat and started functioning only in the second session. Weak trading in the other Asian markets, having pared most of the early gains and flat opening in European markets impacted market sentiment in Hong Kong market and traders preferred to lock-in gains following recent gains and preferred to move to the sidelines ahead of key economic data in the U.S.

In South Korea, the benchmark KOSPI Index gained 18.49 points, or 1.13%, to 1,653, taking cues from Wall Street where the major averages bounced back from weaker opening and ended with modest gains on increasing confidence about recovery. In Seoul, financial and steel shares led the gains on optimism about higher earnings for the third quarter from the companies.

Liquidity-driven rally, buoyed by reports about robust advance tax payments by top firms and significant improvement in business sentiment as revealed by the National Council of Applied Economic Research's business confidence index, lifted the Indian market sharply higher on Tuesday despite the mixed global cues. The BSE Sensex finished at 16,454, up 240 points or 1.48% from its previous close, and the S&P CNX Nifty rose 84 points or 1.74% to 4,892,

Among the other major markets in the region, China's Shanghai Composite Index gained 6.99 points or 0.23% to close at 3,034, Indonesia's Jakarta Composite Index added 37.41 points, or 1.57% to close at 2,420, and Taiwan's Weighted Index advanced 1.23% or 89.31 points to close at 7,346. Singapore's Strait Times Index, however, ended in negative territory with a marginal loss of 1.34 points, or 0.05% at 2,638.

Come Into the LIVE Online Trading Session and Watch Us Make at Least 1 Point ($500 - $2000 a Day). The LIVE Trading Session is Completely FREE! - Sign Up Now here!

The major European markets are rising on Tuesday after they ended on a mixed note yesterday. Currently, the French CAC 40 Index is up 0.84% and the U.K. FTSE 100 Index is gaining 0.77%, while the German DAX Index is moving up 0.51%.

On the economic front, sentiment in the U.K. housing market improved in August for the first time in two years, according to the latest survey results from the Royal Institution of Chartered Surveyors. The RICS survey showed a 10.7% increase in the proportion of surveyors reporting a rise in house prices compared to the proportion reporting a decline. It was the highest balance recorded since May 2007.

Meanwhile, the French National Institute for Statistics and Economic Studies reported that French consumer prices fell 0.2% year-over-year in August compared to the 0.3% drop expected by economists. On a monthly basis, the consumer price index rose 0.5% following a 0.4% decline in July. Economists had estimated 0.4% monthly growth.

A consumer price inflation report released by the U.K. Office of National Statistics showed that the U.K.’s annual consumer price inflation rate slowed to 1.6% in August from 1.8% in July. Economists had expected the annual rate to ease to 1.4%. The inflation rate stayed has stayed below the central bank's 2% target for the third straight month.

On a monthly basis, consumer prices rose 0.4% in August, slightly bigger than the 0.3% rise expected by economists. The core annual inflation rate that excludes energy, food, alcohol and tobacco was 1.8% in August, unchanged from the previous month and in line with economists' expectations.

The survey results of the Zew Centre for European Economic Research showed that its economic sentiment indicator for Germany rose to 57.7 points in September from 56.1 in August. Economist had forecast a reading of 60. Nevertheless, this value was well above the indicator's historical average of 26.6 points.

U.S. Economic Reports

Among the trio of economic reports released today before the markets opened, the producer price index rose 1.7% month-over-month in August. The decrease followed a 0.9% decline in July. Economists had estimated a 0.8% growth. Core producer prices rose 0.2%, slightly more than the 0.1% increase expected by economists.

Food prices rose 0.4% compared to a 8% jump in energy prices. Inflation in the pipeline seems to be picking up, as the intermediate food and energy prices rose 0.3% and 7.1%, respectively.

The retail sales report released by the Commerce Department showed that retail sales rose a better-than-expected 2.7% in August following a downwardly revised 0.2% drop in August. Retail sales, excluding autos, rose 1.1% compared to the previous month’s 0.5% decline. For August, economists estimated a 1.9% increase in the retail sales and a 0.4% climb in retail sales excluding autos.

The increase in the headline number reflected a 10.6% climb in auto sales and 5.1% rise in gasoline station sales. Most other categories also showed sales growth, with the exception of furniture & home furnishing stores and building material and garden equipment suppliers.

The New York Fed reported that manufacturing conditions improved notably in September. The business conditions index rose 7 points to 18.9 in September.

The new orders was positive and was higher than in the previous month, while the shipments index fell. The employment indexes remained in negative territory. On the other hand, the prices paid as well as the prices received indexes rose from the month-ago levels. On a more positive note, the future general business conditions index rose to its highest level in several years.

The Commerce Department is scheduled to release its business inventories report for July 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 0.9% decline in business inventories for the month.

Business inventories showed a bigger-than-expected 1.1% drop in the month of June. However, business sales rose 0.9%, resulting in an inventory to sales ratio of 1.38 in June compared to 1.26 in the year-ago period.

Here are 10 simple Dos and Don’ts any investor can follow which may contribute to potential for success in trading futures. This FREE guide can provide some of the basic principles that traders inherently live by.

Click Here to Request Your Free Guide!

Best Buy could see some activity after it reported that its second quarter revenues rose to $11.02 billion from $9.8 billion in the year-ago period. The company’s earnings fell to 37 cents per share from 48 cents per share in the year-ago period. The consensus estimates called for earnings of 42 cents per share on revenues of $10.79 billion. The company raised its annual non-GAAP earnings per share guidance to $2.70-$3, while it expects revenues of $48 billion to $49 billion. Analysts estimate earnings of $2.87 per share on revenues of $47.80 billion.

Ilinois Tool Works is expected to move in reaction to its announcement that its third quarter operating revenues fell 21% year-over-year. The company now expects earnings per share from continuing operations to be in the range of 48-56 cents per share, ahead of the consensus estimate of 47 cents per share.

Broadcom and Emulex are likely to be in focus after Emulex said it is reviewing the patents associated with a complaint filed by Broadcom, which alleges that Emulex has infringed on 10 of its patents covering a broad range of high-speed data and storage technologies.

Pall Corp. traded higher in Monday’s after hours session after it reported fourth quarter earnings of 58 cents per share compared to 61 cents per share in the year-ago period. The company’s sales totaled $652 million, lower than $723.21 million last year. Analysts estimated earnings of 52 cents per share on revenues of $631.99 million.

Northrop Grumman could see some buying interest after it said its subsidiary AMSEC LLC was among several contractors awarded a 5-year cost plus fixed fee by the U.S. Navy. The contract is valued at $455 million to all contractors involved.

Qwest Communications International may be in focus after it said it has priced its offering of $550 million aggregate principal amount of debt securities due October 1, 2015. The notes bear an interest rate of 8% per annum.

Meanwhile, Synovus Financial may move to the downside after it said it would issue up to 50 million in new shares in exchange for any and all of its outstanding 4.875% subordinated notes due 2013. Separately, the company said it would offer $350 million worth of shares in a public offering. Smithfield Foods also announced that it has commenced a public offering of $250 million worth of shares. The company said it intends to use the net proceeds from the offering for working capital and general corporate purposes, including retirement of debt.

Another stock that may see some downside in reaction to an offering is Genworth Financial, which said on Monday that it would offer $500 million worth of Class A common stock.

XL Capital is likely to see weakness after it announced that its CFO Brian Nocco has agreed to leave the company effective after year-end. The company also said it has initiated a search for a successor.

TD Ameritrade could be in focus after it said its average client trades per day rose 71% year-over-year to 431,000 in August. The company’s total client assets fell 5% year-over-year to $289.4 billion, while average fee-based investment balances were down 25% to $57 billion.

Lubrizol may trade higher after it raised its full year adjusted earnings guidance to $6.10-$6.40 per share from its earlier estimate of $5.70-$6 per share. The company noted that the revision reflects improving volume trends in the current quarter.

Our informative 24”x36” wall chart explores 40 years of historical market data on Crude Oil, Gold and S&P500 markets, and includes historical event call-outs. It’s a great trading and analytic tool for professional and beginner traders.

Sign up here to receive your chart today!

Investors Hub Services