US & World Daily Markets Financial Briefing 17-02-2010

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Stocks Moving Moderately Higher In Mid-Morning Trading

Stocks are seeing moderate strength in mid-morning trading on Wednesday, as a slew of upbeat economic data, including a six-month high in housing starts, has driven buying interest along with some positive earnings. The major averages are all in positive territory, moving further away from recent three-months lows.

Initial gains were seen after the Commerce Department released a report showing that housing starts rose 2.8 percent to an annual rate of 591,000 in January from the upwardly revised December estimate of 575,000. Economists had expected starts to rise to 580,000 from the 557,000 originally reported for the previous month.

With the increase, housing starts rose to their highest annual rate in six months and are 21.1 percent above the January 2009 rate of 488,000.

At the same time, the Commerce Department said that building permits, an indicator of future housing demand, fell by 4.9 percent to an annual rate of 621,000 in January from the revised December rate of 653,000. The decrease followed a 10.9 percent increase in December.

Also on the economic front this morning, the Federal Reserve released data showing that January industrial production rose 0.9 percent for the month following a 0.6 percent increase in the previous month, while capacity utilization climbed to 72.6 percent from 72.0 percent.

The increase in industrial production exceeded economist estimates of 0.7 percent, while the capacity utilization rate came in line with expectations.

The Federal Reserve will also release the minutes of the most recent Federal Open Market Committee meeting at 2:00 p.m. ET, providing some insight on the central bankers' outlook on economic conditions.

As earnings season continues to approach the finish line, Deere & Company (DE) crushed estimates with first-quarter net income of $0.57 per share, which was three times the average consensus of $0.19 per share. Revenues declined 6 percent to $4.83 billion but still topped expectations for $4.19 billion.

In other corporate news today, Walgreen Co. (WAG) announced that it has agreed to acquire New York-based drugstore chain Duane Reade Holdings Inc. in a cash transaction for a total enterprise value of $1.075 billion, including the assumption of debt. Duane Reade is expected to continue operations under its own name even after the acquisition.

Campbell Soup Co. (CPB) lowered its revenue forecast for 2010 to a range of $7.79 billion to $7.87 billion, with analyst forecasts calling for revenues of $7.87 billion.

The major averages reached new highs for the session in recent trading, but they have given back some ground in the past few minutes. The Dow remains up 33.48 points or 0.3 percent at 10,302.29, the Nasdaq is up 8.22 points or 0.4 percent at 2,222.41 and the S&P 500 is up 4.39 points or 0.4 percent at 1,099.26.

Sector News

Health insurance stocks are showing notable strength in mid-morning trading, with the Morgan Stanley Healthcare Payor Index up by 2.5 percent. With the move, the index is bouncing off of yesterday's two-month closing low.

Commercial real estate stocks are also seeing buying interest, resulting in a 1 percent advance by the Morgan Stanley REIT Index. FelCor Lodging Trust (FCH) is helping to lead the sector higher, posting a 1.7 percent gain. The gain has lifted the stock to its best intraday price in nearly four months.

Biotechnology, banking and electronic storage stocks are also seeing strong outings, while railroad stocks are under pressure.

Stocks Driven By Analyst Comments

Swift Energy (SFY) is on the rise in mid-morning trading after being upgraded at Barclays Capital from Underweight to Equal Weight. The broker also raised its price target from $21 to $30. The stock is currently up by 1.4 percent after reaching its best intraday price in over fifteen months.

Whiting Petroleum (WLL) is also moving higher following an upgrade by Barclays Capital from Equal Weight to Overweight. The stock also saw its price target raised from $70 to $100. Shares are currently up by 1.9 percent and are at their highest intraday price in nearly a month.

On the other hand, Penn Virginia (PVA) is falling after being downgraded by Barclays Capital from Overweight to Equal Weight. The stock is down by 2 percent, pulling back off of the more than one-year closing high set on Tuesday.

TSX May Hold On To Recent Gains

Canadian stocks are likely to hold on to their recent gains Wednesday morning on firm commodities prices. Encouraging domestic wholesales numbers and housing starts data from across the border may also help lift sentiment. However, upside may be capped on profit taking after the main index moved higher for the past five sessions, adding over 4%.

The S&P/TSX Composite Index rose 116.56 points or 1.02% to close Tuesday's session at 11,586.37. The price of oil edged up $0.29 to $77.30, moving higher for a second day. The price of bullion added

In corporate news, New Gold said it purchased 70% interest in El Morro SCM and associated rights and assets from a subsidiary of Xstrata Plc for a total cash consideration of $463 million.

Iamgold Corp reported fourth quarter net loss of $0.13 per share, compared to net loss of $0.33 per share last year.

Internet services provider Tucows Inc. reported net earnings of $0.17 per share for 2009, up from $0.03 per share in 2008 and announced that it will repurchase up to $10 million of its common stock.
 
Software solutions provider Intrinsyc Software International appointed Randy Moore as Vice President, Engineering Operations.

Communications services provider Rogers Communications Inc. reported fourth quarter net income of C$0.51 per share, compared to net loss of C$0.22 per share in the year ago period.

Country's largest food distributor Loblaw Companies said its fourth-quarter net earnings were C$0.60 per share, down from C$0.70 per share last year.

In brokerage updates, Thomas Weisel initiated coverage of Chariot Resources with an "Overweight" rating.

In economic news, Statistics Canada said country's wholesales trade in current dollars increased by 0.7% to $42.80 billion in December, in line with forecasts. The machinery and electronic equipment sector contributed the most to the growth in December. Sales in this sector climbed 1.2% to $8.8 billion.

From the U.S., the Commerce Department said housing starts rose 2.8% to an annual rate of 591,000 in January from an upwardly revised December estimate of 575,000. Meanwhile, building permits eased by 4.9% to an annual rate of 621,000 in January. Building permits are an indicator of future housing demand.

Crude oil futures are edging up $0.39 at $77.40 a barrel after rising $3.14 to $77.01 a barrel in Tuesday’s session. Gold futures are currently edging up $0.70 to $1,120.50 an ounce. In the previous session, the precious metal jumped $29.80 to 1,119.80 an ounce.

Among currencies, the U.S. dollar is trading at 90.83 yen compared to the 90.14 yen it fetched at the close of New York trading on Tuesday. The EUR-USD pair is trading at 1.3718.

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Asian Markets Surge On Wall Street Cues, Higher Commodity Prices

The markets across Asia that were open for trading on Wednesday ended sharply higher taking cues from Wall Street where the major averages ended in positive territory on increasing optimism about sustaining economic recovery as concerns about sovereign debt crisis in Greece took backseat. Higher commodity prices also lifted the positive sentiment. The markets in China and Taiwan are closed for holidays today.

In Japan, the benchmark Nikkei 225 Index rose 272.58 points, or 2.7%, to 10,307, while the broader Topix index of all First Section issues gained 19.46 points, or 2.2%, to 905.

On the economic front, a statement released by the Ministry of Economy, Trade and Industry revealed that an index measuring the activity of tertiary industries in the country unexpectedly declined 0.9% during December compared to the previous month. Analysts expected a modest 0.2% decline in the activity of tertiary industries for the month, following 0.2% decline in November. The report further noted that for the third quarter, the activity of tertiary industries declined 0.2% over the preceding 3-month period.

Light sweet crude oil futures for March delivery ended at $77.30 a barrel in electronic trading, up $0.29 per barrel from previous close at $77.01 a barrel in New York on Tuesday.

Almost all the stocks across the board registered gains on optimism about sustaining the global economic recovery, as sovereign debt concerns in Europe, especially Greece, appears to have eased to a certain extent. Steel stocks and shipping stocks led the gains in the market as risk appetite seems to have resurfaced in the market.
 
Steel stocks advanced as risk appetite returned to the market on increasing optimism about sustaining global economic recovery. JFE Holdings surged up 5.33%, Pacific Metals Co. soared 8.02%, Nippon Steel rose 4.40%, Sumitomo Metal Industries climbed 5.49% and Kobe Steel increased 4.46%.

Shipping stocks also ended in positive territory. Kawasaki Kisen Kaisha climbed 2.91%, Mitsui OSK Lines surged up 5.04% and Nippon Yusen gained 2.13%.

Trading stocks gained on higher commodity prices. Mitsubishi Corp. rose 3.36%, Mitsui & Co., climbed 4.86%, Toyota Tsusho Corp. gained 2.90%, Itochu Corp. ascended 3.27% and Sumitomo Corp. advanced 1.34%.

Banks also ended in positive territory. Sumitomo Mitsui Financial gained 1.81%, Resona Holdings climbed 4.23%, Mitsubishi UFJ Financial rose 1.85% and Mizuho Financial increased 2.92%.

Construction companies also climbed following reports that work has been restarted on the Dubai Metro as a dispute over payments between the parties has been mutually settled. Obayashi Corp. climbed 5.21% and Kajima Corp. surged up 7.00%.

In Australia, the benchmark S&P/ASX 200 Index rose 100.10 points, or 2.19% to close at 4,668, while the All-Ordinaries Index ended at 4,687, representing a sharp gain of 96.00 points, or 2.09%.

On the economic front, results of a survey conducted by Westpac Bank and Melbourne Institute revealed that a leading indicator of the Australian economy surged ahead in December, signaling brisk growth in the coming months. According to the survey, the leading index rose 6.2%, on an annualized basis, in December, well above the long term trend of 2.7%. On a month-on-month basis, the leading index climbed 0.5% or 1.3 points in December compared to the previous month.

In a separate statement, the Department of Employment and Workforce Relations revealed that an index measuring skilled job vacancies in the country increased 1.6% in February compared to the previous month in which the index rose 1.1%.

Metals and mining stocks led the gains following higher commodity prices in the international market. BHP Billiton advanced 2.07%, Fortescue Metals climbed 2.99%, Gindalbie Metals soared 10.53%, Iluka Resources gained 3.11%, Macarthur Coal rose 3.77%, Mincor Resources ascended 6.19%, Murchison Metals was higher by 5.81%, Oz Minerals increased 4.02% and Rio Tinto was richer by 3.32%.
 
Gold stocks also surged up on higher gold prices in the bullion market. Lihir Gold climbed 3.21% on huge volumes while Newcrest Mining surged 4.31%.

Oil stocks also ended in positive territory. Woodside Petroleum gained 1.59%, Santos rose 1.72%, Oil Search increased 2.13% and Origin Energy climbed 2.35%.

Supplier of blood products and vaccines, CSL Ltd reported better than expected financial results beating analysts' estimates. The stock surged up 5.12% following the announcement. Ansell Ltd soared 7.88% after reporting good financial results.

Banks also surged up on increasing optimism about recovery. ANZ Bank climbed 4.60%, Commonwealth Bank of Australia rose 3.24%, National Australia Bank gained 3.47% and Westpac Banking increased 2.79%.

Retail stocks also ended in positive territory. Harvey Norman advanced 1.07%, JB Hi-Fi Ltd added 1.05%, discount variety retailer Reject Shop surged up 5.47%, Wesfarmers edged up 0.34% and Woolworths climbed 1.67%. David Jones, however, bucked the trend and ended in negative territory with a loss of 0.20%.

In Hong Kong, the Hang Seng Index ended in positive territory with a gain of 265.32 points, or 1.31%, at 20,534, as traders, returning to the market after extended holidays, evinced fresh buying interest on resource stocks following stronger commodity prices in the international market. Positive closing on Wall Street in the previous session, and increasing optimism about global economic recovery lifted market sentiment as the traders seem to have discounted the tightening measures from mainland China to cool off the economy and reign in inflation. As many as 35 of the 42 components in the index ended in positive territory, led by banks, and china related resource stocks.

In South Korea, the KOSPI Index ended in the green with a gain of 26.38 points, or 1.65%, at 1,627 as traders evinced fresh buying interest on blue-chip technology, steel and resource stocks amid increasing optimism that the global economic recovery might be sustained. Positive closing on Wall Street amid better-than-expected economic data as well as easing of concerns about sovereign debt in Greece also lifted market sentiment. Volumes were, however, relatively less as traders await more definite cues on sustaining global economic recovery.
 
The Indian market ended sharply higher for a second straight day Wednesday, encouraged by positive global cues. Despite some profit taking in late trading, the benchmark Sensex finished significantly higher at 16,429, up 202 points or 1.25% and the Nifty rose by 58 points or 1.20% to 4,914.

The markets in China and Taiwan are closed for holidays. Among the other major markets, Indonesia's Jakarta Composite Index gained 22.83 points, or 0.89%, to close at 2,581, and Singapore's Strait Times advanced 35.16 points, or 1.27% to close at 2,794.

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The major European markets have opened Wednesday’s session higher, extending their gains into the three straight session, as renewed optimism coupled with fairly robust earnings from French bank BNP Paribas is supporting buying.

The French CAC 40 Index and the German DAX Index are rising 1.89% and 1.34%, respectively, while the U.K.’s FTSE 100 Index is moving up 0.96%.

In corporate news, BNP Paribas reported a fourth quarter rose of 1.37 billion euros compared to a loss in the same period last year. Sequentially, the company’s profits rose 4.6%.

On the economic front, the Bank of England revealed in the minutes of its February Monetary Policy Committee meeting that all nine members of the committee supported a pause in the 200 billion pound asset purchase program. The committee members also suggested that they would be able to provide further monetary stimulus should the outlook for inflation in the medium term warrant it.

The U.K. Office for National Statistical Office noted that the number of people claiming jobseekers’ allowance in the U.K. rose by 235,000 in January to 1.64 billion, marking the highest reading since April 1997. Economists had estimated a 10,000 drop in claims for the month. The claimant count rate stood at 5%. The unemployment rate based on ILO standards remained unchanged at 7.8%. Total pay for the three months to December rose by 0.8% year-over-year.

The trade surplus of the euro zone region rose to 4.4 billion euros in December from a revised surplus of 4 billion euros in November, according to a report released by Eurostat. Exports rose 3.1% month-over-month after remaining unchanged in November, while imports rose for the second straight month, rising 1.7%.

A separate report released by Eurostat showed that construction output rose at a seasonally adjusted 0.5% rate in December compared to the previous month. Annually, construction output fell 3.1% in December, smaller than the 6.8% drop in November.

U.S. Economic Reports

On the economic front, the Commerce Department reported that housing starts rose 2.8% month-over-month in January to a seasonally adjusted annual rate of 591,000 from the previous month’s revised figure of 575,000. Economists had estimated housing starts of 580,000 for January compared to the initially estimated 557,000.

Single-family housing starts rose at a 1.5% monthly rate. Meanwhile, building permits, an indicator of future housing activity, fell 4.9% to 653,000. Annually, housing starts were up 21.1%.

Meanwhile, the Labor Department said import prices rose 1.4% month-over-month in January. In December, the index had risen by a revised 0.2% rate. The increase reflected a 5.3% jump in petroleum import prices and a small 0.4% increase in non-fuel imports.

At the same time, export prices grew at a 0.8% rate compared to a 0.6% increase in December. Prices of agricultural exports climbed 1.4%, while export prices of non-agricultural commodities rose 0.7%.

The industrial production report of the Federal Reserve is due out at 9:15 AM ET. Economists estimate that industrial production rose 0.7% in January, while capacity utilization is expected to come in at 72.6%.

In December, industrial production got a shot in the arm from colder winter weather, with output rising 0.6% month-over-month, mainly aided by a 5.9% jump in utilities output. However, manufacturing output eased 0.1%, following a 0.9% increase in November. Most categories in the manufacturing sector showed monthly declines, but high-tech production rose 2.4% and business equipment output edged up 0.9%. Capacity utilization rose to 72% from 71.5%, but it is still notably below normal levels.

The Federal Reserve is scheduled to release the minutes of its January 26th-27th meeting at 2 PM ET.

As expected, following the end of its January meeting the Federal Reserve announced its decision to keep interest rates unchanged at 0%-0.25%. However, the decision was not unanimous, unlike last time, with Kansas City Fed President Thomas Hoenig voting against the decision. The post-meeting policy statement showed that the central bank now views growth as 'strengthening' as opposed to its earlier stance that growth is picking up. The Fed's commentary on household spending expanding at a moderate pace was also said with more conviction this time around.

Earnings

Host Hotels (HST) could be in focus after it reported a loss of 12 cents per share for its fourth quarter compared to a profit of 18 cents per share last year. The company’s funds from operations fell to 18 cents per share from the year-ago’s 52 cents per share. The recent quarter’s funds from operations included charges of 6 cents per share. Analysts’ estimates, which typically exclude one-time items, called for earnings of 19 cents per share on revenues of $1.35 billion. For 2010, the company expects funds from operations to be 41-57 cents per share, including a 1 cent per share debt prepayment cost, while analysts estimate a profit of 57 cents per share for the quarter.

Deere & Co. (DE) said its first quarter earnings rose to 57 cents per share from 48 cents per share last year. Net sales and revenues fell 6% to $4.835 billion. Analysts estimated earnings of 19 cents per share on revenues of $4.19 billion.

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Campbell Soup could see activity after it reiterated its full year guidance for adjusted EBIT growth of 6%-7% and adjusted net income per share growth of 9%-11%. However, the company downwardly revised its 2010 sales growth guidance to 2.5%-3.5% from its earlier estimate of 4%-5%. Analysts estimate sales growth of 3.8%.

Walgreen (WAG) is likely to be in focus after it announced a deal to buy New York-based Duane Reade Holdings in a cash transaction for a total enterprise value of $1.075 billion, including the assumption of debt.

Whole Foods Market (WFMI) may move in reaction to its announcement that its first quarter earnings rose to 32 cents per share from 20 cents per share last year. Sales rose 7% year-over-year to $2.64 billion. Analysts estimated earnings of 26 cents per share on revenues of $2.64 billion.

Simon Property Group (SPG) may remain in focus after General Growth Properties rejected the company's unsolicited $10 billion takeover bid, saying it is still exploring all possible alternatives for emergence from insolvency and maximizing value for its shareholders.

DIRECTV (DTV) could also be in focus after it said it would vigorously pursue its lawsuit to prevent Dish Network (DISH) from luring its customers through a misleading advertising campaign. The announcement comes after a judge denied a restraining order banning the ad.

Ball Corp. (BLL) is likely to see buying interest after it said it has agreed to repurchase about $125 million of its outstanding stock in a privately negotiated accelerated stock repurchase transaction with Goldman Sachs (GS). The buyback is to be made with cash on hand and available borrowings.

Valmont (VMI) receded in Tuesday’s after hours session after it said it expects a 25% decline in its 2010 earnings, while revenues are expected to be flat with last year. Analysts estimate a 18% decline in earnings and a 4% drop in revenues. The company reported an increase in fourth quarter earnings to $1.14 per share from $1.09 per share last year. However, sales fell to $398.6 million from the year-ago’s $493.1 million. The consensus estimates had called for earnings of $1.09 per share on revenues of $431.34 million.

Coca-Cola (KO) is likely to move to the upside after it announced that its board authorized a 12.5% increase in its regular quarterly dividend to 9 cents per share.

Danaher (DHR) could see some activity after it announced through a press release that its CEO Lawrence Culp would say at the Barclays Capital Industrial Select Conference that the company expects first quarter adjusted earnings to be at or above the high end of its previous guidance of 77-82 cents per share. Analysts estimate earnings of 83 cents per share for the quarter.

Photronics (PLAB) may gain ground after it reported a first quarter pro forma profit of 1 cent per share compared to a loss of 21 cents per share last year. Sales rose 12% to $88 million. Analysts, on average, estimated a loss of 4 cents per share on revenues of $84.67 million.

Questar Corp. (QSTR) is likely to be in focus after it said its subsidiary Questar Exploration & Production’s production rose 11% in 2009. The company also said its year-end proved gas and oil reserves climbed 24%. For 2010, the company estimated 11%-13% production growth.

Nabors (NBR) may see activity after it said its fourth quarter adjusted net income was 18 cents per share on revenues of $841 million. Analysts estimated earnings of 16 cents per share on revenues of $825.03 million.

Hartford (HIG) could also be in focus after it announced the appointment of Christopher Swift as its executive VP and CFO. The company’s current CFO will assume the role of chief risk officer.

TD Ameritrade (AMTD) is expected to move in reaction to its announcement that its average client trades per day rose 38% year-over-year in January, while they rose 22% compared to the previous month.

FMC Technologies (FTI) moved lower in Tuesday’s after hours session after it reported fourth quarter earnings from continuing operations of 75 cents per share, up from 74 cents per share last year. Revenues fell to $1.16 billion from the year-ago’s $1.21 billion. The consensus estimates called for earnings of 74 cents per share on revenues of $1.09 billion. For 2010, the company expects earnings per share from continuing operations of $2.45-$2.65 compared to the $2.51 per share consensus estimate.

Chesapeake Energy (CHK) is likely to be in focus after it said its daily production rose 5% quarter-over-quarter and 13% higher than in the year-ago period to 2.618 billion cubic feet of natural gas equivalent. For 2010, the company expects 8%-10% production growth.

Healthways (HWAY) is likely to see some activity after it reported fourth quarter earnings of 22 cents per share compared to a year-ago loss of 9 cents per share, including 47 cents per share in charges. Revenues fell to $175.2 million from $185.3 million last year. The consensus estimates called for earnings of 22 cents per share on revenues of $173.58 million.

ValueClick (VCLK) could also be in focus after it reported fourth quarter revenues of $110.4 million, almost flat with last year, with the top line trailing the consensus estimate of $132.41 million. The company’s non-GAAP net income rose to 25 cents per share from 15 cents per share last year. Analysts estimated earnings of 16 cents per share on revenues of $132.41 million. For the first quarter, the company expects revenues of $93 million to $97 million and non-GAAP earnings of 15-16 cents per share. The consensus estimates call for earnings of 16 cents per share on revenues of $129.17 million.

La-Z-Boy (LZB) rallied in Tuesday’s after hours session after it reported third quarter sales of $305.1 million, up 5.7% and also ahead of the consensus estimate of $275.56 million. The company reported a profit of 21 cents per share compared to a loss of $1.25 per share a year-ago. On an adjusted basis, the company reported a profit of 17 cents.

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