US & World Daily Markets Financial Briefing 17-03-2010

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Stocks Seeing Modest Strength In Mid-Morning Trading

Stocks are on the upside by modest margins in mid-morning trading on Wednesday, having digested the day's producer price data and awaiting clues on financial regulatory reform from Federal Reserve Chairman Ben Bernanke. The major averages are all in positive territory, building on yesterday's solid gains.

Comments from Fed Chairman Ben Bernanke are likely to be scrutinized by the markets, with the Fed chief scheduled to speak before the House Financial Services Committee about financial regulation at about 2:00 p.m. ET.

Earlier, market focus was on news from the Labor Department, which reported that producer prices fell at a much faster than expected pace in the month of February, with the decrease in prices largely due to a steep drop in energy prices.

The producer price index fell by 0.6 percent in February following an unrevised 1.4 percent increase in January. Economists had been expecting a more modest decrease in prices of about 0.2 percent.

Excluding the steep drop in energy prices as well as a modest increase in food prices, the core producer price index edged up by 0.1 percent in February after rising by 0.3 percent in January. The modest increase in core prices came in line with economist estimates.

The major averages have seen choppy movement in recent dealing, hovering near their highs of the session. The Dow is up 27.66 points or 0.3 percent at 10,713.64, the Nasdaq is up 10.12 points or 0.4 percent at 2,388.13 and the S&P 500 is up 4.10 points or 0.4 percent at 1,163.56.

Sector News

Housing stocks are some of the morning's best performers, contributing to a 1.2 percent advance by the Philadelphia Housing Sector Index. With the upward move, the index has set a six-month intraday high.

Oil stocks are also seeing buying interest, with the NYSE Arca Oil Index rising 1.1 percent to a two-month intraday high. The advance comes as the price of crude oil has risen by$0.96 to $82.66 a barrel following today's in-line crude oil inventories report, which showed a pickup of 1 million barrels.

Software, banking and semiconductor stocks are also seeing buying interest while airline stocks are down by moderate margins, with the NYSE Arca Airline Index slipping by 0.6 percent, pulling back further off of a recent two-year high.

Stocks Driven By Analyst Comments

Cousins Properties Inc. (CUZ) is moving higher after being upgraded by Stifel Nicolaus from Sell to Hold. The stock has gained 3.7 percent, reaching a two-month intraday high.

AthenaHealth (ATHN) is also on the rise following an upgrade at Deutsche Bank from Hold to Buy. Shares are currently up by 1.9 percent, on pace for a three-week closing high, although the stock has not taken out its intraday high.

On the other hand, City Holding Co. (CHCO) is retreating after being downgraded at Stifel Nicolaus from Buy to Hold. The stock is down by 2.1 percent, pulling back off of the more than one-year closing high set on Tuesday.

TSX Poised To Extend Rally As Commodity Prices Rise

Canadian stocks may hold on to their gains Wednesday morning on firm commodities prices and after the country reported improvement in January wholesales sales numbers.

The Federal Reserve's move to keep interest rates unchanged, while making a optimistic assessment of the US economy, and encouraging earnings reports from major companies in the recent past will likely to help lift sentiment.

On Tuesday, the S&P/TSX Composite Index added 80.60 points or 0.67% to 12,089.40. With the advance, the TSX finished at its highest closing level since the onset of the global financial crisis in the autumn of 2008.

The price of oil moved up $0.88 to $82.58 after OPEC left its output levels unchanged. Bullion moved up for the second day adding $3.0 to $1,125.50 an ounce.

In corporate news, oil and natural gas explorer Petrobank Energy reported more than two-fold rise in its fourth quarter net income at C$57.1 million from C$28.08 million in the year-ago quarter. On a per diluted share basis, net income increased 65% to C$0.56 from C$0.34.

Natural gas producer Encana Corp said it will hike its 2010 capital budget by 20% to $4.5 billion and double its output over the next five years.
 
Silicon metal producer Timminco Ltd. reported a wider loss of C$0.48 per share in the fourth quarter, compared to a loss of C$0.01 per share in the prior year period.

Brokerage services provider Belzberg Technologies reported a wider loss of C$0.74 per share in the fourth quarter, compared to a loss of C$0.02 per share in the year ago period.

Bio-technology company BioMS Medical slipped to loss in the fourth quarter, posting a consolidated net loss of C$0.08 per share, compared to a consolidated net income of C$0.01 per share in the previous year period.

Natural resources company Sprott Resource said it will offer units of its subsidiary, Stonegate Agricom Ltd., through an initial public offering.

Manufacturer of immune therapeutics Cangene Corp. reported a lower net income of C$0.06 per share for the second quarter, compared to C$0.08 per share in the same quarter last year.

Healthcare product maker TSO3 Inc. reported a narrower fourth-quarter net loss of C$0.05 per share, compared to C$0.06 per share in the prior year period.

In economic news, Statistics Canada said wholesales sales in current dollars rose the strongest in three years by 3.0% to $44.4 billion in January. The growth in January was contributed by all the sectors, with automotive products, building materials, machinery and electronic equipments recording notable gains.

From the U.S., the Labor Department said its producer price index fell by 0.6% in February following an unrevised 1.4% increase in January. Economists were expecting a more modest decrease in prices of about 0.2%.

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Indian Market Pares Early Gains

The Indian market closed off the day's high on Wednesday, as profit taking emerged at higher levels. Sentiment was upbeat as the U.S and Japan central banks decided to keep interest rates unchanged. Global markets also offered support.

Public sector, healthcare, metal, capital goods, banking and IT stocks led the gainers, while realty, auto, consumer durable and FMCG stocks ended on a subdued note.

After rising to as high as 17,577 in early session, the 30-share Sensex gradually pared gains before finishing at 17,490, up 107 points or 0.61% and the Nifty rose by 36 points or 0.65% to 5,232. However, the BSE small-cap index slipped 0.14% and the market breadth remained slightly negative.

Market heavyweight Reliance Industries ended flat with a negative bias on reports it is eying a gas venture in the United States.

Car maker Maruti Suzuki fell 1.73% amid increasing competition in the small-car space. Mahindra & Mahindra declined 0.90% and Tata Motors ended down 0.83. Cement maker ACC, capital goods manufacturer BHEL, utility Tata Power and FMCG player Hindustan Unilever also ended in the red.

Software exporter TCS rose 1.76% on improving business outlook. Infosys edged up 0.25% and Wipro gained 1.61%.
 
Engineering and construction giant Larsen & Toubro advanced 1.62% on bagging a Rs.1,000-crore contract from ONGC. Likewise, Steel Strips soared almost 6% on winning an overseas order from Renault, France.

Idea Cellular rose over 3% on reports the special audit report commissioned by the Department of Telecommunications has found no discrepancy. Reliance Communication, which crossed the 10-crore subscriber mark recently, ended up 0.28% and Bharti Airtel added a little over a percent.

In the banking space, ICICI Bank rose almost 2%, SBI edged up 0.50% and HDFC Bank gained 0.14%.

Aluminum maker Hindalco gained 2.33%, copper producer Sterlite Industries added 0.23%, steel maker Tata Steel advanced 0.92%, property developer DLF closed up 0.37%, mortgage lender HDFC rose 1.22%, diversified business conglomerate ITC gained 1.23%, and oil explorer ONGC ended up 0.25%.

JSW Steel rose nearly 2% on reports it may raise product prices in April. SAIL (up 1.27%) and NALCO (up 0.10%) closed firm after announcing a price hike.

MSK Projects rose 1.34% on the back of a block deal. Rossell Tea and Coromandel Engg were locked at the 20% upper circuit limit. Piramal Healthcare gained 1.20% on a brokerage upgrade.

 Kajaria Ceramics, which is planning a Rs.125-crore expansion plan, ended up 1.22%. MRF fell over 2% on reports it will invest Rs 3,000 crore over the next next three years. State-run Neyveli Lignite added 1.79% on reports it has replaced a REC loan with cheaper loan from a public sector bank.

Dishman Pharmaceuticals & Chemicals rose 1.41% after it received approval from the Australian drug regulator for its Bavla facilities for all active pharmaceutical ingredients. Reliance MediaWorks advanced 1.36% after it signed a pact with Japan's Imagica Corp to restore Japanese classics.

Elsewhere, Asian stocks rallied on Wednesday, driving the MSCI Asia Pacific Index to a two-month high, as the U.S Federal Reserve renewed its pledge to keep benchmark rates near zero for an extended period and the Bank of Japan doubled its short-term lending program to fight deflation, while keeping interest rates at a record low.

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In Europe, the sentiment is upbeat as well, with the three major averages in the region trading with handsome gains. On the economic front, the minutes of the Bank of England’s March meeting showed that the central bank remains in a wait and watch mode. The decision to maintain rates unchanged was unanimous, with committee members wanting to assess the effects of the previous monetary policy easing.

Employment data released from the U.K. today was mixed, with the number of people claiming unemployment benefits declining by 32,300 in February, marking the biggest drop since November 1997. The unemployment rate dipped to 5%. However, the ILO survey showed that the number of employed people declined by 54,000 in the three months to January, while the number of unemployed people fell a more modest 33,000. Consequently, the employment levels in the U.K. are at their lowest since January 2006.

A report released by Eurostat showed that the euro zone’s construction output fell 2.2% month-over-month in January compared to the 1% drop in the previous month. Annually, construction output slipped 12.5%, faster than the 2.5% decline in December.

Separately, Eurostat said hourly labor costs in the euro area fell 2.2% year-over-year in the fourth quarter, a slower rate of growth than the 2.7% rise expected by economists. In the third quarter, labor costs had declined 3%.

U.S. Economic Reports

Dallas Federal Reserve Bank President Richard Fisher is scheduled to speak on a panel about crisis response at a Dallas Fed conference on the euro and dollar in the crisis in Dallas.

The producer price inflation report of the U.S. Labor Department showed that producer prices fell by 0.6% month-over-month in February. Economists had expected the headline index to show a more modest 0.2% decline. In January, producer price index had risen 1.4%.

Food prices rose 0.4%, the same pace as in the previous month, while energy prices fell 2.9%, reversing some of the 5.1% increase in the previous month. The core producer price index was up 0.1%, in line with expectations. Prices of intermediate energy goods as well as intermediate food prices declined.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended March 12th at 10:30 AM ET.

The EIA's oil inventory report for the week ended March 5th showed that crude oil inventories rose by 1.4 million barrels to 343 million barrels. Inventories of crude oil were above the upper limit of the average range.

However, gasoline stockpiles and distillate stockpiles fell by 2.9 million barrels and 1.5 million barrels, respectively. Despite the declines, inventories of gasoline were above the upper limit of the average range and inventories of distillate were above the upper boundary of the average range. Refinery capacity utilization averaged 80.9% over the four weeks ended March 5th compared to 80.5% in the previous week.

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Staples (SPLS) may be in focus after it said it offered 5.60 Australian dollars for all the shares in Corporate Express Australia that it does not already own. Staples currently has a 58.6% stake in the Australian company. Along withy a previously announced 0.125 Australian dollar per share dividend, the offer price works out to 5.725 Australian dollars per share for each of Corporate Express Australia shareholders.

CIT Group (CIT) is likely to react to its announcement that it reported a profit of $3.2 billion for the fourth quarter. However, excluding special accounting procedures and other items related to its reorganization, the company posted a pre-tax loss of $1 billion.

MDU Resources (MDU) may also see some activity after it announced that its subsidiary Fidelity Exploration & Production Company has signed an agreement to buy producing natural gas properties located in the Green River Basin in Sweetwater and Carbon counties in southwest Wyoming. The company noted that the purchase price for the properties is $113 million and the effective date of the acquisition is October 1, 2009, although the deal is expected to close on or before April 29th, 2010.

TD Ameritrade (AMTD) is likely to react to its announcement that its average client trades per day rose 13% year-over-year to 347,000 in February. However, the metric fell 18% from the previous month. The company also said due to low intra-day volatility and near-zero interest rates, its March quarter earnings are likely to be at similar levels as that of its December quarter.

Fuqi International (FUQI) may see weakness after it said it has identified certain accounting errors that would have a material impact on its full year results. As a result of the accounting errors, cost of sales for the first three quarter of 2009 were understated and gross profit and net income were accordingly overstated.

Based on the latest estimates, Fuqi said it has overstated earnings per share for the nine months ended September 30, 2009 by approximately $0.15-$0.19 per share. The company also lowered its fourth quarter guidance below the consensus estimates.

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