US & World Daily Markets Financial Briefing 19-04-2010

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Stocks Mixed In Mid-Morning Trading

Stocks are mixed in mid-morning trading on Monday as traders are digesting a better-than-expected reading on leading economic indicators and upbeat earnings from Citigroup (C). Meanwhile, concerns regarding the future of Goldman Sachs (GS) remain a significant overhang for the markets.

In an upbeat sign for the economy, the Conference Board released a report showing that its index of leading economic indicators rose by 1.4 percent in March following an upwardly revised 0.4 percent increase in February.

Economists had expected the index to increase by 1 percent compared to the 0.1 percent growth originally reported for the previous month.

On the earnings front today, Citigroup (C) reported first quarter net income of $0.14 per share, compared to a loss of $0.16 per share in the prior year quarter. Wall Street analysts expected the company to record breakeven results for the period.

The company said its revenues for the quarter totaled $25.42 billion, down from $26.97 billion in the prior year quarter but well above estimates of $20.77 billion for the quarter.

Additionally, Halliburton Co. (HAL) reported first quarter net income of $0.23 per share, down sharply from $0.42 per share in the same quarter a year ago. Excluding the impact of the devaluation of the Venezuelan Bolívar Fuerte, the company said it earned $0.28 per share.

On average, analysts polled by Thomson Reuters expected the company to earn $0.25 per share for the quarter. Analysts' estimates typically exclude special items.

Eli Lilly & Co. (LLY) said its adjusted first quarter net earnings came in at $1.18 per share, topping forecasts that called for $1.10 per share for the quarter. Meanwhile, net revenues of $5.49 billion missed estimates of $5.54 billion.

The major averages are currently on opposite sides of the unchanged line, with the Nasdaq posting a modest loss. While the Nasdaq is down 1.53 points or 0.1 percent at 2,479.73, the Dow is up 12.10 points or 0.1 percent at 11,030.76 and the S&P 500 is up 1.81 points or 0.2 percent at 1,193.94.

Sector News

Health insurance stocks are some of the morning's best performers, as reflected by the 2.9 percent advance by the Morgan Stanley Healthcare Payor Index. Amerigroup (AGP) is one of the sector's leading percentage gainers, rising by 2.5 percent. The upward move has lifted the stock to its best intraday price in over two years.

Banking stocks are also seeing notable buying interest as traders are doing some bargain hunting in the sector following Friday's sell-off and amid reaction to today's earnings report from Citigroup. The Kbw Bank Index is currently up by 0.7 percent and remains near last week's seventeen-month intraday high.

Commercial real estate, biotechnology and healthcare provider stocks are also notably higher, while weakness is visible among computer hardware, semiconductor and gold stocks.

Stocks Driven By Analyst Comments

AK Steel (AKS) is moving lower after being downgraded at Longbow from Buy to Neutral. The broker cited rising iron ore prices as a reason for the ratings change. The stock has lost 3 percent and has sunk to a six-week intraday low.

Lifepoint Hospitals (LPNT) is also under pressure following a downgrade at Goldman Sachs from Neutral to Sell based on valuation. Shares are currently down by 0.7 percent after setting their lowest intraday price in roughly a month's time.

On the other hand, Endo Pharmaceuticals (ENDP) is on the rise after being upgraded at Goldman Sachs from Neutral to Buy. The stock has risen by 3.6 percent, setting a three-week intraday high.

TSX Poised To Open Lower Amid Goldman, Commodities

Bay Street stocks may open lower Monday amid falling commodities prices. Commodities fell after regulatory probes on Goldman Sachs widened to Europe. Worries over the impact of fraud charges on Goldman hampered stock markets across Asia and Europe Monday. Traders may overlook encouraging quarterly earnings report from Citigroup, that bet analysts' estimates.

The S&P/TSX Composite Index lost 140.86 points or 1.15% to settle at 12,070.66 Friday, just a day after settling at a fresh 18-month high of 12,211.52.

The price of oil continued to moved down for a second session following China's move to cool its real-estate market and amid recovering dollar. Crude for May delivery was down $1.97 to $81.27 a barrel.

The price of gold was lingering near its 2-week low, shedding $4.00 to $1,132.30 an ounce in morning deals. Meanwhile, the Canadian dollar was trading near its 3-week low versus the U.S. dollar.

Financial stocks may be in play amid mixed news. Citigroup Inc. said Monday it earned $0.14 per share in first quarter, as against the Street estimates for a breakeven.

Earlier, last week, Bank of America and JP Morgan reported encouraging quarterly earnings that bet consensus estimates.

Friday, the SEC accused Goldman Sachs of defrauding investors by misstating and omitting key facts about a financial product tied to sub-prime mortgages.

In corporate news from Canada, Insurance solutions provider Kingsway Financial Services announced that its President and CEO Colin Simpson will resign on June 30, 2010.

Branded online betting games and Internet casino software provider CryptoLogic Ltd. said that arbitration proceedings have been formally commenced by its unit, WagerLogic Ltd., against Marvel Enterprises Inc. and Marvel Enterprises B.V.,

TD Bank, a subsidiary in the TD Bank Financial Group, announced that it has acquired certain assets and liabilities of Riverside National Bank of Florida, First Federal Bank of North Florida and AmericanFirst Bank from the Federal Deposit Insurance Corporation, effective immediately.

Norex Exploration Services  and Tesla Exploration announced that they have completed their previously announced business combination, through a share exchange transaction under which Tesla shareholders exchanged each common share of Tesla held, on an exempt take-over bid basis, for 8.4333 common shares of Norex.

Precious metal explorer KWG Resources announced that it has closed a second tranche of non-brokered private placement through the sale of FT units at C$0.125 each for proceeds of approximately C$2.8 million.

Independent energy company Excelsior Energy said it has entered into an agreement to privately place about 41.67 million units at C$0.36 per unit for aggregate gross proceeds of up to C$15.0 million.

Medical industry services provider Med BioGene reported a narrower loss of $0.04 per share in 2009, compared to $0.06 per share in last year.

Gold producer LNG Energy said it has entered into an agreement with InterOil Corp. to buy 2D seismic on LNG's 100% working interest PPL 319 in Papua New Guinea

In economic news, Statistics Canada said foreign investments in Canadian securities were up by $6.7 billion in February. Meanwhile, Canadian acquired $3.9 billion of foreign debt and equities in February.

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Asian Markets Plunge On Goldman Sachs Charge, Flight Ban

The markets in Asia plunged sharply on Monday amid concerns about SEC's investigation on Goldman Sachs for alleged fraudulent activities. A weak closing on Wall Street on Friday, increasing uncertainty over the restoration of flight services in Europe following the spewing of volcanic ash into the atmosphere and concerns about China's tightening measures to cool off the property market impacted market sentiment.

In Japan, the benchmark Nikkei-225 Index dropped 193.41 points, or 1.74%, to 10,909, while the broader Topix index of all First Section issues lost 18.00 points, or 1.82 percent, to 971.

On the economic front, a results of a survey released by the Cabinet Office revealed that Japanese consumer confidence in March improved to 41 from prior month's 40. According to the results, households' consumer confidence came in at 40.9, up from 39.8 in February. Households' sentiment stood above the consensus forecast of 40.5.

In a separate statement, the Japan Department Stores Association revealed that nationwide department store sales dropped 3.5% year-on-year to JPY 5.44 trillion in March. With the recent fall, department store sales have declined for 25 consecutive months, the statement revealed.

Almost all the stocks declined amid concerns about SEC's charge on Goldman Sachs' alleged fraudulent activities related to collateral debt obligations. Financial stocks were the major laggards. The strengthening of the local currency against the US dollar also negatively impacted the market sentiment as a stronger local currency reduces the value of export sales in local currency terms on realization.

Among the major bankers, Sumitomo Mitsui Financial declined 3.50%, Mitsubishi UFJ Financial lost 3.11%, Mizuho Financial fell 2.65% and Resona Holdings slipped 2.26%.

Shipping stocks also ended weaker. Mitsui OSK Lines slipped 1.15%, Kawasaki Kisen Kaisha lost 2.15% and Nippon Yusen fell 2.34%.

Exporters also ended in negative territory. Canon Inc. declined 2.30%, Sharp Corp. fell 2.53%, Sony Corp. slipped 0.80% and Panasonic Corp. shed 1.65%.

In Australia, the bench mark S&P/ASX 200 Index plunged 69.60 points, or 1.40% to close at 4,915, while the All-Ordinaries Index ended at 4,939, representing a loss of 67.90 points, or 1.36%.

On economic front, data released by the Housing Industry Association and RP Data revealed that land prices in Australia increased 2.2% quarter-on-quarter in the December quarter to A$185,222. On annual basis, land prices increased 14% during the December quarter in comparison to the corresponding period last year.

Light sweet crude oil futures for May delivery ended at $81.82 a barrel in electronic trading, down $1.42 per barrel from previous close at $83.24 a barrel in New York on Friday.

Banks ended sharply lower amid concerns about impact of Goldman Sachs charge on global financial sector. ANZ Bank fell 2.37%, Commonwealth Bank of Australia slipped 1.22%, investment banker Macquarie Group lost 2.60%, National Australia Bank shed 1.02% and Westpac Banking declined 1.49%.

Oil stocks also ended in negative territory following sharp drop in crude oil price in the international market. Woodside Petroleum declined 1.61%, Santos fell 2.29%, and Oil Search slipped 1.03%. However, Origin Energy bucked the trend and ended in positive territory with a gain of 0.24%.

Gold stocks also ended weaker on lower gold prices in the market. Lihir Gold slipped 0.50% and Newcrest Mining fell 1.76%.

Airline stocks also slipped on concerns about the impact of flight ban on the global airline industry. Qantas Airways fell 2.01% and Virgin Blue Holdings plunged 4.58%.

Mining and mineral stocks also declined on lower commodity prices. BHP Billiton declined 1.61%, Rio Tinto fell 2.15%, Fortescue Metals plunged 4.87%, Gindalbie Metals shed 3.36%, Iluka Resources slipped 1.24%, Murchison Metals was down 5.32% and Oz Minerals lost 0.81%.

In Hong Kong, the benchmark Hang Sang Index plunged 460.09 points, or 2.10%, and closed at 21,405, taking cues from Wall Street where the major indices declined on Friday following SEC's charge on Goldman Sachs on fraudulent activities. Extension of ban on flights over Europe on volcanic ash and weak trading across other markets in the region also impacted market sentiment. As many as 37 of the 42 components in the index ended in negative territory with property stocks leading the decline.

Weak global cues on fears about a broader fallout from the charges against Goldman and rate hike worries ahead of the central bank's rate decision on Tuesday weighed on the Indian market Monday. However, the market closed off the day's low, helped by late buying in some heavyweight stocks like Hindalco, Grasim and Bharti Airtel. The benchmark 30-share Sensex fell to a low of 17,277 before recovering considerably to finish at 17,401, down about 191 points or 1.08%, while the 50-share Nifty retreated 59 points or 1.12% to 5,204.

Among the other major markets open for trading, China's Shanghai Composite Index plunged 150.01 points, or 4.79%, to close at 2,980, Singapore's Strait Times Index declined 46.26 points, or 1.54%, at 2,961, Indonesia's Jakarta Composite Index lost 38.25 points or 1.33% at 2,840, and Taiwan's Weighted Index slumped 257.33 points, or 3.17%, to 7,854.

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The major European markets opened Monday’s session lower and are continuing to see weakness. Fears of another backlash to financial firms in the aftermath of SEC’s indictment of Goldman has kept sentiment subdued in the markets.

The French CAC 40 Index is moving down 0.65% compared to a 0.38% drop by the German DAX Index, while the U.K.’s FTSE 100 Index is declining 0.66%.

In corporate news, the Netherlands-based Royal Philips Electronics reported a profit of 200 million euros in the first quarter compared to a loss of 59 million euros in the year-ago period. Sales were up 12% to 5.68 billion euros.

On the economic front, a report released by property website Rightmove showed that the average asking price for a home in the U.K. rose 6% year-over-year in April following a 5.3% rise in the previous month. On a monthly basis, the increase was a much more modest 2.6%.

Ernst & Young’s ITEM Club releases its Spring forecast for the U.K. economy today, with the think tank now more optimistic about the U.K.’s economic performance in 2011 and 2012. While maintaining its forecast for 2009 at 1% growth, the ITEM Club raised its GDP estimate for 2011 to 2.7% from 2.5% estimated earlier and for 2012 to 3.4% from 3.1%. The upbeat expectations are based on strong export and business investment foreseen for the coming years.

Eurostat, the statistical arm of the European Commission, reported that the euro area’s construction output fell a seasonally adjusted 3.3% in February compared to the previous month. On a year-over-year basis, construction output fell 15.2%, steeper than the 10.6% drop in the previous month.

U.S. Economic Reports

Housing reports are likely to dominate the unfolding week's economic events, with the National Association of Realtors' existing home sales report and the Commerce Department's new home sales report, both for March, and the Federal Housing Finance Agency's house price index for February likely to be on the radar. The weekly jobless claims report is also likely to be in focus, given the worrisome jump in first time claims for unemployment benefits in the recent reporting week.

Traders may also focus on the durable goods orders for March to assess the strength in spending on goods designed to last more than 3 years. The Conference Board's leading economic indicators index for March, the Labor Department's producer price index for March and announcements concerning the Treasury auctions of 2-year, 5-year and 7-year notes round up the other economic events of the week.

Apart from these reports, meeting of the G20 finance ministers and central bank governors in Washington on April 22nd-23rd could also generate some interest for market participants, especially due to the swirling rumors that China may revalue its currency.

After three months of declines, existing home sales may have seen a rebound due to the incentive offered by the first time homebuyers tax credit and an improvement in affordability. The pending home sales index, a leading indicator for home sales, rose sharply in March.

Durable goods orders are likely to increase yet again in March, despite Boeing (BA) reporting a decline in orders from a month-ago. The results of the Institute for Supply Management's survey for March were upbeat, with the new orders index remaining near a 5-year high and the order backlogs index contining to climb.

The producer price index is likely to have rebounded in March following the decline in February. BMO Capital Markets estimates the annual rate of producer price inflation to reach a 1-1/2 year high of 5.7%, while at the same time, the core reading is likely to remain more muted at 0.2%. Although the firm believes that the core producer price inflation rate may have bottomed due to commodity price inflation, it is of the view that core consumer price inflation is unlikely to rise, given the still weak pricing power and falling labor costs.

The Conference Board is scheduled to release a report on the U.S. leading index for March at 10 AM ET. The consensus estimate calls for a 1% increase in the leading indicators index for the month.

The index edged up 0.1% month-over-month in February, marking the 11th straight month of growth. While the coincident indicators index rose 0.1%, the lagging indicators index climbed 0.3%.

Out of the 10 components of the leading index, four were positive, with the treasury yield curve and money supply being the biggest positive contributors. On the other hand, consumer expectations and average workweek weighed on the index.

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Abraxis BioScience (ABII) is likely to be in focus after it said overall survival findings from a Phase I/II study of nab-paclitaxel given in combination with gemcitabine increased survival of the first-line treatment of patients with advanced pancreatic cancer. The treatment is currently approved for the treatment of breast cancer after failure of combination chemotherapy for metastatic disease or relapse within six months of chemotherapy.

OSI Pharma (OSIP) could move in reaction to its announcement that the FDA has approved the daily pill Tarceva as a maintenance treatment for patients with locally advanced or metastatic non-small cell lung cancer, whose disease has not progressed after four cycles of platinum-based first-line chemotherapy.

Earnings

Eli Lilly (LLY) reported first quarter non-GAAP earnings of $1.18 per share. Revenues rose 9% to $5.49 billion. Analysts estimated earnings of $1.10 per share on revenues of $5.54 billion. The company now expects 2010 non-GAAP earnings of $4.40-$4.55 per share, while analysts estimate earnings of $4.73 per share.

Hasbro (HAS) said its first quarter net revenues rose 8% to $672.4 million. The company’s earnings rose to 40 cents per share, including a gain of 14 cents per share, compared to 14 cents per share last year. Analysts’ estimates, which typically exclude one-time items, called for earnings of 16 cents per share on revenues of $642.65 million. The company also said its board has authorized the company to buy back an additional $625 million worth of shares.

Halliburton (HAL) reported first quarter income from continuing operations of 28 cents per share compared to 42 cents per share last year. Consolidated revenues rose to $3.8 billion from the year-ago’s $3.91 billion. The consensus estimates called for earnings of 25 cents per share on revenues of $3.76 billion.

Citigroup (C) reported first quarter net income available to common shareholders of 14 cents per share compared to a loss of 16 cents per share last year. Revenues declined to $25.42 billion from $26.97 billion last year. Analysts expected break-even results for the quarter and revenues of $20.77 billion.

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