US & World Daily Markets Financial Briefing 20-04-2010

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Stocks Moving Mostly Higher In Mid-Morning Trading

Stocks are mostly trading to the upside in mid-morning trading on Tuesday amid the day's strong earnings results, led by Goldman Sachs (GS), which unveiled its quarterly report card this morning. The major averages are mostly higher, although the Dow continues to show a lack of conviction.

Goldman Sachs reported first-quarter net earnings of $5.59 per share, up from the $3.39 per share in the same quarter last year, while total revenues for the period came in at $12.78 billion. Wall Street analysts expected the company to earn $4.01 per share on $11.16 billion in revenues.

While the firm's strong earnings have boosted sentiment on a short-term basis, strong reservations remain regarding the firm's long-term future amid recent fraud charges by the SEC.

In other earnings news, Coca-Cola (KO) said its adjusted first-quarter net income was $0.80 per share, topping forecasts for $0.74 per share for the quarter. Quarterly revenues were $7.53 billion, up from $7.17 billion in the prior year quarter but short of the $7.72 billion mark expected on Wall Street.

Johnson & Johnson (JNJ) rolled out adjusted quarterly earnings of $1.29 per share, edging out estimates of $1.27 per share for the quarter. The firm's sales came in at $15.63 billion, just ahead of the $15.62 billion estimated by analysts.

Traders are also focusing on earnings reported after the markets closed for trading on Monday, with IBM Corp. (IBM) said that its first quarter profit rose 13 percent from last year, helped by higher revenue and improved margins.

The company's quarterly earnings per share also came in above analysts' expectations as did its quarterly revenue. ISM also raised its earnings forecast for the full year.

Additionally, Steel Dynamics, Inc. (STLD) said that it swung to a first quarter profit, as sales shot up 91 percent from last year. The company's quarterly earnings per share also came in above analysts' expectations. Steel Dynamics also said it now sees a more stable and positive outlook for the rest of the year.

Amid a light economic calendar, the markets are likely to keep a close eye on Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner as they testify before the House Financial Services Committee regarding the bankruptcy of Lehman Brothers. The testimony is scheduled to begin at 11:00 a.m. ET.

The major averages are currently turning in a mixed performance, as the Dow has slipped below the unchanged line. While the Dow is down 4.61 points or less than 0.1 percent at 11,087.44, the Nasdaq is up 2.64 points or 0.1 percent at 2,482.75 and the S&P 500 is up 4.29 points or 0.4 percent at 1,201.81.

Sector News

Oil service stocks are seeing notable strength in mid-morning trading, as reflected by the 2.4 percent climb by the Philadelphia Oil Service Sector Index. The strength in the sector comes amid a notable rebound by the price of crude oil.

Transocean (RIG) is leading the oil service sector higher, posting a 3.6 percent gain. The upward move has lifted the stock to its best intraday level in three months.

Healthcare provider stocks are also on the rise, with the Morgan Stanley Healthcare Provider Index up by 1.4 percent. Despite the gain, the index remains rangebound near last month's historic high.

Railroad, natural gas and semiconductor stocks are also seeing strong gains, while weakness is visible among computer hardware stocks, resulting in a 1.5 percent loss by the NYSE Arca Computer Hardware Index.

With the retreat, the index is moving lower for a third straight session, falling further from last week's more than nine-year closing high.

Airline, brokerage and trucking stocks are also moving lower, although by much more modest margins.

Stocks Driven By Analyst Comments

Microchip Technology (MCHP) is moving higher following an upgrade at UBS to Buy from Neutral. The broker cited the firm's new products investment and limiting layoffs as reasons for the upgrade. The stock is up by 2.4 percent, climbing to its best intraday level in nineteen months.

Interpublic Group of Companies Inc. (IPG) is also on the rise after being upgraded at Argus from Hold to Buy. The stock has gained 7.1 percent, reaching its highest intraday price in nearly two years.

On the other hand, Dollar Financial Corp. (DLLR) is under pressure after a downgrade by analysts at Jefferies from Buy to Hold. Shares are currently down by 1.1 percent, moving further off of the more than two -year high set last week.

TSX May Open Higher Amid BOC Rate Decision, Commodities

Canadian stocks are likely to open higher Tuesday amid a recovery in the commodities prices and on the just released interest rate decision by the Bank of Canada.

Today BOC announced that it is maintaining its target for the overnight rate at a record low of 0.25%. The bank rate was left unchanged at 0.5% and and the deposit rate at 0.25%. The bank now projects that the economy will grow by 3.7% in 2010 before slowing to 3.1% in 2011 and 1.9% in 2012.

On Monday, the S&P/TSX Composite Index gained 32.31 points or 0.27% to 12,102.97. The price of oil edged up $0.92 to $82.37 a barrel and the price of gold gained $7.40 to $1,142.60 an ounce.

Financial stocks may be in play following encouraging quarterly earnings reports by major banks from south of the border. Close to the heels of consensus beating earnings reports from JP Morgan, Bank of America and Citibank, Goldman Sachs reported first quarter net earnings of $5.59 per share. Analysts were expecting the company to record earnings of $4.01 per share this quarter.

In corporate news from Canada, book retailer Indigo Books & Music announced a 10% increase in the company's quarterly dividend, raising it from C$0.10 to C$0.11 per common share, equating an annual dividend of C$0.44 per share, up from C$0.40 in 2009.

IMAX Corp. announced a new joint venture agreement with Tokyu Recreation to install five digital IMAX theater systems in Japan.

Communication and media company Rogers Communications and drug retailer Shoppers Drug Mart announced a pilot project in which Rogers and Fido wireless products will be sold in more than 30 Shoppers Drug Mart stores in a key regional area.

Insurance company Kingsway Financial Services said it added 3.9% of stake in Kingsway Linked Return of Capital Trust taking its total stake to about 26.72%

Wood pulp maker Tembec announced that its European subsidiary, Tembec SAS has signed a share purchase agreement with Paper Excellence B.V for the acquisition of 100% of the shares of Tembec Saint-Gaudens SAS and Tembec Tarascon SAS. Tembec will record a gain of about C$23 million in its financial results for the quarter ending June 2010.

Oil and gas firm Provident Energy Trust said it will combine its upstream business with Midnight Oil Exploration in a C$460 million transaction.

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Asian Markets Rebound On Earnings Optimism

The markets in Asia recovered from yesterday's sharp decline and ended in positive territory on Tuesday with modest gains taking cues from Wall Street where the major averages ended in positive territory lifted by buoyant results from Citigroup as well as reports that the SEC vote on charging Goldman Sachs was split. Bargain hunting following sharp declines in the previous session also lifted market sentiment as traders awaited further developments on Goldman Sachs and a slew of earnings from the U.S. However, the market in China ended in negative territory with marginal loss while the Japanese market ended mixed around the unchanged line..

In Japan, the benchmark Nikkei-225 Index fell 8.09 points, or 0.1%, to 10,901, while the broader Topix index of all First Section issues rose 1.27 points, or 0.1%, to 972.

On the economic front, a report released by the Ministry of Economy, Trade and Industry revealed that an index measuring tertiary industrial activity in the country declined a seasonally adjusted 0.2% in February compared to the previous month. Economists expected the index to contract 1% for the month following 2.9% increase in the previous month.

Trading companies ended in negative territory amid concerns that the rate hike announced in India might curb demand. Mitsubishi Corp. fell 1.81%, Mitsui & Co., lost 1.99%, Itochu Corp. slipped 2.30%, Marubeni Corp. shed 1.39%, and Sumitomo Corp. declined 0.63%.

Real estate related stocks also ended weaker. Sumitomo Realty & Development fell 1.47%, Mitsubishi Estate slipped 0.95%, Mitsui Fudosan shed 0.80% and Tokyu Land Corp. edged down 0.26%. However, Heiwa Real Estate managed to end in positive territory with a gain of 0.70%.

Mixed trading was witnessed among steel stocks. JFE Holdings declined 0.43%, Sumitomo Metal Industries slipped 0.37%, Nippon Steel Corp., shed 0.29% and Pacific Metals edged down 0.13%. However, Nisshin Steel managed to end in positive territory with a gain of 1.03% and Kobe Steel ened unchanged from its previous close.

Banking stocks ended in positive territory taking cues from Wall Street. Sumitomo Mitsui Financial advanced 0.79%, Mitsubishi UFJ Financial added 0.20%, Mizuho Financial gained 0.54% and Resona Holdings rose 0.34%.

Automotive stocks ended in positive territory on optimism about recovery. Suzuki Motor Corp. advanced 0.88%, Honda Motor Corp. added 0.47%, Isuzu Motors surged up 4.58%, Toyota Motor Corp. gained 0.28%, and Mazda Motor Corp. climbed 2.72%.

In Australia, the bench mark S&P/ASX 200 Index advanced 10.70 points, or 0.22% to close at 4,926, while the All-Ordinaries Index ended at 4,949, representing a gain of 10.10 points, or 0.20%.

On economic front, minutes of the recent board meeting of Reserve Bank of Australia revealed that the members of the policy board felt this month that a rate increase was warranted given a faster than expected recovery in the country's terms of trade. The members also hinted that more rate hikes will be necessary as the Australian economy continues its robust rebound from the global downturn.

The members saw the latest increase as "a further step in the process of returning interest rates to more normal levels"."Since lending rates were still a little below average, members expected that they would probably need to rise further in the period ahead," the minutes said.

Banks led the gains following buoyant results from Citigroup (C ) revealed yesterday. ANZ Bank added 0.20%, Commonwealth Bank of Australia advanced 0.29%, National Australia Bank climbed 2.67% and Westpac Banking Corp. gained 0.29%. Investment banker Macquarie Group however, bucked the trend and ended in negative territory with a loss of 0.36%.

Minerals and mining stocks also advanced. Fortescue Metals gained 1.57%, Gindalbie Metals climbed 3.09%, Iluka Resources rose 1.26%, Macarthur Coal advanced 0.85%, Mineral Resource surged up 4.62%, Mincor Resources gained 2.62% and Rio Tinto added 0.76%. Oz Minerals and Murchison Metals remained unchanged from previous close. However, BHP Billiton bucked the trend and ended in negative territory with a marginal loss of 0.09%.

Oil stocks also ended in positive territory. Woodside Petroleum advanced 0.74% and Santos Ltd added 0.64%. Oil Search Ltd remained unchanged from previous close. However, Origin Energy bucked the trend and ended in negative territory with a loss of 0.24%.

Gold stocks ended in negative territory. Lihir Gold fell 2.02% and Newcrest Mining was down 0.79%.

Retail stocks ended in negative territory. David Jones shed 0.88%, Harvey Norman plunged 5.32%, JB Hi-Fi Ltd fell 1.55%, Myer Holdings slipped 0.95%, Wesfarmers lost 1.22% and Woolworths declined 0.51%.

In Hong Kong, the benchmark Hang Sang Index ended in positive territory with a gain of 218.21 points, or 1.02% at 21,623, lifted by positive closing on Wall Street in the previous session after Citigroup reported better than expected results and International Business Machines also reported better results. Positive trading across other markets in the region on bargain hunting and optimism about better than expected earnings from US companies also lifted market sentiment. China-related stocks, resources stocks and banks advanced while property stocks ended weaker during the session.

Positive sentiment in global markets and a small hike in key policy rates helped the Indian market bounce back on Tuesday after a sell-off in the previous session. However, profit taking in the afternoon session and selling in heavyweight IT stocks tempered the early gains. Infosys fell a percent, TCS lost 2.75% and Wipro ended down 1.27%. After steadily rising to a high of 17,560, the 30-share Sensex pared its gain and ended up 60 points or 0.34% at 17,461, while the 50-share Nifty rose 26 points or 0.51% to 5,230.

Among the other major markets open for trading, China's Shanghai Composite Index ended in negative territory with a marginal loss of 0.76 points, or 0.03%, at 2,980. However, Singapore's Strait Times Index gained 20.44 points, or 0.69%, at 2,981, Indonesia's Jakarta Composite surged up 50.85 points or 1.79% at 2,891, and Taiwan's Weighted Index rose 46.20 points, or 0.59%, to 7,900.

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The European markets are rebounding on Tuesday after declining in the past two sessions. The French CAC 40 Index is rising 1.27% compared to a 1.31% gain by the German DAX Index, while the U.K.’s FTSE 100 Index is advancing 0.79%.

In corporate news, Swiss drug giant Novartis (NVS) reported that its first quarter earnings rose to $2.95 billion from $1.98 billion last year, as sales climbed 25% year-over-year to $12.13 billion.

U.K. department store Tesco reported a pre-tax profit of 3.2 billion pounds for the full year ended February 2010, up 9% year-over-year, and sales of 56.9 billion pounds, up 6% year-over-year.

Reflecting by higher fuel prices, stronger price increases for communication products and a slowdown in the increase in the prices of clothing, the U.K.’s consumer price inflation rate quickened to 3.4% in March compared to 3% in February. Economists had expected a more modest 3.1% increase. Capital Economics commented that the monetary policy committee is most likely to overlook the increase due to the vast amount of spare capacity in the economy.

The results of a survey by the Zew Center of Economic Research showed that its indicator of economic sentiment in Germany rose to 53 in April from 44.5 in March. The current month’s reading represents the first increase in seven months. The indicator assessing the current economic situation rose for the eleventh straight month.

The report is likely to reinforce the positive view about the German economy. ING expects the Germany economy to show very meager growth in the first quarter. However, in the coming quarters, one can expect positive surprises due to a catching up of construction work, government investment and continuing demand for German products.

Earnings

Goldman Sachs (GS) reported first quarter earnings of $5.59 per share compared to $3.39 per share in the year-ago period. Net revenue rose to $12.78 billion from $9.43 billion in the year-ago period. Analysts estimated earnings of $4.01 per share on revenues of $11.16 billion.

Bank of New York Mellon (BK) said its first quarter income from continuing operations rose to 49 cents per share from 31 cents per share in the year-ago period. The recent quarter’s results included a charge of 10 cents per share. Analysts’ estimate, which typically exclude one-time items called for earnings of 53 cents per share.

Coca-Cola’s (KO) first quarter net revenues rose 5% to $7.53 billion. The company’s earnings rose to 69 cents per share from 58 cents per share in the year-ago period. The company said its comparable earnings rose 23% to 80 cents per share. Analysts estimated earnings of 74 cents per share on revenues of $7.72 billion.

Johnson & Johnson (JNJ) reported that its first quarter sales rose to $15.63 billion from the year-ago’s $15.03 billion. On an adjusted basis, the company reported earnings of $1.29 per share, up 2.4% year-over-year. Analysts estimated earnings of $1.27 per share on revenues of $15.62 billion.

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International Business Machines (IBM) declined in Monday’s after hours session despite reporting first quarter earnings of $1.97 per share, up 16% year-over-year. The company’s revenues rose 5% to $22.9 billion. The consensus estimates had called for earnings of $1.93 per share on revenues of $22.75 billion.

Gilead Sciences (GILD) could see weakness after it said it terminated the Phase II clinical trial of GS 9450 in patients with chronic hepatitis C. The company attributed its decision to reports of significant laboratory abnormalities and adverse events in a number of clinical study participants.

H.B. Fuller (FUL) receded in Monday’s after hours session after it said it has entered into a new $200 million senior unsecured multi-currency revolving credit facility. The company said the new facility matures on June 19th, 2013 and replaces its existing revolving credit facility.

Steel Dynamics (STLD) may see buying interest after it reported first quarter net income of 29 cents per share compared to a net loss of 48 cents per share in the year-ago period. Net sales rose 32% year-over-year to $1.6 billion. Analysts estimated earnings of 26 cents per share on revenues of $1.37 billion.

Brown & Brown (BRO) receded in Monday’s after hours session after it reported that its first quarter net income fell to 31 cents per share from 34 cents per share last year. Revenues fell to $252.27 million from the year-ago’s $263.58 million. The consensus estimates called for earnings of 30 cents per share on revenues of $250.24 million.

RLI Corp. (RLI) also declined in Monday’s after hours session after it reported that its first quarter operating earnings fell to 94 cents per share from $1.03 per share in the year-ago period. Consolidated revenues climbed 26.8% year-over-year to $139.33 million. The results trailed the consensus estimates that called for earnings of 96 cents per share on revenues of $133.96 million.

Werner Enterprises (WERN) may see weakness after it reported first quarter earnings of 15 cents per share, below the consensus estimate of 16 cents per share. However, earnings increased from 10 cents per share last year. Revenues were up 8% year-over-year to $425.1 million. The consensus estimates called for revenues of $419.37 million.

Zions Bancorp. (ZION) is expected to be in focus after it reported a net loss applicable to common shareholders of 57 cents per share compared to a loss of $7.47 per share last year. The results for the recent quarter included one-time items having a net negative impact of 17 cents per share. Analysts estimated a loss of 95 cents per share for the quarter.

Kimco Realty (KIM) could see some activity after its said its COO David Lukes has resigned, effective April 23rd, to take up the position of CEO of Mall Properties. The company also said its CFO Michael Pappagallo will assume the additional role of COO on an interim basis.

Intuit (INTU) is expected to move in reaction to its announcement that its season-to-date TurboTax federal units increased 10% year-over-year. At the same time, Procter & Gamble (PG) could gain ground after it announced a 9.5% increase in its dividend to $0.4818 per share on its common stock.

Atheros Communications (ATHR) rallied strongly in Monday’s after hours session after it reported that its first quarter revenues rose 144% to $214..7 million. On a non-GAAP basis, the company reported earnings of 57 cents per share compared to 6 cents per share last year. The consensus estimates called for earnings of 51 cents per share on revenues of $201.20 million.

Renaissance Learning (RLRN) is likely to gain ground after it announced that its first quarter revenues rose 11.6% year-over-year to $32.2 million. The company’s earnings were 20 cents per share and included a tax benefit of 4 cents per share compared to 13 cents per share last year.

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