US & World Daily Markets Financial Briefing 21-04-2010

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Earnings A Bright Spot Amid Continuing Uncertainties

The major U.S. index futures are pointing to a mixed opening on Wednesday. With little clues from Main Street, the markets are left to the mercy of earnings to give direction. Fortunately, earnings continue to be encouraging. Apple (AAPL) reported stellar quarterly results, with its performance showing that consumers are still spending despite the recession. That said, the dollar’s strength amid the weakening of the euro following apprehensions over the resolution of Greece’s debt crisis should weigh down on commodities.

Strong earnings kept sentiment upbeat on Tuesday, as traders shed their fears about possible trouble brewing on the financial horizon and focused on the positives. The Dow Industrials, which opened modestly higher, surrendered its gains an hour into the trading before recovering and advancing for the rest of the session. The index closed up 25.01 points or 0.23% at 11,117, holding above the 11,000 level.

While the Nasdaq Composite Index rose 20.20 points or 0.81% to 2,500, the S&P 500 Index gained 9.65 points or 0.81% to close at 1,207

U.S. Economic Reports

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended April 16th at 10:30 AM ET.

The oil inventory report for the week ended April 9th showed that crude oil stockpiles declined by 2.2 million barrels to 354 million barrels. Nevertheless, inventories of crude oil remained above the upper boundary of the average range.

Gasoline stockpiles fell by 1.1 million barrels but remain above the upper limit of the average range. On the other hand, distillate stockpiled rose by 1.1 million barrels and remained above the upper boundary of the average range. Refinery capacity averaged 83.4% over the four weeks ended April 9th compared to 82.2% in the previous week.

Currency, Commodity Markets

Crude oil futures for June delivery are trading down $0.19 at $83.66 a barrel in their first session as the front-month contract. The May futures expired on Tuesday at $83.45 a barrel, a gain of $2.

Gold futures are currently up $3.60 at $1,142.80 an ounce. In the previous session, the precious metal rose $0.40 to $1,139.60 an ounce.

On the currency front, the U.S. dollar is trading at 93.176 yen compared to 93.220 yen at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.3387.

TSX Poised For Mixed Opening Amid Flat Commodity Prices, Strong Earnings

Bay Street stocks may struggle to sustain recent gains Wednesday morning amid flat commodities prices. However, the continued flow of encouraging earnings reports from the south of the border might help sentiment.

U.S. stock futures were mixed ahead of open Wednesday.

On Tuesday, the S&P/TSX Composite Index edged up 10.56 points or 0.09% to 12,113.53. Yesterday, the Bank of Canada left its overnight rate unchanged at a record low of 0.25%.

The price of oil eased $0.03 to $83.82 a barrel ahead of the weekly inventories data from EIA. The price of gold edged up $1.20 to $1,139.80 an ounce.

Meanwhile, the Canadian dollar rose to its 23-month high versus the U.S. dollar following the BOC's decision to drop its conditional commitment to keep rates on hold until end of June.

Blackberry maker Research In Motion may be in play after Apple Inc. reported quarterly earnings of $3.33 per share, up from $1.79 per share in the year ago period. Apple said it sold a record 8.8 million of its popular iPhone smart phones, more than double the number sold a year ago.

In corporate news from Canada, natural resources company Teck Resources reported first-quarter net earnings of C$1.53 per share, compared to C$0.50 per share in the same quarter last year.

Oil and natural gas-company EnCana Corp. reported improved first-quarter net earnings of $1.97 per share, up from $1.28 per share in the year ago quarter. The company attributed the increase to a $912 million gain from its hedging program. It said it will pay a quarterly dividend of $0.20 per share. Analysts were expecting the company to report earnings of $0.33 per share this quarter, excluding special items.

Oilfields services company Pure Energy Services has completed the purchase of the USA cased-hole electric wireline assets and operations of Cathedral Energy Services in exchange for its performance drilling assets and operations and a cash payment of about C$2.1 million.

Producer of platinum group metals North American Palladio announced plans to sell at least 15 million units at C$5.00 per unit.

Communications network company Aastra Technologies reported lower first quarter net earnings of C$0.28 per share, compared to C$1.02 per share in the previous year quarter.

METRO Inc. reported improved second-quarter net earnings of C$0.74 per share, compared to C$0.68 per share last year. The company declared a quarterly dividend of C$0.17 per Class A Subordinate Share and Class B Share payable June 8, 2010, an increase of 23.6% over last year.

In economic news, Statistics Canada said the country's wholesale sales fell 1.2% in February after rising for the past three months. The decline was mainly due to lower sales of motor vehicle and parts, and the machinery, equipment and supplies sub-sectors.

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Most Asian markets advanced for the second straight session on Wednesday, propelled higher by earnings optimism, which dispelled the gloom cast by Goldman’s indictment and other economic uncertainties.

Japan’s Nikkei 225 average, which bucked the uptrend in the region on Tuesday, opened higher and advanced steadily throughout the session to close up 189.37 points or 1.74% at 11,090.

Most index components advanced in the session, with Fuji Electric Holding (up 5.45%), Hino Motors (up 6.25%), Kajima (up 4.41%), Kawasaki Kisen (up 4.24%), Mitsubishi Paper (up 4.24%), Mitsui OSK Lines (up 4.09%), Nitto Boseki (up 6%), Sumitomo Heavy (up 4.47%), Taiyo Yuden (up 5.05%) and Tokai Carbon (up 4.19%) among the notable gainers.

On the economic front, Japan’s Cabinet Office reported that its leading economic index rose to 98.5 in February from 97.9 in January, marking the strongest increase since 2007. However, the coincident index edged down 0.2 points to 100.5.

Australia’s All Ordinaries opened unchanged, but it rose sharply in early trading before consolidating its gains over the rest of the session. The index ended up 31 points or 0.63% at 4,981.

Energy stocks led the day’s advance on a day when the market witnessed broad based buying, although consumer staple stocks experienced some weakness. Among the miners, BHP Billiton declined after it revealed that an internal investigation following a SEC investigation showed possible violation of anti-graft laws. The company also said its iron ore production rose 11% year-over-year in the first quarter.

Rio Tinto also slipped slightly, although other mining stocks advanced. In the banking space, ANZ, Commonwealth Bank and Westpac rose, while National Australia Bank receded.

Hong Kong’s Hang Seng Index, which showed nervousness throughout the session, pulled back decisively into negative territory in late trading. The index closed down 112.45 points or 0.52% at 21,511. Most stocks, barring resource and utility stocks, showed weakness in the session.

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KeyCorp. reported a first quarter loss from continuing operations of 11 cents per share compared to a loss from continuing operations of $1.03 per share in the year-ago period. Analysts estimated a loss of 30 cents per share.

United Technologies said that its first quarter earnings rose 19% to 93 cents per share. The earnings included a charge of 5 cents per share. Revenues fell 1% to $12.1 billion. Analysts estimated earnings of 90 cents per share on revenues of $12.26 billion. The company also raised the low end of its 2010 earnings guidance by 10 cents to $4.50 per share while maintaining the upper end at $4.65 per share. The company expects revenues of $54 billion to $55 billion. The consensus estimates call for earnings of $4.63 per share on revenues of $54.74 billion.

Sun Trust Bank reported a first quarter net loss available to common shareholders of 46 cents per share compared to a loss available to common shareholders of $2.49 per share in the year-ago period. Total revenues fell 14.2% to $1.9 billion. Analysts estimated a loss of 58 cents per share on revenues of $2.01 billion.

Boeing reported that its first quarter revenues were $15.22 billion, down 8% year-over-year. The company’s earnings declined to 70 cents per share from 86 cents per share last year. Analysts estimated earnings of 64 cents per share on revenues of $15.23 billion. The company also downwardly revised its earnings estimate for 2010 to $3.50 to $3.80 per share, including a previously announced charge of 20 cents per share, while analysts estimate earnings of $3.84 per share.

AT&T said its first quarter earnings before charges were 42 cents per share compared with 53 cents per share last year. Excluding one-time items, the company reported earnings of 55 cents per share. Consolidated revenues edged up 0.3% to $30.6 billion. Analysts estimated earnings of 55 cents per share on revenues of $30.72 billion.

McDonald’s reported first quarter revenues of $5.61 billion and earnings per share rose 15% to $1 per share. Analysts estimated earnings of 96 cents per share on revenues of $5.53 billion.

Elan reported that its first quarter revenues rose to $310.5 million from the year-ago’s $245.1 million. The company reported break-even results compared to a loss of 22 cents per share in the year-ago period. Analysts estimated a loss of 4 cents per share on revenues of $298.60 million.

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Apple could move to the upside after it reported second quarter revenues of $13.50 billion, up from $9.08 billion last year, with the sales upside driven by strong sales of its iPhones and Macintosh computers. The Street estimated sales of $12.04 billion. The company’s earnings rose to $3.33 per share from $1.79 per share last year, exceeding the $2.45 per share consensus estimate. For the third quarter, the company estimates earnings of $2.28-$2.39 per share on revenues of $13 billion to $13.4 billion. Analysts estimate earnings of $2.70 per share on revenues of $12.9 billion.

Mid-America Apartment Communities may gain ground after it announced that it expects first quarter funds from operations to exceed its prior guidance. The company expects funds from operations of 96 cents to $1 per share compared to its earlier guidance of 86-96 cents per share. The company attributed the optimism to solid occupancy, strong collections performance and better than anticipated fee income.

Tupperware is likely to see some buying interest after it reported that its first quarter adjusted earnings rose 69% year-over-year to 73 cents per share. Sales rose 20% to $557.1 million. Analysts estimated earnings of 62 cents per share on revenues of $546.73 million. The company expects second quarter sales growth of 7%-9% and adjusted earnings of 95 cents to $1 per share. The company upwardly revised its adjusted full year guidance, now expecting adjusted earnings of $3.68-$3.78 per share and sales growth of 6%-8%. The consensus estimates call for earnings of $3.56 per share on revenues of $2.32 billion, up 9.2%.

Phillips-Van Heusen is likely to react to its announcement that it has commenced an offering of 4.5 million shares of its common stock and an offering of $525 million of senior unsecured notes due 2020. The company said it intends to use the net proceeds of the common stock offering for its impending purchase of Tommy Hilfiger. Separately, the company raised its non-GAAP earnings for the first quarter to 80 cents per share compared to its earlier estimate of 73-75 cents per share. The company also lifted its full year non-GAAP earnings guidance to $3.25-$3.33 per share. Analysts estimate 74 cents per share for the quarter and $3.55 per share for the full year.

Yahoo may also see some activity after it reported that its first quarter net income rose to 22 cents per share from 8 cents per share in the year-ago period. The recent quarter’s earnings included gains of 7 cents per share. Analysts estimate, which typically excludes one-time items, called for earnings of 9 cents per share. Revenues, excluding traffic acquisition costs, were $1.13 billion compared to the $1.17 billion consensus estimate. The company expects second quarter revenues of $1.6 billion to $1.68 billion.

Cree could also be in focus after it reported that its third quarter revenues rose to $234.1 million from $131.1 million last year. On a non-GAAP basis, the company’s earnings rose to 47 cents per share from the year-ago’s 13 cents per share. The consensus estimates called for earnings of 44 cents per share on revenues of $223.47 million. For its fourth quarter, the company estimates revenues of $255 million to $265 million and non-GAAP earnings of 48-51 cents per share. Analysts estimate earnings of 47 cents per share on revenues of $241.81 million.

Gilead Sciences may move in reaction to its announcement that its first quarter revenues rose 36% to $2.09 billion. The company’s non-GAAP earnings rose to 99 cents per share from 66 cents per share last year. Analysts estimated earnings of 96 cents per share on revenues of $2.07 billion.

Salesforce.com  may also react in reaction to its announcement that it has signed an agreement to buy Jigsaw, a provider of crowd-sourced data services in the cloud.

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