US & World Daily Markets Financial Briefing 21-08-2009

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Stocks To Focus on Data Reinforcing Growth View

The major U.S. index futures are pointing to a higher opening on Friday. Positive economic data points that emerged from Europe set the stage for a positive tone after Asian stocks struggled during the day. With economic reports from Europe reinforcing the view that manufacturing and services activity are on a rebound, traders bid up commodities, which should be market positive. That said reports that China may announce measures to rein in bank lending should act as a dampener. Stocks may also stay focused on the existing home sales report and a speech by Federal Reserve Chairman Ben Bernanke, scheduled to be delivered during the day.

After opening mostly lower on Thursday, U.S. stocks rose moderately in early trading, encouraged by a few positive economic readings. Following some sideways movement, the major averages saw some further upside in late trading, resulting in the third straight session of gains.

At the close of trading, the Dow Industrials was up 70.89 points or 0.76% at 9,350. Meanwhile, the Nasdaq Composite climbed 19.98 points or 1.01% to end at 1,989 and the S&P 500 Index gained 10.91 points or 1.09% to close at 1,007.

Twenty-three of the thirty Dow components ended the session higher. Cisco Systems (CSCO) (up 3.06%) was the top gainer in the session, while American Express (AXP), Boeing (BA), General Electric (GE), JP Morgan Chase (JPM) and United Technologies (UTX) all ended up over 2%.

Among the sector indexes, the NYSE Arca Airline Index rose 2.08%, the NYSE Arc Biotechnology Index gained 1.42%, the KBW Bank Index moved up 2.87% and the NYSE Arca Securities Broker/Dealer Index advanced 1.94%. The NYSE Arca Oil Index, the NYSE Arca Gold Bugs Index, the Philadelphia Oil Service Index and the Philadelphia Housing Sector Index gained about 1% each.

In the technology space, the Philadelphia Semiconductor Index rose 1.01%, the NYSE Arca Internet Index advanced 1.20% and the NYSE Arca Networking Index surged up about 2%.

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Canadian Stocks May Struggle To End Week On A High Note

Canadian stocks will look to break out of a stubborn range on Friday after seeing only nominal gains in the previous two sessions. However, trading is likely to be subdued today, with little first-tier economic data or earnings news to drive interest in equities.

On Thursday, the S&P/TSX Composite Index rose 13.68 points to 10,700.51, helped by strength among mining stocks. Conflicting indications about the health of the global economy have caused the summer rally in equities to peter out over the past week.

Energy stocks are coming off a lackluster performance, but may enjoy some buying interest today after the price of crude jumped above $73 a barrel.
 
Enterprise content management software provider Open Text Corp. Thursday after the bell reported a drop in profit for the fourth quarter, even as revenues increased from last year. Excluding certain one-time items, quarterly earnings per share grew 18%, and topped market projections.

Ontario Teachers' Pension Plan bought the media company CTV's remaining 7.7 per cent stake in Maple Leaf Sports, boosting its stake in the parent company of the Toronto Maple Leafs.

European shares are in positive territory after data showed the eurozone economy stabilized in August. Asian stocks were mostly weaker overnight. US stocks futures are pointing a bit higher.

Oil prices have shown a notable upward move in morning trading on Friday, moving back to the upside after giving back some ground in the previous session. Optimism about an economic recovery in the second half has helped to push oil prices higher in recent sessions.

In its first day as the front-month contract, crude for October delivery is currently up $0.94 at $73.85 a barrel after ending the previous session down $0.92 at $72.91 a barrel. Earlier in the session, the price of oil rose as high as $74.48 a barrel.

The pullback by oil prices in the previous session came as traders cashed in on the rally that was seen on Wednesday, although some upbeat economic data helped to limit the downside.

A report released by the Philadelphia Federal Reserve showed an unexpected expansion in manufacturing activity in the mid-Atlantic region in month of August, while the Conference Board's leading economic indicators index rose for the fourth consecutive month in July.
 
Economic data may also attract some attention later this morning, with the National Association of Realtors due to release its report on existing home sales in the month of July. Economists expect existing home sales to edge up to a 5.0 million unit rate.

Traders are also likely to keep an eye on a speech by Federal Reserve Chairman Ben Bernanke, who is due to speak about the recent financial crisis at the Kansas City Fed's annual conference in Jackson Hole, Wyoming.

In other commodities trading, the price of gold has moved sharply higher after seeing some weakness in the previous session. Gold for December delivery is currently up $14.50 at $956.20 an ounce after ending Thursday's trading down $3.10 at $941.70 an ounce.

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Asian Markets End Mixed; Concerns About Recovery Linger

The Asian markets ended mixed on Friday with the markets in China, India, South Korea and Indonesia ending positive territory while the markets in Australia, Japan, Singapore and Taiwan ended in negative territory.

In Japan, benchmark Nikkei 225 Index ended at 10,238. representing a loss of 145.21 points, or 1.40%, while the broader Topix index of all first section stocks was down 11.25 points, or 1.17%, to 947.

Light sweet crude oil price for September delivery ended at $72.49 a barrel in electronic trading, down $0.42 from its previous close $72.91 a barrel in New York on Thursday.

Reports in the U.S., which is the major market for Japanese automakers, that the popular "cash for clunkers" program would end by August 24 lead automakers lower. Toyota Motor Co., maker of the Prius hybrid and Corolla cars, declined 2.93%, Honda Motor fell 4.06%, Nissan Motor slumped 5.18% and Hino Motors lost 2.56%.

Exporters declined following the strengthening of the local currency against the US dollar. Sony Corp. declined 1.41%.

Metal stocks ended weaker following drop in commodity prices. Sumitomo Metal Mining lost 3.39%, Sumitomo Electric Industries fell 3.33% and Mitsui Mining & Smelting slumped 4.69%.

In Australia, the benchmark S&P/ASX200 Index shed 86.90 points, or 1.99%, to close at 4,291, while the All-Ordinaries Index ended at 4,306, representing a loss of 85.70 points, or 1.95%.
 
Banks declined sharply after Westpac Banking stated that flat quarterly earnings and a rise in bad debts is weighing down the banking sector. ANZ Bank lost 3.01%, Commonwealth Bank of Australia fell 3.18%, National Australia Bank slumped 4.39% and Westpac Banking declined 2.45%.

Telecommunications company Telstra declined 4.93% after federal government's Future Fund unloaded shares of the company equivalent to A$2.4 billion in the market in the previous session.

APN News & Media, the company that publishes more than 100 papers in Australia and New Zealand, reported a 53% drop in net profit for the first half, hurt by slumping advertising revenue. The shares declined 5.37%.

Apparel manufacturer Billabong International declined 5.10% following disappointing results.

Mining and metal stocks ended weaker. BHP Billiton declined 1.40%, Rio Tinto fell 2.96%, Fortescue Metals lost 1.55%, Gindalbie Metals shed 1.23%, and Oz Minerals slipped 0.90%.

Mixed trading was witnessed among energy stocks. Woodside Petroleum shed 0.80%, Oil Search lost 1.05% and Origin Energy fell 1.50%. However, Santos bucked the trend and advanced 1.77%.

In Hong Kong, the Hang Seng Index ended in negative territory with a loss of 129.84 points, or 0.64% at 20,199, on concerns about the pace of recovery in the global economy in general and mainland China in particular. Banks and resource stocks ended in negative territory while bargain hunting at lower levels in property stocks limited the losses.

In South Korea, the benchmark KOSPI Index ended in positive territory with a gain of 4.59 points, or 0.29%, at 1,581, following Wall Street where the indices ended higher for third straight session. Technology stocks and automotive stocks led the gains on hopes of recovery later in the year. However, profit taking at late session ahead of the weekend limited the gains.
 
The stock market in India ended in positive territory following positive economic data in Europe and expectations of recovery later in the year. The BSE Sensex finished at 15,241, up 228.51 points or 1.52% and the S&P CNX Nifty rose 75 points or 1.69% to 4,529.

Among the other major markets in the region, China's Shanghai Composite Index gained 1.69% or 49.19 points, to 2,961 and Indonesia's Jakarta Composite Index added 0.23% or 5.26 points to close at 2,334. However, Singapore's Strait Times Index lost 14.71 points, or 0.57% to close at 2,545 and Taiwan's Weighted Index, ended in negative territory with a loss of 78.43 points, or 1.16%, at 6,655.

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The major European markets are advancing on Friday, with financial and utility stocks seeing firm buying interest. The major indexes in the region, namely the French CAC 40 Index, the German DAX Index and the U.K. FTSE 100 Index, are all gaining more than 1%.

U.S. Economic Reports

The National Association of Realtors is scheduled to release its report on existing home sales for July at 10 AM ET. Economists estimate existing home sales of 5 million for the month.

Existing home sales rose 3.6% to a seasonally adjusted annual rate of 4.89 million units in June. Economists had estimated sales of 4.84 million for the month. May sales were revised down by 50,000 to 4.72 million units. Sales have been increasing for each of the past three months and existing home sales are now at their highest level since October 2008.

The months-supply of new homes fell to 9.4 in June from 9.8 in May and is now at the lowest level since December 2008. Distressed sales accounted for 31% of the overall sales. The median price of an existing home rose to $181,800, although it is down 15.4% from the year-ago period.

Bernanke is due to speak on 'the Year of Crisis' at the Kansas City Fed's annual Jackson Hole conference at 10 AM ET.

Earnings

Ann Taylor Stores (ANN) reported second quarter non-GAAP earnings of 6 cents per share compared to 53 cents per share last year. Net sales fell to $470.2 million from $592.3 million. Analysts estimated earnings of 3 cents per share on revenues of $472.21 million.

J.M. Smucker (SJM) reported that its first quarter earnings rose to 83 cents per share from 77 cents per share in the year-ago period. On an adjusted basis, the company’s earnings were 92 cents per share, ahead of the 80 cents per share consensus estimate.

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Foot Locker (FL) is likely to see weakness after it announced that it broke even in the second quarter compared to a profit of 11 cents per share in the year-ago period. Revenues fell 16% to $1.10 billion. Analysts estimated earnings of 6 cents per share on revenues of $1.17 billion.

Bristol-Myers Squibb (BMY) could be in focus after it said it would extend its previously announced cash tender offer to buy all shares of Medarex (MEDX) until midnight on August 26, 2009. The extension came in connection with the parties reaching an agreement to settle the legal proceedings related to the tender offer.

RadioShack (RSH) is likely to see some strength after it announced that it would increase its share repurchase program by an additional $200 million. In total, the company has the authority to buy back $290 million worth of shares under the existing share repurchase program.

Mentor Graphics (MENT) is likely to trade higher after it reported a second quarter loss of 22 cents per share compared to a loss of 19 cents per share last year. On an adjusted basis, the company reported a profit of 2 cents per share. Revenues were almost unchanged at $182.6 million. The consensus estimates had called for a loss of 10 cents per share on revenues of $165.8 million. The company expects third quarter adjusted earnings of 1 cent per share and revenues of $183 million, which exceeded the consensus estimates that called for a loss of 2 cents per share on revenues of $179.6 million.

Oracle (ORCL) may see some buying interest after it said the Justice Department has approved its proposed acquisition of Sun MicroSystems (JAVA). Salesforce.com (CRM) may also gain ground after it reported second quarter earnings of 17 cents per share on revenues of $316.1 million. Analysts estimated earnings of 15 cents per share on revenues of $312.5 million. For the third quarter, the company expects earnings of 15-16 cents per share on sales of $323 million to $324 million. The company’s full year guidance calls for earnings of 60-61 cents per share on revenues of $1.27 billion to $1.28 billion. Analysts estimate earnings of 60 cents per share on revenues of $1.26 billion.

Aeropostale (ARO) could be in focus after it said its second quarter earnings rose to 57 cents per share from 31 cents per share in the same period last year. Revenues climbed 20% to $453 million. The Street had estimated earnings of 56 cents per share on revenues of $451.9 million. The company forecast third quarter earnings of 76-78 cents per share compared to the 76 cents per share consensus estimate.

Brocade Communications (BRCD) may move in reaction to its announcement that its third quarter adjusted earnings fell to 12 cents per share from 16 cents per share last year. Revenues rose to $493.3 million from $365.7 million. Analysts estimated earnings of 11 cents per share on revenues of $503.67 million.

Pacific Sunwear (PSUN) is likely to react to its announcement that it posted a second quarter loss of 22 cents per share compared to a profit of 6 cents per share in the year-ago period, while analysts estimated a loss of 23 cents per share. Sales fell 22% to $242.8 million, exceeding the consensus estimate of $239.7 million. For the third quarter, the company expects a loss of 16-23 cents per share compared to analyst estimates for a loss of 9 cents per share.

Intuit (INTU) could see weakness after it reported a fourth quarter of loss of 22 cents per share, wider than a loss of 19 cents per share in the year-ago period. The company’s adjusted loss was 10 cents per share. Revenues fell to $475.8 million from the year-ago’s $478.2 million. Analysts estimated a loss of 12 cents per share on revenues of $469.9 million.

Gap (GPS) may also be in focus after it reported earnings of 33 cents per share for its second quarter compared to 33 cents per share in the year-ago period. Sales declined to $3.25 billion, above the consensus estimate of $3.23 billion.

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