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Stocks Little Changed In Mid-Morning Trading
Stocks are showing a lack of conviction in mid-morning trading on Monday, as a lack of significant economic news has traders unwilling to move capital. The major averages are currently all positive but have been bouncing back and forth across the unchanged line.
The markets are currently looking ahead to Fed Chairman Ben Bernanke's appearance before the House Financial Services Committee, where he will discuss employment growth and the prospect of additional stimulus at 11:00 a.m. ET.
The Fed chief is also set to deliver the Semiannual Monetary Policy Report before the House Financial Services Committee on Wednesday and before the Senate Banking Committee on Thursday.
Shortly, San Francisco Federal Reserve President Janet Yellen will be speaking at the University of San Diego, with traders keeping an eye on the remarks for further economic guidance from the Fed.
As earnings season continues to wind down, home improvement retailer Lowe's Companies Inc. (LOW) said its fourth-quarter net earnings surged 26.5 percent to $0.14 per share, beating bottom-line estimates for $0.12 per share. Sales for the quarter increased 1.8 percent to $10.17 billion, surpassing the consensus estimate.
Campbell Soup Co. (CPB) reported second-quarter net earnings of $0.74 per share, in-line with Wall Street forecasts. Net sales for the quarter edged up 1 percent to $2.15 billion, short of the $2.23 billion expected for the quarter.
Also on the corporate front, Schlumberger Ltd. (SLB) and Smith International Inc. (SII) jointly announced that their Boards of Directors unanimously approved a definitive merger agreement in which the companies would combine in a stock-for-stock transaction valued at about $11 billion.
The major averages have all seen choppy movement in recent dealing, lingering near the unchanged line. The Dow is currently up 4.01 points at 10,406.36, the Nasdaq is up 0.80 points at 2,244.67 and the S&P 500 is up 0.10 points at 1,109.27.
Sector News
Despite the lack of direction being shown by the broader the markets, airline stocks are markedly stronger, with the NYSE Arca Airline Index up by 1.3 percent. The index has reached its best intraday level in over twenty months.
The index is being boosted by US Airways Group Inc. (LCC), which is up by 2.7 percent. With the upward move, the stock has set its highest intraday price in thirteen months.
Trucking and banking stocks are also posting strong gains, while natural gas stocks are under pressure, with the NYSE Arca Natural Gas Index down by 1.1 percent. The drop is dragging the index off of the nearly one month closing high set last Friday.
Gold, wireless and computer hardware stocks are also moving lower, offsetting the gains in other equity segments.
Stocks Driven By Analyst Comments
Textainer Group (TGH) is on the rise in mid-morning trading after being upgraded at Deutsche Bank from Buy to Hold with a price target of $22. The stock is up 5.7 percent, at its best intraday level in twenty months.
Skyworks (SWKS) is also moving higher following an upgrade at Deutsche Bank from Hold to Buy. The broker also raised its target price on the stock from $16 to $18. Shares have gained 4.5 percent, reaching their highest intraday price in five weeks.
On the other hand, H&R Block (HRB) is moving lower after being downgraded at Oppenheimer from Outperform to Perform. The stock has pulled back by 5.3 percent, falling to its lowest intraday price in over two months. |
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Canadian Stocks Positioned For Modest Gains Monday
Canadian stocks will look to extend an eight-day bull run on Monday and early signals are somewhat positive, as gains among resource stocks may pace Bay Street once again.
The S&P/TSX Composite Index ended higher 14.45 points or 0.12% to 11709.29 on Friday, registering a weekly gain of approximately 260 points and advancing over 5% over eight consecutive trading days since February 8.
Monday is expected to be a quiet day on the corporate front, with few Canadian companies turning in earnings results.
The price of oil pushed above $80 a barrel in early dealing this morning, supported by expectations of the increased energy demand. Meanwhile, news of a merger between major US oil service rivals Schlumberger and Smith could generate interest in their Canadian counterparts.
Suncor Energy Inc. announced the completion of its assessment and expected schedule to repair portions of an oil sands upgrader damaged by fire in early February. Repairs are currently underway and the company currently expects the upgrader to return to production in early April.
Boralex Power Income Fund ended its fiscal year 2009 with revenue from energy sales of $102.2 million and earnings of $51.7 million, down $7.1 million and $6.0 million respectively compared to fiscal 2008. The company said the decrease stems mainly from the shortfall caused by the shutdown of power and steam production at the Dolbeau power station.
Flight training specialist CAE Inc. said it is launching a family of new helicopter mission simulators. The company stated that the first CAE 3000 Series simulator would be available for training by the summer of 2010. CAE is demonstrating a fixed-based version of the new CAE 3000 Series at Heli-Expo.
In earnings news from the US, Home improvement retailer Lowe's reported Monday a 27 percent increase in quarterly profit, helped by higher sales and strong demand for appliances as the housing market continues to recover.
With the broader economy turning around following the worst recession in decades, Home Depot's biggest rival said its expects sales to rise as much as 3 percent in the current quarter. Still, the outlook fell short of market expectations, putting pressure on the company's stock.
Campbell Soup Co. on Monday reported a second quarter profit that matched market expectations, but revenues fell short of the mark as US soup sales cooled off. |
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Asian Markets Rise On Optimism About Economic Recovery
The markets across Asia, except China, ended in positive territory on Monday with sharp gains as traders turned optimistic about the sustenance of global economic recovery after concerns about U.S. rate hike eased considerably. Higher metal prices in the international market and positive closing on Wall Street on Friday also lifted market sentiment. China resumed trading after a weeklong holiday and ended in negative territory with a moderate loss.
In Japan, the benchmark Nikkei 225 Index rose 276.89 points, or 2.7%, to 10,400, while the broader Topix index of all First Section issues rose 20.67 points, or 2.3%, to 910.
On the economic front, a report released by Japan Chain Stores Association revealed that supermarket sales in the country declined 4.9% in the month of January, slightly lower than the 5% decline reported in December. The report further noted that sales, before stores adjustment, declined 4.3% annually in January.
Light sweet crude oil futures for March delivery ended at $80.16 a barrel in electronic trading, up $0.35 per barrel from previous close at $79.81 a barrel in New York on Friday.
Almost all the stocks in the Nikkei-225 index, except 1, ended in positive territory as traders resorted to short covering after having overdone on Friday amid concerns that discount rate hike in the US might signal interest rate hikes. The weakening of the local currency against the US dollar, with the yen hovering above 91.50 per US dollar also lifted market sentiment.
Realty stocks led the gains. Mitsui Fudosan surged up 4.52%, Sumitomo Realty & Development climbed 4.27%, Mitsubishi Estate rose 3.55%, Heiwa Real Estate Co., gained 4.15% and Tokyu Land Corp. increased 2.11%.
Trading companies also ended in positive territory. Mitsubishi Corp. climbed 3.16%, Mitsui & Co., surged up 3.92%, Toyota Tsusho Corp. rose 3.54%, Sumitomo Corp. gained 2.71% and Itochu Corp. soared 3.99%.
Banks also ended higher. Sumitomo Mitsui Financial added 0.67%, Resona Holdings advanced 0.47%, Mizuho Financial climbed 2.92% and Mitsubishi UFJ Financial rose 1.33%.
Among automotive stocks, Toyota Motor advanced 1.21%, Honda Motor climbed 2.75%, Isuzu Motors rose 2.75%, Hino Motors surged up 5.83%, Mitsubishi Motor gained 3.31% and Nissan Motor increased 2.59%.
In Australia, the benchmark S&P/ASX 200 Index gained 82.40 points, or 1.78% to close at 4,717, while the All-Ordinaries Index ended at 4,733, representing a gain of 76.40 points, or 1.64%.
On the economic front, results of a latest survey conducted by the Housing Industry Association along with the Commonwealth Bank of Australia revealed that housing affordability in the country unexpected declined 18.4% in the fourth quarter of 2009. The survey attributed higher house prices, increased interest rates and the winding down of the first home buyers' boost as the reasons for the sharp drop in affordability.
Separately, the Australian Bureau of Statistics revealed that the sale of new motor vehicles in the country declined by a seasonally adjusted 3.4% in January, compared to the previous month where the sales rose by 3.3%. The report further noted that sale of new sport utility vehicles declined 4.7% and other vehicles plunged 17.4%, while sale of passenger vehicles registered a nominal 4.0% increase. Total sales of new vehicles during the month were 86,636.
Light sweet crude oil futures for March delivery ended at $80.16 a barrel in electronic trading, up $0.35 per barrel from previous close at $79.81 a barrel in New York on Friday.
Banks ended in positive territory on optimism about economic recovery. ANZ Bank, which is slated to release its trading update on Friday, gained 2.64%, Commonwealth Bank of Australia climbed 2.50%, National Australia Bank added 0.32% and Westpac Banking Corp. rose 2.59%. Investment banker Macquarie Group increased 1.84%.
Resource stocks also advanced following higher metal prices in the international market. BHP Billiton gained .83%, Fortescue Metals advanced 2.04%, Gindalbie Metals climbed 4.00%, Iluka Resources rose 3.56%, Murchison Metals soared 4.55%, Oz Minerals surged up 8.16% and Rio Tinto increased 2.16%.
Gold stocks also climbed on higher gold prices. Lihir Gold rose 2.57% and Newcrest Mining surged up 4.59%.
Oil stocks were also higher. Woodside Petroleum advanced 2.27%, Santos gained 1.42%, Oil Search added 0.95% and Origin Energy climbed 3.35%.
Telecom major Telstra Corp. was the major loser in the market having declined 4.75% on huge volumes. Singapore Telecommunications, however, advanced 0.84%.
In Hong Kong, the Hang Seng Index ended in positive territory with a sharp gain of 483.25 points, or 2.43%, at 20,377, as traders evinced fresh buying interest in stocks that over-reacted on Friday amid concerns about the impact of discount rate hike by the US Federal Reserve. Positive closing on Wall Street on Friday as interest hike concerns eased considerably, as well as cues from other markets in the region lifted market sentiment. As many as 40 of the 42 components in the index ended in positive territory.
In South Korea, the KOSPI Index ended in positive territory with a gain of 33.20 points, or 2.08%, at 1,627, as traders evinced fresh buying interest in steel, bank and technology stocks on increasing optimism about sustaining global economic recovery. The sell-off in Friday amid concerns about discount rate hike in the US appeared to be an over-reaction after Wall Street ended in positive territory on Friday. Positive trading across other markets in the region also lifted market sentiment.
The Indian market snapped a two-day losing streak Monday, tracking strong Asian cues. However, the market closed off the day's high, as investors cut positions ahead of Thursday's settlement of current month derivative contracts and the Union Budget due on Friday. Subdued European markets also dampened sentiment to some extent. The benchmark Sensex pared its gains steadily before finishing at 16,192, up 45 points or 0.28%, and the Nifty rose by 12 points or 0.24% to 4,856.
Among the other major markets, Indonesia's Jakarta Composite Index advanced 9.89 points, or 0.39%, to close at 2,564, Singapore's Strait Times ended flat with a gain of 0.32 points, or 0.01% at 2,757, and Taiwan' s Weighted Index rose 118.20 points, or 1.59%, to close at 7,560. China's Shanghai Composite Index, however, bucked the trend and ended in negative territory with a loss of 14.73 points, or 0.49%, at 3,003. |
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The major European markets are trading higher after showing some volatility in early trading. The indexes had risen in each of the past 5 sessions. While the French CAC 40 Index and the German DAX Index are rising 0.19% and 0.01%, respectively, the U.K.’s FTSE 100 Index is gaining 0.21%.
U.S. Economic Reports
The unfolding week's calendar is dominated by housing reports that could shed some light on the strength and the vulnerabilities of the sector, which has been thriving on the back of stimulus measures. Traders may keep a close watch on the National Association of Realtors' existing home sales report for January, the Commerce Department's new home sales report for January, the S&P Case-Shiller's house price index for December and the Federal Housing Finance Agency's house price index for December.
Federal Reserve Chairman Ben Bernanke's testimony before Congress and speeches by Fed officials are also likely to be on the radar, as market participants seek more clarity on the interest rate environment, especially after last week's increase in the discount rate. Traders may also pay attention to the Conference Board's consumer confidence index for February, the weekly jobless claims report, the results of the ISM-Chicago's manufacturing survey for February and the durable goods orders report for January. The results of Treasury auctions of 2-year, 5-year and 7-year notes could also be of interest to the markets.
Existing home and new home sales should see a rebound in January following steep declines in the previous month. The extension of the first-time homebuyers' credit till April may have supported demand and in turn sales. That said, a sustainable recovery will likely materialize only when job growth kicks in and foreclosures peak.
Both of the consumer confidence readings for the week may see a slight pullback, given the fact that the equity markets turned hostile in February. However, the recent sharp declines in job losses should support the indexes in the near term.
Meanwhile, durable good orders are expected to show decent growth. Going by the regional manufacturing surveys, the industrial sector has been faring fairly well due to debilitated inventory levels, as manufacturers trimmed stocks to bring them in alignment with sales, and an upturn in exports. However, order growth in the transportation sector may have been weak due to a decline in orders reported by Boeing (BA). |
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Schlumberger (SLB) may react to the confirmation from the company that it has agreed to buy Smith International (SII) in an all-stock transaction. Each Smith shareholder will receive 0.6966 shares of Schlumberger in exchange of each Smith share. Upon closing, Smith shareholders will own 12.8% for Schlumberger’s outstanding stock.
FirstMerit (FMER) may also be in focus after it announced that it has acquired through its subsidiary FirstMerit Bank, the banking operations of George Washington Bank, the subsidiary of George Washington Savings Bancorp, through a purchase and assumption agreement with the FDIC. George Washington Savings was closed on Friday and the FDIC was appointed as receiver.
CONSOL Energy (CNX) is likely to see some activity after it announced a restructuring plan at its Fola Surface and Preparation Plant operations near Bickmore. The company said it would change to a traditional 5-day week from a continuous operation, retaining 301 people and laying off 157 employees. The change will take effect from February 22nd.
Tuesday Morning (TUES) could move in reaction to its announcement that Madison Dearborn Capital Partners sold off its remaining shares in the company, exiting its position as it is liquidating the fund that had invested in the company.
NCI Building (NCI) may be in focus after it announced that its board has authorized a reverse stock split at a 1-for-5 ratio of its outstanding common stock. The company’s shares will be traded on a split-adjusted basis on March 6th, 2010.
Newmont Mining (NEM) could move in reaction to its announcement that its wholly-owned subsidiary Newmont Mining Corp. of Canada has bought 3 million units of Loncor Resources by way of a private placement at a price of C$1.25 per unit for aggregate proceeds of C$5 million. The company said the purchase was for investment purposes.
Terex (TEX) may see some activity after it announced that it has completed the previously announced sale of its mining business to Bucyrus (BUCY) for $1 billion in cash and about 5.8 million shares of Bucyrus common stock.
Amgen (AMGN) is expected to be in focus after it said the U.S. FDA has evaluated the company’s complete response letter for denisumab for treating post-menopausal osteoporosis and classified it as a Class 2 resubmission. The PDUFA action date is set as July 25th, 2010.
GlaxoSmithKline (GSK) may see weakness after a U.S. Senate report revealed that there is evidence that Glaxo knew of possible cardiac risks associated with its diabetes drug Avandia even before its adverse effects were publicly known. However, the company rejected the claims by the report. |