US & World Daily Markets Financial Briefing 22-04-2010

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Stocks moved sharply lower at the start of trading on Thursday, with the major averages all showing notable moves to the downside. The initial weakness came as renewed concerns about the Greek debt crisis have overshadowed largely positive earnings news.

With Nokia leading the way lower after providing a cautious second quarter outlook, telecom stocks are seeing considerable weakness in early trading. The NYSE Arca Telecom Index is currently down 4.4 percent after hitting its worst intraday level in a month.

Most of the other major sectors have also moved to the downside, with networking, airline, semiconductor, and biotech stocks posting notable losses.

Traders are cashing in on recent gains amid concerns that, even though earnings have largely been better than expected, the results may not support further upside for the markets.

The weakness in the markets also comes after debt-ridden Greece revealed a budget deficit totaling 13.6 percent of GDP for fiscal year 2009, wider than the 12.9 percent deficit forecast for the period.

In U.S. economic news, the Labor Department reported that its producer price index rose by 0.7 percent in March following an unrevised 0.6 percent decrease in February. The increase in producer prices exceeded economists' expectations for an increase of about 0.5 percent.

Excluding a jump in food prices as well as an increase in energy prices, the core producer price index edged up by 0.1 percent for the second consecutive month. The modest increase in core prices came in line with economist estimates.

In a separate report, the Labor Department said that initial jobless claims fell roughly in line with estimates in the week ended April 17th. Jobless claims fell to 456,000 from the previous week's revised figure of 480,000. Economists had been expecting jobless claims to fall to 450,000.

On the earnings front, Verizon Communications Inc. reported adjusted first-quarter net income of $0.58 per share, just above Wall Street expectations for $0.56 per share. Verizon's total operating revenues were $26.90 billion, roughly matching analyst expectations.

After the closing bell on Wednesday, Qualcomm Inc. (QCOM) reported second-quarter earnings of $0.59 per share, just above the consensus estimate of $0.57 per share. Revenues for the quarter came in at $2.66 billion, up from $2.46 billion in the comparable quarter last year.

eBay Inc. reported first-quarter net income $0.42 per share, edging out forecasts for $0.41 per share. Net revenues for the quarter totaled $2.20 billion and topped expectations for $2.18 billion.

The major averages have seen some further downside in the past few minutes, falling to new lows for the young session. The Dow is down 97.26 points or 0.9 percent at 11,027.66, the Nasdaq is down 33.59 points or 1.3 percent at 2,471.02 and the S&P 500 is down 14.80 points or 1.2 percent at 1,191.13.

Bay Street stocks may open lower Thursday amid falling commodities prices and on renewed worries over the Greece debt-situation. Eurostat said Thursday that the Greek budget deficit jumped to 13.6% of its GDP in 2009, as against the government's projection of 12.7%.

U.S. stock futures also point to a lower opening.

On Wednesday, the S&P/TSX Composite Index gained 21.03 points or 0.17% to 12,134.56, rising for a third day.

The price of oil slipped $0.96 to $82.72 a barrel on demand concerns, while the price of gold was down $6.70 to 1,142.10 an ounce.

Blackberry maker Research In Motion may be in play after Nokia, the world's biggest mobile phone maker, reported a lower-than-increase in first quarter earnings. Earlier this week, Apple Inc. reported better-than-expected earnings, mainly on higher sales of its smart phone, iPhone.

In corporate news from Canada, provider of product life cycle solutions to OEMs Celestica Inc. reported improved earnings in first-quarter at $0.11 per share, compared to net earnings of $0.08 per share for the same period last year.

Drilling services Trust (Pprovider Precision Drilling) reported first-quarter net income of C$0.22 per unit, compared to C$0.28 per unit in the same quarter last year.

Specialty retailer West 49 Inc. swung to profit, reporting fourth-quarter net income of C$0.01 per basic share, compared to net loss of C$0.13 per basic share last year.

Beer maker Brick Brewing Co. swung to profit in FY10, reporting net income of C$0.05 per share compared with a loss of C$0.31 per share in the prior year period.

Mobile local search services provider  In other report, the Labor Department said its producer price index rose by 0.7% in March following an unrevised 0.6% decrease in February. The increase in producer prices exceeded economists' expectations for an increase of about 0.5%.
. reported a narrower net loss of C$0.04 per share in 2009, compared to a loss of C$0.11 in the prior year.

Torstar Corp., is a favorite to buy ailing media company Canwest Global Communications Corp.'s insolvent newspaper assets, the Globe and Mail reported.

In economic news, Statistics Canada said the number of people received regular employment insurance remain unchanged at 698,800 in February.

In other report released today, the agency said Canada's composite leading indicator increased by 1.0% in March, recording gains for a 10th straight month.

From the U.S., the Labor Department said jobless claims fell to 456,000 in the week ended April 17 from the previous week's revised figure of 480,000. Economists were expecting the claims to fall to 450,000 from the 484,000 originally reported for the previous week. Earlier, data for the previous two weeks from the department revealed unexpected increase in jobless claims.

In other report, the Labor Department said its producer price index rose by 0.7% in March following an unrevised 0.6% decrease in February. The increase in producer prices exceeded economists' expectations for an increase of about 0.5%.

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Most Asian markets, with the exception of the Malaysian, Indonesian, Singaporean and Indian markets, ended Wednesday's session lower. The lackluster trading on Wall Street overnight impacted sentiment despite earnings continuing to lend support.

Japan's Nikkei 225 average opened lower and languished in negative territory throughout the session to close down 140.96 points or 1.27% at 10,949. Most stocks, barring some electrical machinery, electronics and heavy equipment makers, declined in the session.

A report released by Japan's Ministry of Finance showed that the island nation's trade surplus rose 43.5% year-over-year to 6 trillion yen in March, with the increase marking the fourth straight month of growth. Exports climbed 43.5% year-over-year, outpacing the growth in imports, which rose 20.7%. Seasonally adjusted figures showed that exports remained flat compared to the previous month, while imports declined 3.7%.

Australia's All Ordinaries opened modestly lower and declined sharply in early trading. Thereafter, the selling momentum slowed, resulting in a steady decline throughout the trading. Thereafter, the index moved sideways before closing down 43.70 points or 0.88% at 4,937. The market witnessed broad based selling pressure, with material and healthcare stocks declining sharply in the session.

Hong Kong's Hang Seng Index, which traded with a moderate loss for much of the session, regained some ground in late trading to close down 55.99 points or 0.26% at 21,455. Property and resource stocks showed notable weakness and utility stocks closed on a mixed note. A bounce by some financial stocks helped to offset some of the weakness.

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Europe’s main markets turned lower in midday dealings, with banking stocks leading the decline after Eurostat said Greece's budget deficit was 13.6% of GDP.

That is almost a full percentage point higher than a government projection of 12.7%.

Among the banks, BNP Paribas, Societe Generale, Credit Agricole, Deutsche Bank, Commerzbank and UBS are all lower.

Elsewhere in the sector, Credit Suisse saw first-quarter net profit rise 2% to 2.06bn Swiss francs and said it was well placed to meet new Swiss banking rules. Net revenue fell 6% to 8.96bn francs.

Shares in Nokia dived after the mobile phone maker cut its profit outlook for its key phone unit and posted weaker-than-expected first quarter results.

Net profit rose to €349m from €122m in the January to March period, but analysts were looking for a net profit of €388m. Net sales were up 3% to €9.5bn

“We continue to face tough competition with respect to the high end of our mobile device portfolio,” said chief executive Olli-Pekka Kallasvuo.

Swiss food producer Nestle is still the best performer in Switzerland after reporting a 4.4% rise in first-quarter sales and confirmed its full-year prospects. Sales increased to 26.28bn Swiss francs in the three month period from 25.17bn francs a year ago.

Organic growth was 6.5% in the quarter, while Nestle's food and beverages business posted a 4.1% rise in sales. For 2010, the Nescafe coffee firm expects its food and beverages business to achieve higher organic growth than in 2009.

"Our strong sales performance in the first quarter confirms we are capturing opportunities in our different growth pillars, both in emerging and developed markets, even in a global economic environment which remains challenging," said chief executive Paul Bulcke.

Across the markets, the Dax in Frankfurt is up 61 points at 6,169 and the Cac in Paris is 38 points higher at 3,940. The Swiss market has dropped 70 points to 6,745.

On the M&A front, bus and rail operator Arriva has agreed to be taken over by Germany’s Deutsche Bahn in a £1.59bn deal that will create a new European transport giant. Under the terms of the deal, Arriva shareholders will also receive a 2009 dividend of 18.8p per share.

The news comes after Arriva said on Monday that the German state-controlled company, which already owns Chiltern Railways and rail freight services in the UK, was willing to make a cash offer of 775p per share.

Engineering and project management company AMEC has been signed up by French power generating company EDF Group to assist with the proposed delivery of four new nuclear reactors at Hinkley Point and Sizewell in the UK.

Channel Tunnel operator Eurotunnel saw a rise in revenues in the first quarter of 2010, after the lifting of restrictions due to a fire in 2008 disrupted traffic during the same period the previous year.

Revenue excluding its newly acquired Europorte rail freight subsidiaries climbed by 10% from the same period a year ago to €130.1m


CAC 40 - Risers

1. PPR € 108.75 +1.49%
2. Vivendi € 20.38 +1.09%
3. Pernod Ricard € 65.97 +0.67%
4. L'Oreal € 80.52 +0.65%
5. Michelin € 53.34 +0.64%
6. Air Liquide € 88.12 +0.09%
7. Essilor International € 46.60 +0.06%

CAC 40 - Fallers

1. BNP Paribas € 52.36 -3.00%
2. Dexia € 4.42 -2.96%
3. Societe Generale € 43.01 -2.89%
4. Credit Agricole € 12.32 -2.69%
5. ST Microelectronics € 7.70 -2.68%
6. Alstom € 45.99 -2.68%
7. Schneider Electric € 86.04 -2.32%
8. Bouygues € 38.44 -2.09%
9. AXA € 16.45 -1.88%
10. EDF € 40.86 -1.72%

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Qualcomm may be in focus after it reported that its second quarter revenues rose to $2.66 billion from the year-ago's $2.46 billion, exceeding the $2.63 billion consensus estimate. On a pro forma basis, the company reported earnings of 59 cents per share compared to a loss of 3 cents per share last year. Analysts estimated earnings of 57 cents per share for the quarter. For the full year, the company estimates pro forma earnings of $2.21-$2.32 per share on revenues of $10.40 billion to $11 billion. Analysts estimate earnings of $2 per share on revenues of $10.77 billion.

eBay may see weakness after it said it expects full year revenues to be $8.8 billion to $9.1 billion and non-GAAP earnings to be $1.63-$1.68 cents per share. Analysts estimate earnings of $1.67 per share on revenues of $9.12 billion. The company also reported that its first quarter net revenues rose 9% year-over-year to $2.20 billion. On a non-GAAP basis, the company reported earnings per share of 39 cents, lower than 42 cents per share last year. The consensus estimates called for earnings of 41 cents per share on revenues of $2.18 billion.

Amgen is likely to see some activity after it reported that its first quarter adjusted earnings rose 20% to $1.30 per share as revenues grew 9% to $3.59 billion. Analysts estimated earnings of $1.23 per share on revenues of $3.59 billion. The company trimmed its guidance for the full year and now expects earnings and revenues towards the low end of its guidance range of $5.05-$5.25 per share in earnings and $15.1 billion to $15.5 billion in revenues.

E*Trade Financial is also likely to be in focus after it reported a first quarter net loss of 2 cents per share compared to a loss of 41 cents per share last year, narrower than the loss of 3 cents per share estimated by analysts. Net revenues rose to $537 million from $523 million in the year-ago period.

Starbucks Corp. may gain ground after it reported that its second quarter consolidated net revenues rose 9% year-over-year to $2.5 billion. On a non-GAAP basis, the company reported earnings of 29 cents per share compared to 16 cents per share last year. The Street had estimated earnings of 25 cents per share on revenues of $2.41 billion. The company raised its full year non-GAAP earnings estimate to $1.19-$1.22 per share, while analysts estimate earnings of $1.12 per share.

Netflix is also likely to move to the upside after it said its first quarter revenues rose to $493.67 million from $444.54 million in the year-ago period. The company's net income increased to 59 cents per share from 56 cents per share in the year-ago period. The consensus estimates called for earnings of 54 cents per share on revenues of $493.07 million. The company now expects full year GAAP net income of $2.41-$2.63 per share and revenues of $2.11 billion to $2.16 billion, while analysts estimate revenues of $2.10 billion.

Intersil Corp. fell sharply in Wednesday's after hours session despite reporting that its first quarter net revenues rose 60% year-over-year to $189.4 million, exceeding the $185.01 million consensus estimate. The company's earnings rose to 22 cents per share from 2 cents per share last year, also above the consensus estimate of 20 cents per share. For the third quarter, the company expects earnings of 23-26 cents per share on revenues of $200 million to $208 million. Analysts estimate earnings of 22 cents per share on revenues of $191.43 million.

Chipotle Mexican Grill moved higher in Wednesday's after hours session after it reported that its first quarter revenues rose 15.6% to $409.7 million and that its earnings rose 52.6% to $1.19 per share. Analysts estimated earnings of 95 cents per share on revenues of $397.2 million.

MKS Instruments also rose in Wednesday's after hours session after it reported that its first quarter sales rose 33% year-over-year to $198.1 million, above the consensus estimate of $180 million. The company reversed to a profit of 58 cents per share compared to a loss of 34 cents per share last year. On a non-GAAP basis, the company reported earnings of 58 cents per share compared to the consensus estimate of 49 cents per share.

Questar may also see some strength after it said it is considering a tax-free spin-off of its natural gas and oil exploration and production business. Meanwhile, Teradyne could rally after it reported that its first quarter revenues rose 23% to $330 million compared to the consensus estimate of $302.74 million. The company reported non-GAAP earnings of 33 cents per share compared to a loss of 38 cents per share. For the second quarter, the company expects non-GAAP earnings of 45-52 cents per share on revenues of $390 million to $420 million. Analysts estimate revenues of $302.74 million.

Terex may see weakness after it reported a first quarter net loss from continuing operations of 73 cents per share compared to a loss of $1.04 per share last year. Net sales from continuing operations fell 3.1% year-over-year to $935.9 million. Analysts estimated a loss of 52 cents per share on revenues of $1.1 billion.

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