US & World Daily Markets Financial Briefing 22-05-2009

Get our Daily Trade Signals and Grain Newsletter along with a copy of the CBOT Introduction to Agricultural Futures and Options Book for Free! The grain trading professionals at MF Global can guide you in the right direction with your trading. Click here to Get your Free Grain Trading Kit Today

Uncertain Outlook May Keep Averages in Recent Trading Ranges

The major U.S. index futures are pointing to a higher opening on Friday. Although the fundamental picture hasn’t changed much and there are little catalysts the markets can look forward to, stray positive earnings that keep trickling in may comfort traders. Sears Holdings (SHLD) could lead the retail space higher in today’s session following its upbeat earnings and its success in negotiating a new credit agreement. Additionally, the continued buoyancy in the commodity prices should lend support to commodity stocks.

That said, traders may exercise some caution ahead of the long weekend on account of the ‘Memorial Day’ holiday on Monday. Given the fact that sentiment is alternating between hope and despair, there is unlikely to be a break out either to the upside or downside and the major averages are likely to stay in the recent trading ranges.

U.S. stocks opened Thursday’s session notably lower, weighed down by concerns surrounding the lowering of S&P’s outlook on U.K. and insipid jobs data. Thereafter, the major averages moved sideways, as the selling pressure waned, with the indexes ending with losses in excess of 1% each.

The Dow Industrials closed down 129.91 points or 1.54% at 8,292, the S&P 500 Index receded 15.14 points or 1.68% to 888, while the Nasdaq Composite fell 32.59 points or 1.89% to 1,695.

After showing clear negativity for the day, the Dow settled close to its 21-day moving average of 8,307. If the index violates this level, it can find support around its 50-day moving average of 7,981. Notwithstanding its resurgence since March, the index has preserved its cyclical bear market down trending line, which goes on to say that a sustainable upturn may not be in the cards in the near term. The other key downside support levels are likely to be around 7,536, 7,185 and 6,529. Meanwhile, overhead resistances are found around 8,374, 8,679 and 9,045.

Twenty-three of the thirty Dow components ended Thursday’s session lower, with Alcoa (AA) (down 4.11%), Caterpillar (CAT) (down 4.72%), DuPont (DD) (down 3.19%), General Electric (GE) (down 3.85%) and Home Depot (HD) (down 3.94%) leading the slide. Verizon (VZ), Microsoft (MSFT), 3M Co. (MMM), Intel (INTC) and Boeing (BA) also showed notable losses. However, General Motors (GM) rallied 32.41%.

Among the sector indexes, the Dow Jones Transportation Average declined 3.88% and the Amex Biotechnology Index declined about 2%. The Amex Oil Index and the Philadelphia Oil Service Index fell 2.23% and 4.04%, respectively. Technology stocks also showed weakness, as reflected by a 2.56% drop by the Philadelphia Semiconductor Index. The Amex Internet Index receded 2.02% and the Amex Networking Index slid 1.41%. However, the Amex Disk Drive Index rallied 4.12% and the Amex Gold Bugs Index rose 1.55%.

Even as analysts debate over the likely course of action, the economic picture is becoming murkier. An attempt to get more clarity on the economic picture reveals that the current recovery will no way bear any resemblance to the ones in the past. According to Sean Hannon from Epic Insights, the economy is likely to experience an extended period of base building, when growth remains low and economic activity sluggish.

There is every possibility that this period of slack growth is misconstrued as continuation of recessionary conditions. An improvement in some of the recent economic indicators therefore necessarily does not reflect resumption of growth, given the gravity of the problem at hand. Continuing unemployment claims is continuing to rise to fresh record highs and is currently hovering around 6.6 million compared to a forty-year average of 1.5 million and a recession peak of 2.6 million. Housing starts are at 458,000, significantly lower than the 40-year average of 1.5 million and a recession low of 850,000.

It may well take much more than a quarter or a year for the economy to return to its form and any positive economic reading received in the mean time should be taken with a pinch of salt. Although positive data points suggest an improvement, they could signal a protracted base building period before the economy can return to a period of growth.

Validating the theory of a long and painful recovery, the Labor Department said yesterday that initial jobless claims declined by 6,000 to 631,000 from the previous week’s average of 643,000, which was revised higher by 6,000. The increase in claims reflected plant closures by auto giants General Motors and Chrysler.

Meanwhile, the Philadelphia Fed’s survey showed that the index of business activity rose 1.8 points to –22.6 in May. However, the increase was less than what analysts had expected. Nonetheless, May marked the third straight month of improvement in contraction. The new orders index fell to –25.9 from –24.3 in April, while the backlog of orders index rose slightly to its highest level since September. The shipment index climbed to –19 in May from –35.7 in April, signaling a sharp improvement. Moreover, the future general business activity index rose to 47.5 from 36.2 in the previous month, marking the highest level since November 2004.

The Conference Board’s leading indicators index rose 1% in April following a 0.2% decline in March, marking the first increase in seven months. Stock prices, the interest rate spread, consumer expectations, initial unemployment claims, the average workweek and supplier deliveries all contributed positively to the index, with real money supply and housing starts acting as a drag. Meanwhile, the coincident economic index fell 0.2% compared to a 0.5% drop in the lagging economic index.

You can now manage your positions directly from your web browser, whether you use PC or Mac.  Test-drive VT Trader™ Web with your free practice account! Click Here

Bay Street stocks will look to recover some of yesterday's sharp losses in early trading on Friday morning. Trading could be light as U.S. traders prepare for a three-day Memorial Day weekend.

Oil prices moved back into the green in electronic trading, which could provide a boost for energy stocks. Light sweet crude added 82 cents to $61.87 after dipping below $60 overnight.

Metals are also higher with gold adding $5.70 to $956.90 and copper climbing 5.85 cents to $2.1095.

In corporate news, Computer Modelling Group reported fourth quarter net earnings of C$6.1 million or C$0.35 per share, up from C$3.0 million or C$0.18 per share for the comparable period last year.
 
North American gold producer Yukon-Nevada Gold Corp. said it has appointed Robert Baldock as its president and chief executive officer. Graham Dickson, who was director, interim chairman, president and chief executive officer, was appointed as chief operating officer.

In economic news, Statistics Canada reported retail sales increased for the third consecutive month in March, rising 0.3% in current dollars to $33.9 billion. In volume terms, retail sales rose 0.7% in the month.

On Thursday, the S&P/TSX Composite Index lost 282.85 points or 2.76% to settle at 9,949.59. Wednesday, the index hit a multi-month intraday high above 10,300.

Click Here

Major markets across the Asia-Pacific region ended in the red on Friday, mirroring the losses on Wall Street amid concerns about the pace of global economic recovery. Although the major averages in the region opened notably lower, buying that emerged thereafter helped them trim much of their losses over the course of the session. The Indian market shrugged off the weak sentiment in the region and ended in positive territory on short covering and value buying.

In Tokyo, the Nikkei 225 Average opened at 9,156 compared to its previous close of 9,264 on weaker cues from Wall Street. However, policy announcement and positive outlook issued by the Bank of Japan lifted the index almost into positive by mid-day. The strengthening of the local currency in reaction to comments by Finance Minister Kaoru Yosano that the government will not intervene in the currency market weighed on the market, as the index ended at 9,226, down 38.34 points or 0.41%. The broader Topix Index of all first section issues lost 0.63% or 5.56 points, to close at 876.

On the economic front, a revised report from the Japanese Cabinet Office showed that the leading index stood at 76.3 in March, revised down from the initial estimate of 76.6. But the reading stood above February's 74.4.

Following a 2-day policy-setting meeting, the Bank of Japan announced that it has unanimously decided to maintain the uncollateralized overnight call rate at 0.1%. The central bank also expanded the range of eligible collateral to ensure financial market stability by further facilitating money market operations. It has decided to accept bonds issued by the governments of the United States, the United Kingdom, Germany, and France as eligible collateral.

Further, in its assessment of economic conditions, the central bank said economic conditions have been deteriorating, but exports and production are beginning to level out. Looking forward, exports and production are expected to start recovering despite the continuing weakness in domestic private demand, the bank opined.

Exporters declined after the local currency strengthened against the dollar. Tire manufacturer Bridgestone Corp. declined lost 2.49% following reports that US automaker General Motors might file for bank-ruptcy during next week.

Japan Tobacco, the third-largest cigarette maker in the world, announced plans to increase the final dividend payable to shareholders. Following the news, the stock ended higher by 1.65%. Oil stocks ended on a mixed note, while banks showed weakness.

In Sydney, the All Ordinaries closed slightly above the day's low at 3,755, down 1.30% or 49.40 points. The benchmark S&P/ASX 200 Index followed a similar trend and ended lower by 52.30 points, or 1.40%, at 3,762.

Mining stocks declined, led by Rio Tinto following reports that Chinalco might not agree to the proposals made by Rio Tinto to restructure the US$19.5 billion deal. A sharp drop in metal prices also weighed on the mining stocks. Rio Tinto lost 3.30%, while BHP Billiton declined 2.73%.

Energy stocks also declined on lower crude oil prices in the international market. Woodside Petroleum slumped 4.43%, Santos shed 3.73% and Oil Search edged down 0.19%. Gold stocks advanced, while mixed trend was witnessed among banking stocks. 0.51%.

In Hong Kong, the Hang Seng Index staged a smart recovery in the afternoon, led by property stocks and trimmed part of its loss before finally ending at 17,063, down 0.80% or 136.97 points.

Weak cues from Wall Street and gloomy outlook for the economy triggered selling, with only seven of the 42 components of the index ending in positive territory. Banks, resource and china-related stocks were the major losers.

In South Korea, the benchmark KOSPI Index ended at 1,404, down 17.90 points or 1.26%, on increasing concerns about the pace of global recovery. Technology stocks were the major losers, with heavyweight Samsung Electronics declining 2.31% and LG Electronics shedding 4.37%. Steel giant POSCO lost 3.16%. Shipping stocks also ended lower, with Hyundai Heavy Industries losing 3.59%.

In India, value buying and short covering generated buying interest mainly among mid-cap stocks. Besides, positive sentiment ahead of the swearing in ceremony of the new prime minister lifted the stocks. The Sensex ended with a gain of 150.61 points or 1.10% at 13,887, while the broader Nifty index ended at 4238.50 up 27.60 points or 0.66%.

Among the other major markets in the region, China's Shanghai Composite Index lost 13.02 points or 0.50% to close at 2,597, and Indonesia's Jakarta Composite Index slipped 4.01 points or 0.21% to close at 1,882. Singaporean Strait Times Index ended higher at 2,245 with a gain of 34.30 points or 1.55% and Taiwan's

Come Into the LIVE Online Trading Session and Watch Us Make at Least 1 Point ($500 - $2000 a Day). The LIVE Trading Session is Completely FREE! - Sign Up Now here!

The major European averages are moving up modestly in Friday’s session after yesterday’s sharp declines, triggered by a downgrade of S&P’s outlook on the U.K. The French CAC 40 Index and the German DAX Index are rising 1.27% and 1.01%, respectively, while the U.K.’s FTSE 100 Index is gaining 0.63%.

In corporate news, British airways reported an operating loss of 220 million pounds, reversing from a profit of 875 million pounds in the year-ago period. The company also announced that it is suspending its dividend payment for the year and also said it will trim capacity this winter by 4%.

The revised first quarter GDP report released by the U.K. Office of National Statistics showed that first quarter GDP decline was confirmed at 1.9% quarter-over-quarter. Annually, the GDP decline was 4.1%. Industrial output was down 5.3% sequentially in the first quarter, with manufacturing output showing a 5.5% decline. Output of the services sector fell by 1.2%. Consumer spending declined by 1.2% in real terms, while gross fixed capital formation fell by 3.8%.

Stocks in Focus

Johnson & Johnson (JNJ) is likely to be in focus after it announced that it has agreed to buy Coguar Biotechnology for $1 billion through a cash tender offer. Coguar is developing compounds for the treatment of prostrate cancer, breast cancer and multiple myeloma. Johnson & Johnson expects the deal to close in the third quarter and believes that the deal will have a 2-3 cents per share dilutive impact on earnings upon closing.

Western Digital (WDC) may trade higher after Standard & Poor’s said Western Digital will replace Embardq (EQ) in the S&P 500 Index following the latter’s agreement to sell itself to CenturyTel (CTL). Meanwhile, Equinix (EQIX) will take Embarq’s place in the S&P MidCap 400 Index.

McGraw-Hill (MHP) could move in reaction to its announcement that it is divesting its Vista Research to Guidepoint Global. The company expects to record a pre-tax loss of $13.8 million or 3 cents per share related to the deal in its second quarter results.

Campbell Soup (CPB) may gain ground after it reported that its third quarter-adjusted earnings of 48 cents per share exceeded the 42 cents per share consensus estimate. Revenues were down 10% to $1.69 billion and trailed the mean analysts’ estimate of $1.79 billion.

Foot Locker (FL) is expected to move in reaction to the news that its first quarter earnings rose to 20 cents per share from 2 cents per share in the year-ago period. On an adjusted basis, the company reported earnings of 14 cents per share on a 7% revenue decline to $1.22 billion. The consensus estimates had called for earnings of 13 cents per share on revenues of $1.23 billion.

Sears Holding is likely to move to the upside after it reported that its first quarter earnings were 21 cents per share compared to a loss of 43 cents per share last year. The company also said it has negotiated a new credit agreement with Bank of America, replacing its existing credit agreement with a $1.7 billion credit line that extends through March 2010 and a $2.4 billion line that extends through 2012.

Salesforce.com (CRM) could come under selling pressure after it once again lowered its full year revenue guidance to $1.25 billion to $1.27 billion from its earlier estimate of $1.3 billion to $1.33 billion. The company also reported that its first quarter earnings rose to 15 cents per share from 8 cents per share last year, as revenues rose 23% to $304.9 million. Analysts, on average, estimated earnings of 11 cents per share on revenues of $304.73 million.

AIG (AIG) is expected to be in focus after it announced that its Chairman and CEO Edward Liddy will depart following a short 9-month stint at the company. The company’s board also announced it will split the role of the Chairman and CEO.

AutoDesk (ADSK) is also likely to be in focus after it reported a loss of 14 cents per share compared to a profit of 41 cents per share last year. On an adjusted basis, the company reported a profit of 18 cents per share on a 29% sales decline to $426 million. The company also announced additional job cuts and its intention to close some facilities. Analysts, on average, estimated earnings of 8 cents per share on revenues of $419.07 million.

Pacific Sunwear (PSUN) is expected to move in reaction to its announcement that its first quarter net sales fell to $223.5 million from $266.9 million last year. Analysts estimated sales of $214.48 million. The company reported a loss of 13 cents per share compared to a net loss from continuing operation of 17 cents per share in the year-ago period. The company expects a loss of 11-17 cents per share for the second quarter.

Aeropostale (ARO) may also be in focus after it reported that its first quarter net income, including a pre-tax charge of 2 cents per share, rose to 47 cents per share from 26 cents per share last year. Net sales rose 21% to $408 million. Analysts estimated earnings of 48 cents per share on revenues of $404.65 million. For the second quarter, the company expects earnings of 43-45 cents per share, including a pre-tax charge of 3 cents per share. Analysts’ estimate that typically excludes one-time items calls for earnings of 37 cents per share.

Gap (GPS) could react to its announcement that its first quarter earnings declined 3 cents to 31 cents per share, as net sales fell to $3.13 billion from $3.38 billion last year. The consensus estimates called for earnings of 30 cents per share on revenues of $3.14 billion.

Here are 10 simple Dos and Don’ts any investor can follow which may contribute to potential for success in trading futures. This FREE guide can provide some of the basic principles that traders inherently live by.

Click Here to Request Your Free Guide!

Crude Oil Pares Early Gains, Hovers Near $61

Crude oil gave back overnight gains on Friday morning as equities moved lower, leading to concerns over energy demand. Trading is expected to be lighter than usual ahead of the Memorial Day weekend.

Light sweet crude for July delivery fell to $61.01, down 4 cents for the session, after earlier touching as high as $61.98. Oil fell as low as $60.50 on the opening half-hour of trading.

July crude oil, which took over as the front-month contract on Tuesday, remained up about $4.25 for this week. Prices reached as high as $62.26 on Wednesday before cooling off as discouraging economic data dashed hopes for improved energy demand.
 
Earlier in the week, the Energy Information Administration reported U.S. commercial crude oil inventories fell by 2.1 million barrels in the week ended May 15. Experts had forecast a decline of about 1.5 million barrels of crude oil.

The dollar continued to see weakness against other majors, boosting the hedge appeal of oil and other commodities.

The greenback fell to a six-month low against the sterling, its lowest mark in nearly five months against the euro and a two-month low versus the yen.

There is no major economic news in the docket for today. In corporate news, the Washington Post reported troubled automaker General Motors (GM) may be sent into bankruptcy protection by the U.S. government as early as the end of next week.

Our informative 24”x36” wall chart explores 40 years of historical market data on Crude Oil, Gold and S&P500 markets, and includes historical event call-outs. It’s a great trading and analytic tool for professional and beginner traders.

Sign up here to receive your chart today!

Investors Hub Services