US & World Daily Markets Financial Briefing 24-06-2010

Stocks Seeing Moderate Weakness In Mid-Morning Trading

Stocks are moderately lower in mid-morning trading on Thursday, as concerns about the sustainability of the economic recovery act as an overhang on market sentiment. The weakness comes as jobless claims remain at elevated levels and after the Federal Reserve issued uninspiring economic commentary yesterday.

Before the start of trading, the Labor Department reported that first-time claims for unemployment benefits continued to hover well above the 400,000 level in the week ended June 19th, pointing to a still sluggish labor market.

The report showed that initial jobless claims fell to 457,000 from the previous week's revised figure of 476,000. Economists had expected jobless claims to fall to 460,000 from the 472,000 originally reported for the previous week.

In a separate report, the Commerce Department said durable goods orders fell by 1.1 percent in May following an upwardly revised 3.0 percent increase in April. Economists had expected orders to decrease by 1.3 percent compared to the 2.8 percent growth that had been reported for the previous month.

Excluding a 6.9 percent drop in orders for transportation equipment, however, orders for durable goods actually increased by 0.9 percent in May compared to a 0.8 percent decrease in April. Nonetheless, the increase in ex-transportation orders fell short of economist estimates for 1.3 percent growth.

In corporate news, BP Plc (BP) has reinstalled the containment cap it removed temporarily yesterday for observation of the leaking oil well in the Gulf of Mexico. The well continues to seep oil into the Gulf at an undetermined pace.

After the markets closed for trading in previous session, home goods retailer Bed Bath & Beyond, Inc. (BBBY) said that its first quarter profit rose 53 percent from a year ago, helped by strong same-store sales growth and improved margins. The company's quarterly earnings and revenues were able to comfortably top Wall Street estimates.

Casual dining chain Darden Restaurants, Inc. (DRI) reported a fourth quarter profit that dropped below estimates due to lower sales. Looking ahead, the company said it expects fiscal year 2011 earnings to be much better amid improved economic and industrial conditions.

The major averages have seen some upside in recent trading, moving off of their session lows, but they currently remain firmly negative. The Dow is down 64.77 points or 0.6 percent at 10,233.67, the Nasdaq is down 20.22 points or 0.9 percent at 2,234.01 and the S&P 500 is down 9.59 points or 0.9 percent at 1,082.45.

Sector News

Banking stocks are some of the worst performers in morning trading, dragging the KBW Bank Index down by 2 percent. Despite the drop, the index remains rangebound.

The weakness in the banking sector is partly due to concerns about the outlook for the global economy, with the Federal Reserve saying Wednesday that financial conditions have become less supportive of economic growth due in part to the European debt crisis.

Steel stocks are also seeing significant weakness, as reflected by the 1.7 percent drop by the NYSE Arca Steel Index. Rio Tinto plc (RTP) is one of the leading decliners within the sector, posting a loss of 3.4 percent and pulling back off of the nearly two-month closing high set yesterday.

Commercial real estate, electronic storage, internet and semiconductor stocks are also markedly lower, while some strength among utility and airline stocks may be limiting the drop by the broader markets.

Stocks Driven By Analyst Comments

Home Depot (HD) is moving notably lower after being downgraded at Janney Montgomery Scott from Buy to Neutral. The stock has fallen by 2.3 percent and is on pace for a fresh four-month closing low.

American Eagle (AEO) is also under pressure after analysts at Oppenheimer downgraded the stock from Outperform to Perform. Shares are currently down by 2.8 percent, moving back down towards the fifteen-month closing low set earlier this month.

On the other hand, HRPT Properties (HRP) is trading higher after Stifel Nicolaus upgraded the stock from Hold to Buy. The stock is up by 1.1 percent but remains rangebound.

Let CMS Forex find patterns for you

Our integrated pattern recognition technology identifies patterns in real-time.

Download the free demo - Click Here

Canadian Markets Report

Toronto Stocks May Witness Lackluster Session Thursday

Bay Street stocks may open lower Thursday amid falling commodities prices and weak cues from the global equity markets. Also, the Federal Reserve's less bullish statement on the economy, indirectly pointing to the sovereign debt issues in the euro zone, will weigh on the sentiment.

Meanwhile, overseas equity markets were lower amid concerns over the global economic growth, with stocks across Asia and Europe dipping earlier today.

On Wednesday, the S&P/TSX Composite Index edged up 9.56 points or 0.08% to 11,807.50, after shedding over 1% in the previous session.

The price of crude oil moved down on concerns over demand growth after the API and the EIA said crude inventories rose in the U.S., the largest consumer. Crude for August delivery was down $0.58 to $74.77 a barrel.

The price of gold edged down $5.30 to $1,229.50 an ounce.

In international M&A news, French insurer AXA SA said it will sell its UK life business to Resolution Ltd. for around $4.10 billion

In corporate news, Suncor Energy said it will sell certain natural gas properties to TAQA NORTH, a subsidiary of the Abu Dhabi National Energy Company PJSC, for about C$285 million.

Oil exploration company Niko Resources swung to profit in the year ended March 31 2010, reporting net income of $2.37 per share, compared to a loss of $0.38 per share in the prior year.

Semiconductor company Gennum Corp. turned to profit in second-quarter, reporting net income of $0.12 per share, compared with a net loss of $0.03 per share in the prior year period. The company declared a dividend of $0.035 per share.

Insurance services provider Anthony Clark Intl. Insurance Brokers posted full year 2010 net income of $0.43 per share, compared with $0.09 per share in the prior year period.

In economic news from the U.S., the Commerce Department said said that durable goods orders fell by 1.1% in May following an upwardly revised 3.0% increase in April. Economists were expecting orders to decrease by 1.3% compared to the 2.8% growth that had been reported for the previous month.

In another report, the Labor Department said initial jobless claims fell to 457,000 from the previous week's revised figure of 476,000. Economists were expecting jobless claims to fall to 460,000 from the 472,000 originally reported for the previous week.

Yesterday, the FOMC left its benchmark interest rate unchanged at a range of zero to 0.25% and maintained its pledge to keep rates at the record low level for 'an extended period.' However, a less bullish statement on the economy by the Fed weighed on trader sentiment. Analysts opined the Fed will hold on rates until next year at the earliest.

Learn how to trade

Our "Value Packed" online trading seminar will show you how you can.

Click Here To Find Out More

Asia Markets Report

Asian Markets End In Negative Territory

The markets in Asia ended in negative territory, but off the lows, on Thursday in cautious trading amid fresh concerns about sustaining global economic recovery after home sales data in the US disappointed more than expected and the Federal Reserve vowed to keep the interest rates unchanged for a longer period of time. Lackluster trading looking for direction was the order of the day across the markets, awaiting more cues from the U.S.

In Japan, the benchmark Nikkei 225 Index finished up 4.64 points, or 0.05%, at 9,928, while the broader Topix index of all First Section issues fell 1.07 points, or 0.12%, to 880.

On the economic front, a report released by the Ministry of Finance revealed that the country saw a merchandise trade surplus of 324.2 billion yen in May marking the 12th consecutive monthly surplus. It was, however, well below analyst expectations for a 480 billion yen surplus following the revised 740.5 billion yen surplus in April.

A report released by the Bank of Japan revealed that an index measuring corporate service prices in the country declined 0.8% on year in May, coming in at 97.4. That follows a 1.1 percent annual contraction in April. On a monthly basis, prices were down 0.1 percent after shedding 0.4 percent in April.

One in every two stocks declined amid concerns about global economic recovery after new home sales data in the US was disappointing raising fresh concerns about sustaining economic recovery. The strengthening of the local currency against the US dollar also impacted market sentiment.

Among the losers, Asahi Glass declined 2.65%, Bridgestone Corp. shed 1.65%, Mitsubishi Paper plunged 2.68% and Sanyo Electric lost 3.12%.

Most traders preferred to adopt a cautious approach awaiting more cues on global economy.

In Australia, the benchmark S&P/ASX200 Index slipped 6.40 points, or 0.14% and closed at 4,480, while the All-Ordinaries Index ended at 4,504, representing a loss of 5.30 points, or 0.12%.

On the economic front, a report released by the Conference Board revealed that its Leading Economic Index for Australia increased 0.1% in April. The private sector agency further revealed that its Coincident Index also rose 0.1%. Releasing the report, the agency said despite the April increase, the strengths among the leading indicators were "less widespread than the weaknesses."

Light sweet crude oil futures for August delivery ended at $76.38 a barrel in electronic trading, up $0.03 per barrel from previous close at $76.35 a barrel in New York on Wednesday.

Mining stocks advanced after the new PM said that the Government would cancel its resource super profits tax advertising and also opened the door for discussions with mining companies. BHP Billiton revealed that it would suspend its advertising campaign against resource tax.

The shares of BHP Billiton advanced 1.30%, while Rio Tinto gained 1.69%. Among other resource stocks, Fortescue Metals rose 2.48%, Gindalbie Metals surged up 5.48%, Iluka Resources climbed 2.45% , Macarthur Coal surged up 6.48% and Oz Minerals added 0.98%.

Banks, however, ended in negative territory, awaiting more cues from the new PM and her policies. ANZ Bank edged down 0.22%, Commonwealth Bank shed 0.76%, National Australia Bank fell 1.18% and Westpac Banking was down 1.98%. Investment banker Macquarie Group plunged 4.73%.

In Hong Kong, the benchmark Hang Seng Index ended in negative territory with a loss of 123.12 points, or 0.59%, at 20,733, amid fresh concerns about sustaining global economic recovery after disappointing homes sales report from the U.S and Federal Reserve's pessimistic outlook for the economy apart from assurance for persisting with lower interest rates. Weak trading across other markets in the region also impacted market sentiment.

The Indian market ended a volatile session almost flat with a negative bias on Thursday on concerns over the fragile nature of the global economic recovery following a disappointing report on U.S new home sales and the Fed's pessimistic growth outlook. After rising by about 90 points earlier in the session, the 30-share Sensex reversed its direction and fell to a low of 17,633 before ending down 26 points or 0.14% at 17,730, while the 50-share Nifty closed almost unchanged at 5,321.

Among the other major markets open for trading, China's Shanghai Composite Index slipped 3.13 points, or 0.12%, and closed at 2,568, Indonesia's Jakarta Composite Index shed 10.69 points, or 0.37% to close at 2,914, and Singapore's Strait Times Index lost 23.44 points, or 0.82% to close at 2,848. However, Taiwan's Weighted Index bucked the trend and ended in the green with a nominal gain of 7.74 points, or 0.10% at 7,590.

Vector Vest

DO YOU OWN THE RIGHT STOCKS?

Analyze Your Stocks FREE! – Click Here

European Markets

The major European markets are also seeing notable weakness on the day, adding to the losses posted in the two previous sessions. The U.K.'s FTSE 100 Index and the German DAX Index are both down by 0.7%, while the French CAC 40 Index is down by 0.8 percent.

In economic news, Eurozone industrial orders grew more than expected in April compared to last year, recording the strongest annual rate of growth in a decade. Industrial new orders growth in the 16-nation currency bloc accelerated to 22.1% in April from a revised 20.3% in March, according to data issued by Eurostat.

Meanwhile, the European Union has called on the G20 group of nations to coordinate with each other in planning exit strategies from stimulus support measures ahead of this weekend's summit in Toronto.

In an open letter, European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso said a coordinated exit strategy could prevent spill-over effects that would adversely affect individual countries.

In corporate news, French oil and gas firm, Total SA and U.S. biotechnology firm Amyris Inc. announced a strategic partnership to develop new products and build biological pathways to produce and commercialize renewable fuels and chemicals.

U.S. Economic Reports

First-time claims for unemployment benefits fell by a little more than expected in the week ended June 19th, according to a report released by the Labor Department, although weekly claims continue to hover above the 400,000 level.

The report showed that initial jobless claims fell to 457,000 from the previous week's revised figure of 476,000. Economists had expected jobless claims to fall to 460,000 from the 472,000 originally reported for the previous week.

The Labor Department also said that the less volatile four-week moving average fell to 462,750 from the previous week's revised average of 464,250. Continuing claims also fell to 4.548 million in the week ended June 12th from the preceding week's revised level of 4.593 million.

Meanwhile, after reporting five consecutive monthly increases in durable goods orders, the Commerce Department has released a report showing that durable goods orders fell in the month of May due largely to a drop in orders for transportation equipment.

The Commerce Department said that durable goods orders fell by 1.1 percent in May following an upwardly revised 3.0 percent increase in April. Economists had expected orders to decrease by 1.3 percent compared to the 2.8 percent growth that had been reported for the previous month.

Excluding a 6.9 percent drop in orders for transportation equipment, however, orders for durable goods actually increased by 0.9 percent in May compared to a 0.8 percent decrease in April. Nonetheless, the increase in ex-transportation orders fell short of economist estimates for 1.3 percent growth.

Let CMS Forex find patterns for you

Our integrated pattern recognition technology identifies patterns in real-time.

Download the free demo - Click Here

Stocks in Focus

Lennar (LEN) may be in focus after it reported that its second quarter revenues declined 9% to $814.5 million. The company reported earnings of 21 cents per share compared to a loss of 76 cents per share last year. Analysts estimated break-even results on revenues of $835.54 million.

After the markets closed for trading in previous session, home goods retailer Bed Bath & Beyond, Inc. (BBBY) said that its first quarter profit rose 53 percent from a year ago, helped by strong same-store sales growth and improved margins. The company's quarterly earnings and revenues were able to comfortably top Wall Street estimates.

Casual dining chain Darden Restaurants, Inc. (DRI) reported a fourth quarter profit that dropped below estimates on pre-tax charges and lower sales, reflecting the absence of an extra week benefit in the prior year. Looking ahead, the company said it expects fiscal year 2011 earnings to be much better amid improved economic and industrial conditions.

Jobless Claims Drop But Still Point To Sluggish Labor Market

First-time claims for unemployment benefits fell by a little more than expected in the week ended June 19th, according to a report released by the Labor Department Thursday morning, although weekly claims continue to hover well above the 400,000 level.

The report showed that initial jobless claims fell to 457,000 from the previous week's revised figure of 476,000. Economists had expected jobless claims to fall to 460,000 from the 472,000 originally reported for the previous week.

With the decrease, jobless claims fell to their lowest level in six weeks, although Peter Boockvar, equity strategist at Miller Tabak, noted that claims remain very elevated at this stage of an economic recovery.

"Bottom line, it was good to see the drop off in claims following last week's spike, but the absolute level still remains high and points to a still sluggish labor market," Boockvar added.

The Labor Department said that the less volatile four-week moving average fell to 462,750 from the previous week's revised average of 464,250.

Continuing claims, a reading on the number of people receiving ongoing unemployment help, also fell to 4.548 million in the week ended June 12th from the preceding week's revised level of 4.593 million.

While the report also showed that those receiving emergency unemployment compensation fell by about 71 thousand in the week ended June 5th, those receiving extended benefits jumped by about 116 thousand, resulting in a net increase of about 45 thousand.

Next Friday, the Labor Department is scheduled to release its report on the employment situation in the month of June. Economists expect the report to show that the economy lost about 70,000 jobs during the month, while the unemployment rate is expected to remain unchanged at 9.7 percent.

The employment report for May showed a notable increase in payroll employment in the month, although the increase in jobs was largely due to the hiring of temporary employees to work on the census.

The report showed that non-farm payroll employment increased by 431,000 jobs in May following an unrevised increase of 290,000 jobs in April. The job growth fell short of economist estimates for an increase of about 500,000 jobs.

While the increase in jobs in May marked the fastest pace of job growth since March of 2000, the increase was primarily due to the addition of 411,000 temporary employees to work on Census 2010.

Meanwhile, the Labor Department also said that the unemployment rate slipped to 9.7 percent in May from 9.9 percent in April. Economists had expected the unemployment rate to edge down to 9.8 percent.