US & World Daily Markets Financial Briefing 25-03-2010

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Stocks Posting Solid Gains In Mid-Morning Trading

Stocks are up by solid margins in mid-morning trading on Thursday, as a drop in jobless claims and anticipation of a resolution to the debt Greek crisis has prompted some buying interest. The major averages are all in positive territory, rebounding after yesterday's pullback.

The Labor Department reported that initial jobless claims in the week ended March 20th fell to 442,000 from the previous week's revised figure of 456,000. Economists had been expecting jobless claims to edge down to 450,000 from the 457,000 originally reported for the previous week.

Additionally, the Labor Department said continuing claims, a reading on the number of people receiving ongoing unemployment help, fell to 4.648 million in the week ended March 13th from the preceding week's revised level of 4.702 million.

With the decrease, continuing claims fell to their lowest level since coming in at 4.589 million in December of 2008.

Market attention is now on Federal Reserve Chairman Ben Bernanke, as he testifies before the House Financial Services Committee regarding the Fed's exit strategy.

Meanwhile, the markets are also keeping a watchful eye on any developments out of a European Union summit, looking for a resolution to the Greek debt crisis.

In corporate news, electronics retailer Best Buy Co. Inc. (BBY) reported fourth-quarter earnings of $1.82 per share, edging out forecasts that called for $1.79 per share. Revenue increased 12 percent to $16.6 billion, also topping projections of $16.08 billion.

Payroll and human resource service provider Paychex Inc. (PAYX) said that its profit for the third quarter declined 14 percent from last year, hurt by additional expenses related to the Rapid Payroll litigation and lower payroll service revenue. Earnings per share failed to meet analysts' expectations. Looking ahead, the company reaffirmed its fiscal year 2010 outlook.

Red Hat Inc. (RHT), the world's largest seller of Linux software, said that its fourth quarter profit rose 46 percent from a year ago, while revenue increased 18 percent. The company's quarterly earnings per share, excluding items, and revenue both topped estimates.

Separately, Red Hat said its Board of Directors has authorized the repurchase of up to $300 million worth of the company's common stock.

After moving notably higher at the open, the major averages have moved roughly sideways since then, hovering near their best levels. The Dow is up 62.43 points or 0.6 percent at 10,898.58, the Nasdaq is up 18.09 points or 0.8 percent at 2,416.85 and the S&P 500 is up 6.53 points or 0.6 percent at 1,174.25.

Sector News

Telecommunications stocks are posting notable gains in mid-morning trading, as reflected by the 3.2 percent advance by the NYSE Arca Telecommunications Index. The advance has lifted the index to its best intraday level in just over two months.

Qualcomm (QCOM) is leading the sector higher, rising by 7.6 percent to its best price in just under two months. The gain comes after the company raised its second quarter earnings guidance to a range from $0.56 to $0.58 per share, higher than the $0.53 per share forecast by analysts.

Airline stocks are also moving significantly higher, prompting a 1.6 percent gain by the NYSE Arca Airline Index. Despite the strong gain, the index remains rangebound.

Internet, semiconductor, railroad and commercial real estate stocks are also posting strong gains, while modest weakness is visible among energy stocks, with oil service and natural gas stocks under pressure.

Stocks In the News

Transportation and logistics firm Werner Enterprises (WERN) is on the rise after being upgraded at Credit Suisse from Underperform to Neutral. The stock has gained 2.1 percent, setting an eighteen-month intraday high.

Progressive (PGR) is also moving higher after being upgraded at Janney Montgomery Scott from Neutral to Buy. Shares are currently up by 2.8 percent after reaching an eighteen-month intraday high in earlier trading.

On the other hand, Reliant Energy (RRI) is moving lower after the being downgraded by Citigroup from Hold to Sell. The stock is currently down by 3.9 percent, sliding to its lowest intraday price in nearly a year's time.

TSX Poised For A Higher Open On Positive Cues

Canadian stocks are likely to open higher Thursday on a marginal recovery in commodities prices and amid the EU summit. Traders will look to get some positive signals on Greece debt issue at the end of the two-day summit. Also encouraging jobs data from across the border will likely to help lift sentiment.

The U.S. stock futures also point to a higher opening.

However, yesterday's comment by the Bank of Canada's Governor Mark Carney that raised speculation for a sooner-than-expected rate hike could cap any big upside in the stock prices.

Earlier in the day the euro strengthened, giving boost to commodities prices. The euro ticked higher versus the U.S. dollar for the first time in three days after the European Central Bank President announced that the bank will extend its emergency collateral rules beyond this year.

Also the Dubai government announced $9.5 billion aid to the troubled Dubai World as part of its restructuring plans.

On Wednesday, the S&P/TSX Composite Index was down 81.57 points or 0.68% to 11,962.97, snapping its two-day upsurge.

The price of crude oil was up $0.43 to $81.04 a barrel and the bullion recovered from its 6-week low hit in the previous session. Gold for April was up $3.90 to $1,092.70.
 
In corporate news, Athletic apparel maker lululemon athletica reported large growth in its fourth quarter revenues at $0.40 per share compared to $0.16 per share in the year-ago quarter. Analysts were expecting the company to report$0.29 per share for the quarter.

Oil and gas explorer West Energy reported a wider net loss for the fourth quarter at C$0.03 per share, compared to a loss of C$0.03 per share in the year-ago quarter.

Oil explorer Crocotta Energy swung to profit in fourth-quarter, reporting net earnings of C$0.05 per share, compared to net loss of C$0.07 per share last year.

Oil and gas explorer Emerge Oil & Gas posted fourth-quarter net loss of C$4.2 million or C$0.08 per share.

Oil and gas industry technology solutions provider Kelman Technologies reported a net loss of C$14.26 per share for 2009, compared to a breakeven in the prior year.

Precious metal explorer Shore Gold reported a narrower full year net loss of C$0.04 per share, compared to a loss of C$2.48 per share a year earlier.

Independent power producer Maxim Power reported a lower fourth quarter net income of C$0.01 per share, compared to C$0.15 per share last year.

Renewable energy producer Plutonic Power reported a narrower net loss for the fourth quarter of C$0.05 per share, compared to a net loss of C$0.12 per share for the year-ago quarter.

Infrastructure technology company Pure Technologies posted fourth-quarter net income of C$0.07 per share, compared with C$0.02 per share in the same quarter last year.

Online technology solutions provider CYBERplex Inc. reported comprehensive income for the fourth quarter of C$0.02 per share, compared to C$0.09 per share in the year-ago quarter.

Nursery operator PRT Forest Regeneration Income Fund reported a narrower full year net loss C$0.19 per unit compared to C$2.41 per unit in the previous year.
 
Industrial vehicle services provider Azure Dynamics reported a narrower fourth-quarter net loss of C$0.02 per share, compared to C$0.04 per share last year.

Industrial safety services company HSE Integrated slipped into the red in fourth quarter, reporting net loss of C$0.06 per share, compared to a profit of C$0.01 per share in the prior year quarter.

In economic news from the U.S., the Labor Department said initial jobless claims fell to 442,000 in the week ended March 20 from the previous week's revised figure of 456,000. Economists were expecting claims to edge down to 450,000 from the 457,000 originally reported for the previous week. Also continuing claims fell to 4.648 million in the week ended March 13 from the preceding week's revised level of 4.702 million.

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The major Asian markets closed Thursday’s session in a mixed fashion, with the Japanese, South Korean and Indian market closing modestly higher, while the Chinese, Hong Kong and Australian markets closed on a negative note. The European debt crisis continued to restrain buying and led to traders moving into less riskier assets.

Japan’s Nikkei 225 average opened notably higher, but it surrendered its gains over the course of the session, briefly dipping below the unchanged line in late afternoon trading. Thereafter, buying emerged, helping the index to close higher, although off its highs. At the close of trading, the index was up 13.82 points or 0.13% at 10,829.

Most technology stocks advanced, while auto stocks showed mixed sentiment. On the other hand, finance, electrical machinery, retail, construction and heavy machinery stocks showed weakness.

On the economic front, the Bank of Japan said Japan’s corporate service price index declined 1.3% year-over-year in February, marking the seventeenth straight month of declines. In January, services prices slid 1.2%.

Australia’s All Ordinaries languished below the unchanged line throughout the session to close down 6.90 points or 0.14% at 4,896. Most sectors, barring healthcare, energy, IT, telecommunication and utility stocks showed weakness.

Hong Kong’s Hang Seng Index opened notably lower and moved sideways for the rest of the session. The index closed down 241 points or 1.15% at 20,768. Thirty-two of the forty-two index components closed the session lower, with the declines led by property, utility and financial stocks. On the other hand, China Resource Power and China Resources climbed sharply.

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Armed with optimism that the Euro zone leaders meeting at Brussels will arrive at an amicable solution to solve the Greek debt crisis, traders are bidding up stocks in Europe. Positive economic data also lent support to the markets. The French CAC 40 Index and the German DAX Index are rising 0.72% and 0.81%, respectively, while the U.K.’s FTSE 100 Index is gaining 0.55%.

In economic news, the Office for National Statistics said U.K.'s seasonally adjusted value of retail sales rose 4.9% year-over-year in February. The seasonally adjusted volume of retail sales increased by 3.5% in the same period. On a monthly basis, total retail sales value grew 1.9%, while volume was up 2.1%.

German consumer sentiment is set to stabilize in April, revealed the results of a survey conducted by market research group GfK. The forward - looking consumer sentiment indicator, based on a survey of about 2,000 Germans, stood at 3.2 points for April, unchanged from March. Economists were looking for a reading of 3.1.

U.S. Economic Reports

The Labor Department’s jobless claims report showed a bigger than expected decrease in first-time claims for unemployment benefits in the week ended March 20th, with the report also showing a drop in continuing claims.

The report showed that initial jobless claims fell to 442,000 from the previous week's revised figure of 456,000. Economists had been expecting jobless claims to edge down to 450,000 from the 457,000 originally reported for the previous week.

Additionally, the Labor Department said continuing claims, a reading on the number of people receiving ongoing unemployment help, fell to 4.648 million in the week ended March 13th from the preceding week's revised level of 4.702 million

Cleveland Federal Reserve Bank President Sandra Pianalto is scheduled to speak to the Bonita Springs Chamber of Commerce Market Pulse event at Florida Gulf Coast University, Bonita Springs, Florida at 9:10 AM ET.

Federal Reserve Chairman Ben Bernanke is due to testify before the House on the central bank's exit strategy at 10 AM ET.

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Raytheon (RTN) could gain ground after it announced a 21% increase in annual dividend by 21% to $1.50 per share. The company’s board also authorized payment of a quarterly cash dividend of $0.375 per share. Additionally, the board authorized the repurchase of up to an additional $2 billion of the company’s shares.

CryoLife (CRY) is likely to be in focus after it said it has withdrawn its $2 per share proposal to buy Medafor in line with its earlier notification of its intention to withdraw the offer in five business days.

CKE Restaurants (CKR) could move in reaction to its announcement that its fourth quarter total revenues fell to $311.7 million from $327.5 million last year. The company reported earnings of 28 cents per share, higher than 5 cents per share last year. The recent quarter’s results included a tax benefit of $9.9 million. Analysts estimated earnings of 6 cents per share on revenues of $312.13 million.

Red Hat (RHT) moved lower in Wednesday’s after hours session despite reporting fourth quarter revenue growth of 18% year-over-year to $195.9 million. The company reported non-GAAP earnings of 19 cents per share compared to 17 cents per share last year. Analysts estimated earnings of 16 cents per share on revenues of $193.18 million.

Paychex (PAYX) also showed weakness in Wednesday’s after hours session after it reported that its third quarter revenues fell 4% to $507.8 million. The company’s net income per share rose 14% to 31 cents per share, with the results including a charge of 3 cents per share. The consensus estimates called for earnings of 33 cents per share on revenues of $509.25 million.

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