US & World Daily Markets Financial Briefing 26-01-2010

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The major U.S. index futures are pointing to a mixed opening on Tuesday, with sentiment delicately poised as traders weigh uncertainty on one hand and optimistic earnings reports on the other. In Asia, mood continued to be sour, as lingering concerns over possible attempts by China to rein in growth and the anxiety triggered by S&P’s reduction of Japan’s sovereign debt rating outlook.

The European markets are also testing waters amid this uncertainty. U.K. turned in anemic growth in the fourth quarter, although the quarter signaled a technical end to the recession there. Against this backdrop, traders may look ahead to the two house prices surveys and the consumer confidence report for gaining clarity on the economic milieu.

U.S. stocks opened Monday’s session higher, as bargain hunters thronged the Street following three sessions of sharp declines. Thereafter, amid the release of a disappointing housing market report, the major averages showed some indecision before closing modestly higher.

The Dow Industrials gained 23.88 points or 0.23% to end at 10,197 and the Nasdaq Composite Index advanced 5.51 points or 0.25% to 2,211, while the S&P 500 Index moved up 5.02 points or 0.46% to 1,097.

Eighteen of the thirty Dow components closed the session higher, with Caterpillar (CAT) (up 1.64%), General Electric (GE) (up 1.61%), Intel (INTC) (up 2.06%) and Hewlett-Packard (HPQ) (up 2.06%) advancing the most in the session. On the other hand, American Express (AXP) tumbled 2.07%.

Among the sector indexes, the Dow Jones U.S. Basic Materials Average rose close to 1% and the NYSE Arca Oil Index gained 1%. The Philadelphia Oil Service Index rallied 1.46% compared to a 1.42% gain by the Philadelphia Semiconductor Index. However, the NYSE Arca Gold Bugs Index receded 1.45%.

On the economic front, existing home sales fell 16.7% month-over-month to a seasonally adjusted annual rate of 5.45 million units in December compared to 6.54 million units in November. Economists had estimated a more modest decline to 5.90 million units. Inventories as measured by months of supply rose to 7.2 months from 6.5 months. The median sales price of an existing home rose 1.5% year-over-year and moved up 4.9% month-over-month to $178,300.

According to the National Association of Realtors, about 43% of the buyers were first-time buyers, who may have taken advantage of the first time homebuyers credit. Therefore, the recovery of the housing market faces risk once the stimulus measures are withdrawn.

TSX May Struggle To Move Up At Open

Canadian stocks could reel under pressure Tuesday morning as falling commodity price may weigh on investors' sentiment. The prices of oil and bullion were reflecting a weak trend amid strengthening dollar and worries over global economic growth.

Today, Standard & Poor's lowered its outlook on Japan's sovereign debt rating to negative from stable, while the British economy expanded only 0.1% sequentially in the fourth quarter of 2009, after contracting 0.2% in the prior quarter.

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

The main index ended with marginal gains in the previous session, just arresting its three-day losing streak, on bargain hunting. Monday, the S&P/TSX Composite Index added a marginal 0.10% or 11.09 points to 11,354.51.

Energy stocks may be in play as the price of crude oil continued to move lower on anxiety over demand outlook and economic growth concerns. Crude oil for March was at $74.60, down $0.66, a barrel. Meanwhile, Royal Dutch Shell Plc. said it would slow down its future growth in Fort McMurray, Canada, citing high costs in the oil sands.

The price of bullion eased $8.7 to $1,087, an ounce in morning deals Tuesday.

Research In Motion could attract attention after Apple Inc. reported a spectacular earnings, indicating demand for mobile phone is vibrant, despite recent slump in global economy.
 
Healthcare company Diagnostics posted fourth-quarter net loss of C$0.06 per share, wider than C$0.05 per share in the same quarter last year.

Book retailer Indigo Books and Music reported 29% jump in its quarterly profits, prompting RBC to up its price target on the stock to C$19 from C$17..

Home improvement chain Rona Inc. said it plans adding more stores so as to increase the per share earnings by 10% to 15% in the coming two years. Meanwhile, UBS ups its price target on the stock to C$18 from C$17.

Mineral property explorer Palladon Ventures said it has appointed Dale Gilbert as President and Chief Executive Officer, and to the board.

Print media service provider World Color Press is likely to be acquired by Quad/Graphics Inc. for roughly $1.3 billion to $1.4 billion, the Wall Street Journal reported.

Renewable energy company Ram Power Corp. said it has won 2 geothermal concessions in Chile, through its subsidiary, Polaris Energy Chile.

Mining company Galway Resources said it entered into a binding agreement to acquire a 100% interest in the Reina de Oro and Coloro properties in the center of the historic Vetas Gold Mining District in Colombia.

Traders will look to crude oil inventories data from across the border, due later today, which could guide the price of oil in the near future.

Commodity, Currency Markets

Crude oil futures are trading at $74.92 a barrel, down $0.81 a barrel. On Monday, the commodity snapped its losing streak amid the rebound by the equity markets, gaining $0.72 to $75.26 a barrel.

Gold futures are receding $8.30 to $1,088.50 an ounce after advancing $7.10 to $1,096.80 an ounce in the previous session.

Among currencies, the U.S. dollar is trading at 80.67 yen, stronger than the 90.278 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.4072.

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Asian Markets Slump On Concerns About China's Measures

The markets across Asia, which were open for trading on Tuesday ended in negative territory as concerns about tighter measures from China to cool down its economy overshadowed the positive closing on Wall Street for the first time in four sessions yesterday. The markets in India and Australia are closed for holidays.

In Japan, the benchmark Nikkei 225 Index fell 187.41 points, or 1.78%, to 10,325, while the broader Topix index of all First Section issues dropped 18.19 points, or 1.95 percent, to 916.

On the economic front, the Bank of Japan, at the conclusion of its two-day policy meeting, left its key interest rate near zero as expected. The Bank further reiterated that it would keep monetary conditions extremelyaccommodative. The central bank further noted that it foresees deflation moderating slightly in the fiscal year beginning April due mainly to a rise in crude oil prices.

Separately, a report released by Shoko Chukin Bank revealed that confidence among Japanese small and medium-sized enterprises rose to 41.3 in January from 40.4 recorded in December. A reading below 50 suggests that pessimists outnumber optimists. The report further noted that manufacturers' confidence remained at 41.3, while non-manufacturers' sentiment improved 1.7 points during January.

Light sweet crude oil futures for March delivery ended at $74.37 a barrel in electronic trading, down $0.87 per barrel from previous close at $75.26 a barrel in New York on Monday.
 
Stocks across the sectors declined as yen strengthened to less than 90 per US dollar in afternoon session amid concerns that China might tighten its monetary measures to cool-off economy, which had been a driving force behind the recent global economic recovery. Concerns that the global economic recovery might be derailed engulfed traders as they locked gains and moved to sidelines waiting for further cues.

Automotive stocks ended lower. Toyota Motor Corp. plunged 4.68%, Honda Motor fell 2.68%, Nissan Motor declined 1.89%, Isuzu Motors lost 3.02% and Mitsubishi Motor declined 3.02%.

Real estate stocks also ended in negative territory. Sumitomo Realty & Development declined 2.50%, Mitsui Fudosan fell 1.89%, Mitsubishi Estate lost 1.59%, Heiwa Real Estate shed 1.42% and Tokyu Land Corp. slipped 2.00%.

Banking stocks also drifted into the red. Sumitomo Mitsui Financial Group lost 3.00%, Mizuho Financial declined 2.66%, Mitsubishi UFJ Financial fell 3.08% and Resona Holdings plunged 5.84%.

Exporters also declined as a stronger yen reduces the export proceeds in local currency terms upon realization. Canon slipped 1.59%, Sony Corp. slumped 4.76% and Sharp Corp. fell 2.26%.

Shipping stocks ended weaker on economic concerns. Mitsui OSK Lines fell 4.00%, Nippon Yusen fell 3.57% and Kawasaki Kisen Kaisha plunged 4.62%.

In Hong Kong, the Hang Seng Index slumped 489.22 points, or 2.38%, to close at 20,109 on concerns China might take more tightening measures to cool down its economy and in turn might result in possible derailing of the fragile global economic recovery. Chinese banks led the declines with the major banks, Bank of China, China Construction Bank, Bank of Communications and ICBC falling more than 3% each. China related stocks, property stocks and resource stocks also witnessed sell-off on concerns about global economic recovery. As many as 39 of the 42 components in the index ended in the negative territory.
 
In South Korea, the KOSPI Index ended in negative territory for the fourth day, down 32.86 points, or 1.97% at 1,637, as traders sold off stocks on concerns China's policy tightening measures to cool down its economy might derail global economic recovery prospects. Concerns that Chinese decision to restrict new lending could hurt local outbound shipments to the quickly recovering economy led to unloading of shares by investors. Economic data from Bank of Korea revealing that the economy registered a marginal 0.2% growth for the fourth quarter, following 3.2% growth in GDP in the third quarter, also impacted market sentiment.

Among other major markets open for trading in the region, Indonesia's Jakarta Composite Index shed 19.44 points, or 0.75% to close at 2,578, Taiwan's Weighted Index plunged 274.18 points, or 3.48% to close at 7,599, Strait Times Index in Singapore fell 71.38 points, or 2.54%, to close at 2,744 and China's Shanghai Composite Index lost 75.02 points, or 2.42%, to close at 3,019.

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The major European averages are trading mixed on Tuesday after ending lower for five straight sessions. The French CAC 40 Index and the U.K. FTSE Index are moving down 0.31% and 0.10%, respectively, while the German DAX Index is rising 0.03%.

In corporate news, Swiss drug giant Novartis (NVS) reported a 20% increase in its fourth quarter net sales to $12.93 billion, while earnings per share rose to $1.01 per share from 66 cents per share last year. Analysts estimated earnings of $1.10 per share on revenues of $12.04 billion. The company also announced the appointment of Joe Jimenez as CEO, completing the CEO succession process that began in 2008. Novartis also announced an increase in its dividend to 2.10 Swiss francs per share for 2009.

German engineering giant Siemens (SI) said its first quarter earnings rose to 1.53 billion euros from 1.23 billion euros, but revenues fell 12% to 17.35 billion euros.

A report released by the German Federal Statistical Office showed that the German import price index fell 1% year-over-year in December. However, the decline was less severe than the 5% drop in the previous month Economists had estimated a steeper 1.5% decline. The export price index edged down 0.4% compared to the 1.7% decline in November. On a monthly basis, import prices and export prices increased 0.5% and 0.2%, respectively.

French consumer spending rose 2.1% in December compared to the previous month, according to a report released by INSEE. In November, consumer spending had risen at a revised 0.1% rate. Annually, consumer spending rose 5.9% in December compared to the 3.5% increase in the previous month.

Meanwhile, the European Central Bank reported that the euro zone reported a current account surplus of 0.1 billion euros in November compared to deficit of 4.6 billion euros in October. The trade surplus, especially the surplus on trade in services, declined from the previous month and the deficit on the income account increased.

Economic data from the biggest euro zone economy was upbeat, with the Ifo Institute’s survey revealing that the German business climate index rose to 95.8 in January compared to a revised reading of 94.6 for December. Economists had expected a reading of 95.1. The current conditions index rose 0.8 points to 91.2, while the expectations index increased 1.7 points to 100.6.

The U.K.’s Office for National Statistics released its preliminary fourth quarter GDP report, showing 0.1% sequential growth following GDP declines in each of the previous six quarters. Economists had expected 0.5% growth for the quarter. On a year-over-year basis, GDP rose 3.2%, faster than the 3% growth expected by economists.

U.S. Economic Reports

The S&P/Case-Shiller home price index, which tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S., is scheduled to be released at 9 AM. Economists expect a 5% year-over-year decline in the 20-city composite house price index for November following a 7.28% drop in the previous month.

The Conference Board is scheduled to release its consumer confidence report for January at about 10 am ET. The report, which is based on a survey of 5,000 U.S. households, is expected to show that the consumer confidence index rose to 53.5 in December.

In December, the consumer confidence index rose to 52.9 compared to a revised reading of 50.6 in November. The expectations index rose 5.3 points to its highest level since December 2007, while the present situation index slipped 2.4 points to its lowest level since February 1983. Reflecting soft labor market conditions, those that said jobs are plentiful fell to the lowest level since December 1982.

The Federal House Finance Agency, or FHFA, is set to release its house price index for November at 10 AM ET. The index is a weighted, repeat-sales index that measures average price changes of single-family houses in repeat sales or refinancings on the same properties. Economists estimate the increase in house prices to slow to a 0.2% rate from 0.6% in the previous month.

Earnings

Baker Hughes (BHI) reported fourth quarter net income of 27 cents per share, notably lower than $1.41 per share in the year-ago quarter. The recent quarter’s results included 16 cents per share in charges. Revenues declined 24% to $3.19 billion. Analysts’ estimates, which typically exclude one-time items, called for earnings of 35 cents per share on revenues of $2.33 billion.

DuPont (DD) reported a fourth quarter profit of 44 cents per share compared to a loss of 28 cents per share last year. Sales rose 10% year-over-year to $6.4 billion. Analysts estimated earnings of 41 cents per share on revenues of $6.16 billion. The company raised its 2010 earnings guidance to $2.15-$2.45 per share from $2.10-$2.40 per share compared to the $2.01 per share consensus estimate.

Verizon’s (VZ) fourth quarter results revealed a loss of 23 cents per share compared to earnings of 43 cents per share last year. On an adjusted basis, the company reported earnings of 54 cents per share, lower than the year-ago earnings of 43 cents per share. Operating revenues climbed to $27.09 billion from $24.65 billion last year. Analysts estimated earnings of 54 cents per share on revenues of $27.33 billion.

Travelers Co. (TRV) said its fourth quarter operating income rose to $2.12 per share from $1.58 per share in the year-ago quarter. Net premiums written fell 4% to $5.19 billion. The consensus estimates called for earnings of $1.49 per share on revenues of $5.26 billion.

Delta Airlines (DAL) reported a net loss of 27 cents per share for the fourth quarter . On a GAAP basis the company’s operating revenues rose 1% year-over-year to $6.8 billion. On a combined basis, including contributions from Northwest Airlines, operating revenues fell 12%. Analysts estimated a loss of 24 cents per share on revenues of $6.86 billion.

Johnson & Johnson (JNJ) fourth quarter sales rose 9% to $16.6 billion. The company’s adjusted net earnings were $1.02 per share, up 8.5% from the year-ago period. Analysts estimated earnings of 97 cents per share on revenues of $15.70 billion.

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Apple could once again prove to be the apple of investors’ eye after it reported first quarter earnings of $3.67 per share compared to the year-ago’s $2.50 per share and revenues climbed to $15.68 billion from $11.88 billion. The results were way ahead of analysts’ estimates, which called for earnings of $2.07 per share on revenues of $12.06 billion.

Sales of Macintosh computers rose 33% year-over-year to 3.36 million and iPhone sales rose 100% to 8.7 million units, while its ageing iPod saw unit sales of 21 million. For the second quarter, the company estimates revenues of $11 billion to $11.4 billion and earnings of $2.06-$2.18 per share. Analysts estimate fiscal year second quarter earnings of $1.77 per share on revenues of $10.37 billion.

Texas Instruments moved lower in Monday’s after hours session despite reporting an increase in its fourth quarter revenues to $3.01 billion from $2.49 billion last year. The company’s earnings per share surged up to 52 cents from 8 cents in the year-ago period. Analysts estimated earnings of 49 cents per share on revenues of $2.98 billion. For the first quarter, the company expects earnings of 44-52 cents per share on revenues of $2.95 billion to $3.19 billion. The consensus estimates call for earnings of 43 cents per share on revenues of $2.83 billion.

Novo Nordisk may gain ground after it announced that the FDA has approved its new drug application for Victoza, the first once-daily human glucagons-like peptide-1 analog for the treatment of type 2 diabetes. The company noted that the treatment is used as an adjunct to diet and exercise to improve blood sugar control in adults with type 2 diabetes mellitus.

Jacobs Engineering is likely to react to its announcement that its first quarter net earnings declined to 58 cents per share from 94 cents per share last year. Revenues fell to $2.5 billion from the year-ago’s $3.2 billion. Analysts estimated earnings of 58 cents per share on revenues of $2.48 billion. Total backlogs as of January 1st 2010 were $14.9 billion compared to $16 billion as of January 2nd, 2009.

Albemarle rose modestly in Monday’s after hours session after it reported that its fourth quarter net sales rose 8% year-over-year to $558.2 million. The company’s adjusted earnings rose 54% to 64 cents per share. The consensus estimates called for earnings of 57 cents per share on revenues of $528.87 million.

Crane could see some activity after it reported fourth quarter net income attributable to common shareholders of 81 cents per share compared to a net loss of 14 cents per share a year-ago. Excluding special items, the company reported net income of 57 cents per share, up from 56 cents per share last year. Sales fell 8% to $545 million. Analysts, on average, estimated earnings of 54 cents per share.

Kilroy Corp. may move in reaction to its announcement that its fourth quarter funds from operations totaled 39 cents per share compared to 73 cents per share last year. Revenues from continuing operations fell to $67.38 million from $72.28 million in the year-ago period. Analysts’ estimates that typically exclude one-time items called for funds from operations of 40 cents per share on revenues of $68.75 million.

Live Nation could react to its announcement that it has completed its merger with Ticketmaster Entertainment following the receipt of regulatory clearances and approvals from all government authorities. Following the completion of the merger, Standar & Poor’s announced that NCI would replace Ticketmaster in the S&P SmallCap 600 Index after the close of trading on Monday, February 1st.

RLI Corp. is expected to see some activity after it reported fourth quarter operating earnings of $1.17 per share compared to $1.30 per share last year. The company’s consolidated revenues rose 26.3% to $145.94 million. Analysts estimated earnings of 97 cents per share on revenues of $137.79 million.

Parexel moved to the upside in Monday’s after hours session after reporting non-GAAP second quarter earnings of 26 cents per share compared with 23 cents per share last year. Revenues were $337.98 million. Analysts estimated earnings of 22 cents per share on revenues of $381.81 million.

Packaging Corp. of America receded in Monday’s after hours session after it reported that its fourth quarter adjusted earnings fell to 16 cents per share from 30 cents per share last year. The company attributed the decline to lower containerboard and corrugated products price and mix, which was partially offset by higher volume and lower energy and transportation costs. Net sales fell to $532.2 million, lower than $546.1 million last year. The consensus estimates call for earnings of 13 cents per share on revenues of $510.01 million. For the first quarter, the company estimates earnings of 12 cents per share compared to the 17 cents per share consensus estimate.

Zion Bancorp. rose over 4% in Monday’s after hours session after it reported a fourth quarter net loss applicable to common shareholders of $1.26 per share compared to a net loss of $4.37 per share last year. Taxable-equivalent revenues fell 10.07% to $462.61 million. Analysts estimated a loss of $1.64 per share on revenues of $590.39 million. However, net interest margin shrunk to 3.81% from 4.20%.

Amgen could be in focus after it reported that its fourth quarter adjusted earnings fell 1% year-over-year to $1.05 per share but revenues rose 8% year-over-year to $3.8 billion. Analysts estimated earnings of $1.13 per share on revenues of $3.85 billion. For 2010, the company estimates adjusted earnings of $5.05-$5.25 per share on revenues of $15.1 billion to $15.5 billion. The consensus estimates call for earnings of $5.12 per share on revenues of $15.31 billion.

JDA Software is likely to react to its announcement that its fourth quarter revenues rose to $107.1 million from $106.2 million in the year-ago period. Adjusted non-GAAP earnings were flat at 43 cents per share. The Street estimated earnings of 47 cents per share on revenues of $103.43 million.

SRA International could be in focus after it announced a deal to buy privately held environment consulting firm Perrin Quarles Associates.

FMC Technologies is likely to see some buying interest after it announced a deal with Statoil to design and supply subsea equipment to support its Snore field located in the North Sea. The contract will result in $40 million in revenues to FMC.

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