US & World Daily Markets Financial Briefing 27-04-2010

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Stocks Little Changed Amid Polarized Reaction To Data

Stocks are showing a lack of conviction in mid-morning trading on Tuesday, as offsetting reactions to a smaller than expected pickup in home prices and upbeat consumer confidence data has split the market. The major averages are little changed after yesterday's mixed performance.

In a positive sign for the economic outlook, the Conference Board released a report showing that its consumer confidence index increased by much more than expected in the month of April, rising to its highest level in well over a year.

The Conference Board said its consumer confidence index rose to 57.9 in April from a revised 52.3 in March. Economists had expected a much more modest increase by the index to a reading of 53.5 from the 52.5 originally reported for the previous month.

With the bigger than expected increase, the index rose to its highest level since coming at 61.4 in September of 2008.

Earlier, Standard and Poor's revealed that home prices in 20 of the nation's largest metropolitan areas saw the first annual rate of growth in over three years in February, although the pace of growth fell short of economist estimates.

The S&P/Case-Shiller 20-City Composite Home Price Index rose 0.6 percent in February compared to the same month a year ago. Economists had been expecting an annual rate of price growth of about 1.1 percent.

Meanwhile, the Federal Reserve Open Market Committee will commence its 2-day meeting today, culminating in a statement that will be released tomorrow afternoon.

While the Fed is expected to leave interest rates unchanged, a great deal of attention is likely to be paid to any changes in its accompanying statement, which will provide clues about the Fed's assessment of the mending economy.

In earnings news, 3M Co. (MMM) said its adjusted first-quarter net income was $1.40 per share, topping forecasts which called for $1.21 for the quarter. First-quarter sales totaled $6.35 billion, up 24.7 percent compared with $5.09 billion in the year ago quarter and above estimates for revenues of $5.94 billion. The firm also issued upbeat full-year guidance.

DuPont (DD) also reported first-quarter net income of $1.24 per share, higher than the expected earnings of $1.06 per share for the quarter. Sales for the first quarter totaled $8.48 billion, up 23 percent from the prior year period and above forecasts for $8.07 billion for the quarter. The company also boosted its full-year earnings forecast.

Boston Scientific Corp. (BSX) unveiled adjusted first-quarter earnings of $0.16 per share, besting expectations of $0.08 per share for the quarter. Net sales for the quarter were $1.96 billion, down from $2.01 billion in the prior year quarter and below the Wall Street consensus of $2.00 billion.

The major averages have seen some upside in recent dealing but remain near the flat line. While the Dow is up 9.37 points or 0.1 percent at 11,214.40, the Nasdaq is down 0.92 points or less than 0.1 percent at 2,522.03 and the S&P 500 is down 1.91 points or 0.2 percent at 1,210.14.

Sector News

Steel stocks are some of the worst performers in the early going, resulting in a 1.7 percent decline by the NYSE Arca Steel Index. With the pullback the index is extending recent losses and is on pace for a monthly closing low.

Housing stocks are also under pressure following the day's disappointing price data, with the Philadelphia Housing Sector Index posting a 1.1 percent loss. With the drop, the index is pulling back off of a nineteen-month closing high set yesterday.

Electronic storage, oil service and semiconductor stocks are also moving lower, while health insurance and healthcare provider stocks have moved to the upside. The Morgan Stanley Healthcare Payor and Healthcare Provider Indices are up by 1 percent and 1.4 percent, respectively.

Biotechnology, telecommunication and utility stocks are also moving higher, helping to further offset the weakness in the other market segments.

Stocks Driven By Analyst Comments

Taubman Centers (TCO) is on the rise after UBS upgraded the stock from Sell to Neutral. The stock has gained 1.5 percent and is at its best intraday price in nineteen months.

On the other hand, Alberto-Culver (ACV) is moving lower after RBC Capital Markets downgraded the stock from Outperform to Sector Perform. Shares have dipped by 2.5 percent, moving off of their best closing price in just over three months.

Penn Virginia (PVA) is also under pressure after analysts at Jefferies lowered their rating on the stock from Buy to Hold. The stock is down by 2.9 percent, and although it has not slipped past recent intraday lows, it is on pace for a three-week closing low.

Early Signals Point To A Weaker Opening For TSX

Bay Street stocks may struggle to sustain gains Tuesday morning amid easing commodities prices and on renewed worries over the Greece debt situation.

Concern that an aid package will not fully suffice the Greek debt crisis pressured the euro in morning deals. Last Friday, Greece said it will opt for bailout loans from the euro zone and the IMF.

Apart from a weaker euro, China's steps to cool its property markets also weighed on commodities prices.
However, encouraging earnings reports from south of the border may help lift sentiment.

On Monday, the S&P/TSX Composite Index rose rose for a sixth session adding 41.33 points or 0.34% to settle at a fresh 18-month high of 12,280.97.

Ford Motor reported first quarter earnings of $0.46 per share, beating consensus estimates for a profit of $0.31 per share. Chemical maker DuPont reported more than 2-fold jump in its first quarter earnings at $1.24 per share and upped its full year earnings guidance to a range of $2.50 to $2.70 per share. The world's largest package delivery company United parcel Service reported improved first quarter earnings of $0.53 per share, up from $0.40 recorded a year earlier.

Meanwhile, earnings reports from Canadian companies came in mixed, with CN Rail beating estimates and Nexen missing estimates.

In corporate news from Canada, CN Rail reported improved first quarter net income of C$1.08 per share, compared to C$0.90 per share in the year-ago quarter. For 2010, the company continues to expect solid double-digit growth in adjusted earnings per share over last year. Results for the quarter also included an after-tax gain of C$131 million or C$0.28 per share, from a rail-line sale to a Toronto-area transit agency.

Energy company Nexen Inc. reported first-quarter net income of C$0.35 per share, up from C$0.26 per share in the same quarter last year. It also declared quarterly dividend of C$0.05 per common share. Analysts were expecting the company to post C$0.38 per share.

Inmet Mining reported first-quarter net income of C$1.42 per share, compared to C$1.06 per share last year.

Gold miner Kinross Gold said it has upped its stake in Underworld Resources Inc. to nearly 81.6%. Kinross also intends to de-list the Underworld shares from the TSX Venture Exchange on completion of a subsequent acquisition transaction.

Nuukfjord Gold shares will commence trading on the TSX on April 27 under the trading symbol "NUU". The company offered 18 million common shares at $0.50 per share, aggregating gross proceeds of $9 million.

Wood based panel maker Norbord Inc. reported a narrower first-quarter net loss of $0.12 per share, compared to $0.52 per share last year.

In economic news, the Conference Board's index of consumer confidence dropped to 84.8 in April, erasing the gain recorded in March.

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Asian Markets Slide On Economic Concerns, Profit Taking

The markets in Asia, except Japan, ended in the negative territory on Tuesday, as traders preferred to lock in gains and move to the sidelines ahead of key economic data including the FOMC meeting in the US during the week in addition to earnings which is gaining further momentum. Lingering concerns about debt crisis in Greece, fresh worries about China's initiatives to cool off its economy, and lower commodity prices also impacted market sentiment. Japanese market, however, managed to end in positive territory lifted by Fanuc's better than expected earnings and revised outlook.

In Japan, the benchmark Nikkei-225 Index rose 46.87 points, or 0.4%, to 11,213, while the broader Topix index of all First Section issues added 0.92 point, or 0.1%, to 998

On the economic front, a report released by Shoko Chukin Bank in Japan in revealed that confidence among small and medium sized Japanese enterprises rose to 46.8 in April from 45.8 last month. However, a reading below 50 indicates pessimists outnumber optimists. The report further noted that confidence among manufacturers rose 0.2 points to 48.1 and that among non-manufacturers climbed 1.6 to 45.7 in April.

Fanuc Ltd, the automation machinery maker, revealed better than expected earnings for last year and also lifted the outlook for the current year from the previous guidance numbers, and lifted the market into positive territory. The stock surged up 11.46% in late trading session following the results. Other major stocks also ended in positive territory following Fanuc's results. Sony Corp. climbed 3.19%, Advantest Corp advanced 1.62%, Panasonic Corp. gained 1.81% and Sharp Corp. rose 1.95%.

Banks ended in negative territory on profit taking. Sumitomo Mitsui Financial lost 1.67%, Mitsubishi UFJ Financial edged down 0.20%, and Resona Holdings fell 1.08%. However, Mizuho Financial ended unchanged from previous session.

Brokerages also ended weaker on profit taking. Daiwa Securities fell 2.94%, Mizuho Securities slipped 1.10%, Matsui Securities shed 0.41% and Nomura Holdings lost 1.04%.

Most of the stocks ended weaker on profit taking following recent gains. In Australia, the benchmark S&P/ASX200 Index slipped 1.50 points, or 0.03% to close at 4,880, while the All-Ordinaries Index ended flat at 4,913, representing a marginal loss of 0.20 points, or 0.00%.

On economic front, a report released by the Australian Bureau of Statistics revealed that producer prices at the final stage of production rebounded in the March quarter and beat expectations. However, prices were still lower when compared to a year ago. As per the report, the producer price index gained 1% between January and March, rebounding from the 0.4% decrease in the preceding quarter. Economists were looking for a 0.6% increase. This marks the fastest pace of growth in the producer price index since the December quarter of 2008.

Results of a quarterly business survey released by the National Australia Bank revealed that business confidence eased slightly in the March quarter, with the index falling 1 point from the last three months of 2009 to 17. Despite the slight fall in sentiment, confidence was still in positive territory among all sectors, NAB said.

Banks led the declines. ANZ Bank edged down 0.12%, Commonwealth Bank of Australia slipped 0.09% and Westpac Banking lost 0.44%. However, investment banker Macquarie Group added 0.10% and National Australia Bank gained 0.71%.

Mining and metal stocks witnessed mixed trading. BHP Billiton added 0.07%, Gindalbie Metals rose 1.18%, and Murchison Metals gained 1.50%. However, Rio Tinto edged down 0.07%, Fortescue Metals slumped 2.40%, Iluka Resources slipped 0.83%, Macarthur Coal fell 0.68%, Mincor Resources lost 0.94% and Oz Minerals declined 0.84%.

Oil stocks also ended mixed trading. Woodside Petroleum gained 0.30%, Santos advanced 0.29% and Oil Search Ltd rose 0.52%. However, Origin Energy bucked the trend and ended in negative territory with a loss of 1.89%.

Gold stocks ended in positive territory. Lihir Gold gained 0.51% and Newcrest Mining climbed 0.94%.

In Hong Kong, the benchmark Hang Sang Index declined 1.5%, or 325.27 points, and closed at 21,262, following weak closing on Wall Street in the previous session amid profit taking. Weak trading across other markets in the region amid lower commodity prices, fresh concerns about debt crisis in Greece as well as initiatives from mainland China to cool off its economy also impacted sentiment. Traders preferred to lock in gains and move the side lines ahead of the FOMC meeting in the U.S. As many as 40 of the 42 components in the index ended in negative territory.

Subdued global markets and portfolio churning ahead of the expiry of April series F&O series contracts on Thursday weighed on the Indian market Tuesday. However, as the March-quarter results continued to be robust, several second-line stocks saw sustained buying activity. Among frontline stocks, high-beta realty, rate-sensitive banking & auto and commodity-driven metal stocks led the decliners, while defensive FMCG and healthcare stocks rose modestly, helping the key benchmark indexes limit the losses. While the 30-share Sensex average fell 55 points or 0.31% to 17,691, the 50-share Nifty ended down 14 points or 0.26% at 5,308.

Among the other major markets open for trading, China's Shanghai Composite Index ended in negative territory with a loss of 61.58 points, or 2.07%, at 2,908, Taiwan's Weighted Index fell 11.70 points, or 0.14%, to close at 8,146, Indonesia's Jakarta Composite shed 5.41 points or 0.18% to close at 2,939, and Singapore's Strait Times Index declined 10.94 points, or 0.36%, to close at 2,992.

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The major European averages are moving to the downside on Tuesday following two sessions of gains. The French CAC 40 Index and the German DAX Index are trading down 1.67% and 0.79%, respectively, while the U.K.’s FTSE 100 Index is receding 1.33%.

BP (BP) reported that its first quarter replacement cost profit rose to $5.6 billion from $2.4 billion in the year-ago period. The profit growth was aided by an increase in oil prices during the quarter. The company said it expects production in 2010 to be slightly lower than in 2009.

Meanwhile, Daimler reported a profit of 65 euro cents per share for its first quarter compared to a loss of 1.40 euros per share in the year-ago period. Citing strong demand for its Mercedes-Ben luxury vehicles, the company raised its earnings guidance for the full year.

In economic news, Germany’s Federal Statistical Office reported that import prices rose 5% year-over-year in March compared to the 2.6% increase in the previous month. On a monthly basis, import prices were up 1.7%. Excluding crude oil and mineral oil products, prices were up a more modest 0.7%. At the same time, export prices climbed 2% year-over-year following a 0.8% increase in the previous month.

German consumer sentiment, a forward - looking indicator compiled based on a survey by the GfK Institute, rose to 3.8 in May from a revised reading of 3.4 for April. Economists had expected a reading of 3.2 for May. While the economic expectations index rose 18 points to 22.5 in April, the index for income expectations climbed 21.7 points to 35.2. On the other hand, the index measuring the propensity to buy eased 1.8 points to 21.6.

French statistical agency INSEE reported that its consumer confidence index fell to –37 in April from –34 in March. Economists had expected a slight improvement in the index to –33.

U.S. Economic Reports

The Federal Reserve Open Market Committee is scheduled to meet today and make an announcement regarding its near-term direction of monetary policy at 2:15 PM ET tomorrow. The Federal Open Market Committee consists of seven Governors of the Federal Reserve Board and five Federal Reserve Bank Presidents.

Following the previous meeting, the Fed opted to keep interest rates unchanged at 0-0.25%, as was expected. In its commentary, the Fed continued to view the economic activity as continuing to strengthen, while the labor market outlook was upgraded, with the central bank suggesting that the labor market is stabilizing as opposed to its earlier view that the deterioration in the labor market was abating. The Fed noted that business spending on equipment and software has risen significantly, while spending on non-residential structures is termed as declining. The Fed also made a mention of flat to depressed housing starts.

As in the previous meeting, Kansas Federal Reserve Bank President Thomas Hoenig dissented on the grounds that he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.

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 1.1% year-over-year increase in the 20-city composite house price index for February.

The Conference Board is scheduled to release its consumer confidence report for April 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 April.

In March, the consumer confidence index rose 6.1 points to 52.5 from 46.4 in February. In February, the index had fallen by 10 points. While the present situations index rose 4.3 points to 21.7, the expectations index climbed 7.3 points to 70.2.

Earnings

Ford (F) reported a first quarter profit of 50 cents per share, while revenues rose to $28.1 billion from $24.4 billion in the year-ago period.

3M Co. (MMM) said its first quarter adjusted earnings of $1.40 per share, while sales rose 24.7% to $6.3 billion. Analysts expected earnings of $1.21 per share on revenues of $5.94 billion. The company raised its 2010 organic sales growth guidance to 10%-12% from its earlier estimate of 5%-7% and also lifted its earnings guidance to $5.40-$5.60 per share from its prior guidance of $4.90-$5.10.

DuPont (DD) reported that its first quarter earnings rose to $1.24 per share from 54 cents per share in the year-ago period. Sales rose 23% to $8.5 billion. The consensus estimates called for earnings of $1.06 per share on revenues of $8.06 billion. The company raised its full year earnings guidance to $2.50-$2.70 from its earlier estimate of $2.15-$2.45 per share, while analysts estimate earnings of $2.39 per share.

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Pharmaceutical Product Development (PPDI) rallied in Monday’s after hours session after it reported first quarter earnings of 14 cents per share on revenues of $346.8 million. Analysts estimated earnings of 14 cents per share on revenues of $323.83 million. In the year-ago period, the company reported earnings of 38 cents per share on revenues of $364.4 million. Separately, the company confirmed that the NDA for its type 2 diabetes treatment was approved by the Japanese Ministry of Health, Labor and Welfare on April 16th.

Boston Scientific (BSX) may see weakness after it reported that its first quarter sales fell to $1.96 billion from $2.01 billion in the year-ago period and also trailed the consensus estimate of $2 billion. On an adjusted basis, the company reported earnings of 16 cents per share. The company lowered its guidance for the full year due to shipment holds and certain product removal actions and now expects adjusted earnings of 50-60 cents per share on revenues of $7.6 billion to $8 billion. Analysts estimate earnings of 37 cents per share on revenues of $8.05 billion.

Masco (MAS) could also be in focus after it reported that its first quarter sales rose 3% to $1.9 billion. The company reported a loss from continuing operations of 2 cents per share compared to a loss of 24 cents per share last year. The consensus estimates called for break-even results on revenues of $1.81 billion. The company said it expects business conditions in 2010 to show modest improvement compared to 2009.

AES Corp. (AES) is likely to see some activity after it announced that it would sell its equity interest in its Qatar business to its current partner, Qatar Electricity and Water Company. The company expects the deal to close in the second quarter of 2010.

Ameriprise Financial (AMP) receded in Monday’s after hours session despite reporting that its first quarter operating revenues rose 25% to $2.14 billion. The company’s operating earnings rose to 81 cents per share from 60 cents per share in the year-ago period. Analysts estimated earnings of 82 cents per share on revenues of $2.22 billion.

Texas Instruments (TXN) is also likely to be in focus after it reported first quarter earnings of 52 cents per share on revenues of $3.21 billion. In comparison, the company reported earnings of 1 cent per share on revenues of $2.09 billion in the year-ago period. The consensus estimates called for earnings of 51 cents per share on revenues of $3.13 billion. For the second quarter, the company expects earnings of 56-64 cents per share and revenues of $3.31 billion to $3.59 billion, while analysts estimate earnings of 53 cents per share on revenues of $3.22 billion.

Emulex (ELX) tumbled in Monday’s after hours session after it said it expects non-GAAP earnings of 16-18 cents per share and net revenues of $100 million to $103 million for the fourth quarter. The consensus estimates called for earnings of 18 cents per share on revenues of $106,68 million. The company also reported third quarter net revenues of $102.2 million and non-GAAP earnings of 30 cents per share. Analysts estimated earnings of 16 cents per share on revenues of $102.45 million.

Amgen (AMGN) may react to its announcement that it has appointed Robert Bradway as its president and chief operating officer, effective May 11.

RadioShack (RSH) could gain ground after it reported that its first quarter earnings rose to 39 cents per share from 34 cents per share last year. Net sales and operating revenues climbed 4% to $1.04 billion. Analysts estimated earnings of 36 cents per share on revenues of $1 billion.

Health Management (HMA) is expected to see some buying interest after it reported that its first quarter net revenues were $1.29 billion. On an adjusted basis, the company reported earnings from continuing operations of 19 cents per share, up from 15 cents per share last year. Analysts estimated earnings of 17 cents per share on revenues of $1.30 billion. The company also raised its 2010 earnings estimate to 56-61 cents per share from its earlier estimate of 53-58 cents per share, while analysts estimate earnings of 57 cents per share.

Sanmina-SCI (SANM) could move to the upside after it reported second quarter non-GAAP earnings of 23 cents per share compared to a loss of 37 cents per share last year. Revenues of $1.53 billion were higher than $1.20 billion last year and the consensus estimate of $151 billion. For the third quarter, the company estimates non-GAAP earnings of 30-36 cents per share on revenues of $1.55 billion to $1.65 billion. Analysts estimate earnings of 25 cents per share on revenues of $1.51 billion.

Veeco Instruments (VECO) is also likely to rally after it swung to a profit of 49 cents per share on a non-GAAP basis compared to a loss of 22 cents per share last year. Net sales jumped to $163.23 million from $62.85 million in the year-ago period. The consensus estimates called for earnings of 48 cents per share on revenues of $163.89 million. The company expects second quarter non-GAAP earnings of 78-90 cents per share on revenues of $220 million to $240 million. Analysts estimate earnings of 59 cents per share on revenues of $163.89 million.

WMS Industries (WMS) showed weakness in Monday’s after hours session despite reporting third quarter revenues of $197.5 million, up 9% year-over-year. The company’s earnings increased to 55 cents per share from the year-ago earnings of 43 cents per share. For the fourth quarter, the company estimates revenues of $213 million to $223 million, while analysts estimate revenues of $220.58 million.

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