US & World Daily Markets Financial Briefing 28-04-2010

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Stocks Moving Mostly Higher In Mid-Morning Trading

Stocks are mostly higher in mid-morning trading on Wednesday as the markets await the Federal Reserve's interest rate announcement this afternoon while digesting the latest corporate results. The major averages are mostly the flat line after yesterday's substantial retreat.

The Federal Open Market Committee, which concludes its two day meeting today, will announce its interest rate decision at about 2:15 p.m. ET, accompanied by its latest economic commentary.

While interest rates are likely to be kept unchanged, the Fed's view of present economic conditions and its near-term outlook will be of interest to market participants.

On the earnings front this morning, Sprint Nextel Corp. (S) reported a first quarter net loss of $0.29 per share, compared to a net loss of $0.21 per share last year. On average, Wall Street analysts expected the company to report a loss of $0.18 per share.

Sprint Nextel said its net revenues for the quarter declined to $8.09 billion from $8.21 billion in the same quarter a year earlier but beat estimates for revenues of $8.05 billion.

Dow Chemical Co. (DOW) reported a surge in its first-quarter profit, as revenues increased over 48 percent, driven by strong growth in volume and price. Adjusted earnings easily topped Wall Street consensus estimates, along with revenues.

After the markets closed for trading yesterday, health and life insurance service provider Aflac Inc. (AFL) unveiled first quarter earnings and revenues that beat analyst estimates.

The major averages are currently all in positive territory, although the Nasdaq is just above the unchanged line. The Dow is up 37.48 points or 0.3 percent at 11,029.47, the Nasdaq is up 2.06 points or 0.1 percent at 2,473.53 and the S&P 500 is up 5.88 points or 0.5 percent at 1,189.59.

Sector News

Banking stocks are some of the strongest performers in the early going, as reflected by the 1.8 percent advance by the Kbw Bank Index. The upward move is helping the index to offset recent losses that pulled it down from more than one-year highs.

Housing stocks are also seeing strong gains, with the Philadelphia Housing Sector Index posting a 1.4 percent gain, recovering from yesterday's sharp sell-off.

Gold, biotechnology and commercial real estate stocks are also moving higher, while weakness is visible among some software, railroad and steel stocks.

Weakness in tech this morning comes as Hutchinson Technology (HTCH) reported a second quarter net loss that was much wider than forecast and revenues that fell well short of estimates on Wall Street.

Stocks Driven By Analyst Comments

Tellabs (TLAB) is seeing strength after being upgraded at Jefferies from Hold to Buy. Analysts also raised their target on the stock from $6 to $10.50. The stock has gained 4.6 percent, setting a fresh eighteen-month intraday high.

First Potomac Realty Trust (FPO) is also moving higher following an upgrade at Robert W. Baird from Neutral to Outperform. The broker also boosted its price target from $16 to $18. Shares are currently up by 0.6 percent, remaining in a range near more than one-year highs.

On the other hand, Ford Motor Co. (F) is under pressure after a downgrade at Credit Suisse from Neutral to Underperform. The stock is down by 3.2 percent, extending their pullback from Monday's more than five-year high.

Bay Street Poised For A Mixed Open Wednesday

Canadian stocks are likely to witness a mixed reaction Wednesday morning amid varied cues from the commodities prices. Meanwhile, renewed worries over the Greece debt situation may overshadow positive economic data from the U.S., the country's largest trading partner.

Concerns over the Greece sovereign situation rattled stocks markets across the globe, after Standard and Poor's downgraded the debt of Greece and Portugal.

The price of oil moved down near its one-month low. Meanwhile, traders flocked to gold amid a volatile currency market, pushing the price of bullion near its 4-month high.

Crude for June deliver edged up $0.28 to $82.72 a barrel, while gold rose $1.1 to $1,164.80 an ounce.

On Tuesday, the S&P/TSX Composite Index surrendered 134.23 points or 1.09% to 12,146.74, after settling the previous session at a fresh 18-month high.

Gold stocks may be in focus after Barrick Gold reported earnings that beat estimates by a notable margin. Also the recovery in the prices of gold likely to help lift sentiment.

In corporate news, gold miner Barrick Gold reported adjusted first quarter net income of $0.75 per basic share, versus $0.34 per basic share in the last year quarter. Analysts were expecting the to report earnings of $0.63 per share for the quarter.

Integrated energy company Husky Energy reported improved first quarter net earnings of C$0.41 per share, compared to C$0.39 per share in the same period of 2009. The company declared a quarterly dividend of C$0.30 per share.

Electrical equipment maker Hammond Power Solutions posted lower first quarter net earnings of C$0.19 per share, compared to C$0.36 per share in the previous year quarter.

Canadian stock market operator TMX Group reported higher first-quarter net income of C$0.66 per share, up from C$0.58 per share in the year ago quarter. It has also declared a dividend of C$0.38 on each common share outstanding.

Information technology services provider CGI Group said its second-quarter net earnings increased to C$0.28 per share from C$0.25 per share in the prior year period. Analysts were expecting the to report earnings of $0.27 per share for the quarter.

Communication and media company Rogers Communications reported first-quarter net income of C$0.64 per share, up from C$0.49 per share reported last year.

Railways operator Canadian Pacific Railway said its first-quarter net income grew to C$0.59 per share from C$0.36 per share in the prior year period.

Property management company FirstService Corp. reported a narrower net loss of $0.02 in the first-quarter, compared to $1.65 per share last year. Analysts were expecting the to report earnings per share of $0.17.

In economic news, yesterday, the S&P slashed Greece's sovereign debt rating by three notches to 'BB+'. The agency also cut Portugal's credit rating by two steps to 'A-', raising speculation that the debt crisis in the euro zone is extending. Furthermore, the rating agency said its outlook on Greece is 'negative', indicating the agency might downgrade the rating again.

From the U.S., the Conference Board's index of consumer confidence rose to 57.9 in April, higher than economists' forecast for an increase to 53.5. The Richmond Fed's Manufacturing Index soared to a reading of 30 in April from the March reading of 6, widely beating analysts' expectations for the index to edge up to a reading of 7. Meanwhile, the S&P/Case-Shiller home price index rose at an annual rate of 0.6% in February but lower than a 1.1% increase analysts had expected.

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Asian Markets Plunge On European Debt Crisis

The markets in Asia plunged sharply Wednesday on concerns about global economic recovery after the Standard & Poor's action. Lower commodity prices and a weaker euro also impacted market sentiment, as traders preferred to offload shares and move to the sidelines, awaiting further developments on the European crisis as well as the FOMC statement later in the day.

In Japan, the benchmark Nikkei-225 Index plunged 287.87 points, or 2.6%, to 10,925, while the broader Topix index of all First Section issues fell 19.99 points, or 2.0%, to 978.

On the economic front, a report released by the Ministry of Economy, Trade and Industry revealed that retail sales in the country surged up 4.7% year-on-year in March, coming in at 12.286 trillion yen. That marked the third straight month of increase, and it beat forecasts for a 3.7% annual increase following the 4.2% expansion in February.

Stocks across the sectors ended sharply lower. Fanuc Ltd, which lifted the market in the previous session, slumped 5.21%. Kyocera Corp. declined 3.00%, Tokyo Electron lost 3.74%, TDK Corp. slipped 2.59% and Advantest Corp. plunged 5.12%.

Among exporters, Canon Inc. fell 2.51%, Panasonic Corp. lost 2.98%, Sharp Corp. shed 2.39% and Sony Corp. shed 3.38%.

Banks also ended sharply lower. Sumitomo Mitsui Financial lost 1.55%, Resona Holdings fell 1.93%, Mizuho Financial slipped 1.62% and Mitsubishi UFJ Financial shed 1.96%.

Shipping stocks also ended in negative territory. Nippon Yusen fell 1.56%, Mitsui OSK Lines slipped 1.16% and Kawasaki Kishen Kaisa lost 2.03%.

In Australia, the benchmark S&P/ASX200 Index declined 57.20 points, or 1.17% to close at 4,823, while the All-Ordinaries Index ended flat at 4,854, representing a loss of 59.10 points, or 1.20%.

On economic front, a report released by the Australian Bureau of Statistics revealed that consumer prices in the country rose at a stronger than expected pace during the first three months of the year, which may force the central bank to hike the cash rate again when its policy board meets next week. The data comes close on the heels of the release of the producer price inflation report, which also showed a bigger than expected increase in prices. According to the report, consumer price index gained 2.9% year-on-year in the March quarter. This was higher than analyst forecasts for a 2.8% rise and follows a 2.1% increase in prices in the December quarter.

Mining and metals stocks declined on lower commodity prices in the international market. BHP Billiton lost 2.21%, Rio Tinto fell 2.57%, Fortescue Metals slipped 1.02%, Gindalbie Metals plunged 3.88%, Iluka Resources shed 1.67%, Mincor Resources slumped 4.29%, and Murchison Metals was down sharply by 9.59%. Oz Minerals managed to remain unchanged from previous close.

Oil stocks also ended in negative territory. Woodside Petroleum shed 1.51%, Santos fell 1.08%, Oil Search lost 1.21% and Origin Energy slipped 0.74%.

Gold stocks also ended lower. Lihir Gold shed 1.26% and Newcrest Mining was down 0.84%.

Banks also ended lower on concerns about debt concerns in Greece and Portugal as well as investigation into Goldman Sachs' fraud charges. ANZ Bank slipped 1.27%, Commonwealth Bank of Australia slipped 0.72%, National Australia Bank shed 0.11% and Westpac Banking edged down 0.15%.

In Hong Kong, the benchmark Hang Sang Index extended losses for the second successive day Wednesday with a loss of 312.39 points, or 1.47% and closed at 20,949, on concerns that debt crisis in Greece and Portugal in Europe might have a contagion effect on other European countries as well and the global economic recovery might get negatively impacted. The sharp sell-off in Wall Street in the previous session and weak trading across other markets in Asia also impacted market with 39 of the 42 components in the index ending in negative territory.

Fears that Greece's sovereign crisis may spill over to other euro-zone countries sparked a sell-off across Asian equities on Wednesday. After showing some resilience in the first half of the session, the Indian market also finally succumbed to the selling pressure ahead of the expiry of April series derivative contracts on Thursday. The 30-share Sensex average fell to a low of 17,345 before finishing at 17,380, down 311 points or 1.76%, while the 50-share Nifty ended down 93 points or 1.75% at 5,215.

Among the other major markets open for trading, China's Shanghai Composite Index ended in negative territory with a loss of 7.60 points, or 0.26%, at 2,900, Taiwan's Weighted Index fell 64.89 points, or 0.80%, to close at 8,082, Indonesia's Jakarta Composite shed 35.98 points or 1.22% to close at 2,903, and Singapore's Strait Times Index declined 59.64 points, or 1.99%, to close at 2,932.

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The European markets are trading mixed on Wednesday after showing weakness in the previous session, with Greece still serving as an albatross around the markets’ neck. The French CAC 40 Index and the German DAX Index are moving down 0.91% and 0.43%, respectively, while the U.K.’s FTSE Index is rising 0.25%.

In corporate news, Infineon (IFX) reported a profit of 79 million euros for its second quarter compared to a loss of 258 million euros last year. Revenues were up 55% to 1.03 billion euros. At the same time, German software maker SAP (SAP) said its first quarter jumped to 387 million euros from 196 million euros last year. Revenues were up 5% to 2.5 billion euros.

U.K. oil giant Royal Dutch Shell (RDS) reported a first quarter profit of $4.9 billion compared with $3.3 billion in the year-ago period. The profit growth was aided by higher crude oil prices, which pushed revenues up 48% from a year-ago to $80.06 billion.

U.S. Economic Reports

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended April 23rd at 10:30 AM ET.

Crude oil inventories rose by 1.9 million barrels to 355.9 million barrels in the week ended April 16th. Inventories remained above the upper limit of the average range for this time of the year.

Gasoline inventories rose by 3.6 million barrels, remaining above the upper limit of the average range. Distillate fuel stockpiles also increased, rising by 2.1 million barrels. Inventories of distillate fuel were above the upper boundary of the average range. Refinery activity averaged 84.7% over the four-weeks ended April 16th compared to 83.4% in the previous week.

Earnings

Medco Health Solutions (MHS) reported that its first quarter adjusted earnings rose 15.9% to 73 cents per share on revenues of $16.3 million, up 10% year-over-year. Analysts estimated earnings of 72 cents per share on revenues of $15.95 billion. The company reaffirmed its 2010 earnings per share growth guidance of 17%-21%, while analysts estimate earnings growth of 18.7%.

WellPoint (WLP) reported first quarter adjusted net income of $1.95 per share, up from $1.62 per share last year. Operating revenues fell 2.8% to $14.87 billion. Analysts estimated earnings of $1.66 per share on revenues of $14.72 billion.

Comcast (CMCSA) said its first quarter consolidated revenues rose 3.8% to $9.2 billion and said its earnings rose 14.8% to 31 cents per share. The consensus estimates called for earnings of 30 cents per share on revenues of $9.15 billion.

Sprint Nextel (S) reported first quarter net operating revenues that fell 2% to $8.09 billion, while its net loss widened to 29 cents per share from the year-ago’s 21 cents per share. The consensus estimates called for a loss of 18 cents per share on revenues of $8.05 billion.

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Manitowoc (MTW) is likely to see weakness after it reported that its first quarter sales declined 29.7% to $721.9 million. On an adjusted basis, the company reported a loss from continuing operations of 8 cents per share compared to a profit of 18 cents per share last year. Analysts estimated a loss of 1 cent per share on revenues of $808.65 million.

Parametric (PMTC) moved to the downside in Tuesday’s after hours session despite reporting second quarter revenues of $240.56 million, higher than $225.29 million. The company’s earnings rose to 8 cents per share from 6 cents per share in the year-ago period. On an adjusted basis, the company reported earnings of 20 cents per share. Analysts estimated earnings of 19 cents per share on revenues of $243.07 million. For the third quarter, the company expects non-GAAP earnings of 14-20 cents per share on revenues of $235 million to $245 million. The consensus estimates call for earnings of 23 cents per share on revenues of $246.43 million.

Amkor (AMKR) may be in focus after it reported that its first quarter sales declined 3% to $646 million, ahead of the $644.24 million consensus estimate. The company reported earnings of 18 cents per share compared to a loss of 12 cents per share in the year-ago period. For the second quarter, the company expects net sales of $710 million to $736 million and net income of 22-27 cents per share. Analysts estimate earnings of 22 cents per share on revenues of $668.72 million.

Websense (WBSN) declined sharply in Tuesday’s after hours session after it reported non-GAAP revenues of $81.8 million and non-GAAP earnings of 26 cents per share, lower than 32 cents per share last year. Analysts estimated earnings of 27 cents per share on revenues of $82.55 million. For the second quarter, the company estimates non-GAAP earnings of 26-29 cents per share on non-GAAP revenues of $83 million to $85 million and. for the full year, the company estimates non-GAAP earnings of $1.16-$1.23 on revenues of $338 million to $346 million. The Street estimates full year earnings of $1.20 per share on revenues of $342.04 million.

Broadcom (BRCM) could gain ground after it reported that its first quarter net revenues rose 8.9% to $1.46 billion, ahead of the $1.38 billion consensus estimate. The company reversed to a profit of 11 cents per share compared to a loss of 19 cents per share last year.

Sirius XM Radio (SIRI) is also expected to be in focus after it said it has regained compliance with all listing standards, including the minimum bid price requirement. Lennar (LEN) could also see some activity after saying it will sell $500 million worth of debt securities.

RF Micro Devices (RFMD) may see buying interest after it reported that its fourth quarter revenues rose 51.4% year-over-year to $260.8 million. On a non-GAAP basis, the company reported earnings of 16 cents per share compared to a loss of 10 cents per share last year. The consensus estimates called for earnings of 11 cents per share on revenues of $240.20 million.

DreamWorks Animation (DWA) rose in Tuesday’s after hours session after it reported first quarter earnings of 24 cents per share on revenues of $162.1 million. In comparison, in the year-ago period, the company reported earnings of 71 cents per share on revenues of $156.52 million. Analysts estimated earnings of 23 cents per share on revenues of $135.57 million.

Contract electronics manufacturer Flextronics (FLEX) declined in Tuesday’s after hours session after it reported that its fourth quarter adjusted earnings declined to 16 cents per share from 17 cents per share last year. Net sales fell to $5.94 billion from the year-ago’s $6.56 billion. Analysts estimated earnings of 15 cents per share on revenues of $6.04 billion. For the first quarter, the company estimates adjusted earnings of 16-19 cents per share on revenues of $6.1 billion to $6.6 billion, while analysts estimate earnings of 16 cents per share on revenues of $6.33 billion.

Norfolk Southern (NSC) is expected to move to the upside after it reported that its first quarter earnings rose to 68 cents per share from 47 cents per share last year, with the latest quarter’s results including a 7 cents per share impact from the enactment of the healthcare legislation. Railway operating revenues rose to $2.24 billion from $1.94 billion last year. Analysts estimated earnings of 66 cents per share on revenues of $2.11 billion.

Hutchinson Technology (HTCH) tumbled in Tuesday’s after hours session after it reported a loss of 67 cents per share for its second quarter compared to a loss $2.59 per share last year. On an adjusted basis, the company’s loss narrowed to 58 cents per share from a loss of $1.48 per share last year, although it was wider than the consensus estimate for a loss of 11 cents per share. Revenues rose to $87.6 million from the year-ago’s $79 million, trailing the consensus estimate of $98.60 million.

Robert Half International (RHI) may also see weakness after it reported that its first quarter net income slid to 5 cents per share from 6 cents per share last year. Revenues fell to $737.2 million from $823.3 million in the year-ago period. The consensus estimates called for earnings of 6 cents per share on revenues of $750.76 million.

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