US & World Daily Markets Financial Briefing 29-04-2010

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Stocks Advancing As Jobless Claims Dip, EU Works On Greek Bailout

Stocks are up by solid margins in mid-morning trading on Thursday, as the markets are reacting positively to news of progress on an official Greek bailout package from the European Union and a drop in jobless claims in the U.S. The major averages are all in positive territory, recovering further from the sell-off seen on Tuesday.

This morning, EU officials reassured markets that a bailout package for cash-strapped Greece is on the way in an effort to keep the country's debt contagion under wraps. Officials remarked that talks should yield positive action over the next few days.

Early gains by stocks also came as the U.S. Labor Department released a report showing that first time claims for unemployment benefits saw a modest decrease in the week ended April 24th, with the drop in initial jobless claims coming in roughly in line with economist estimates.

Weekly jobless claims fell to 448,000 from the previous week's revised figure of 459,000. Economists had been expecting jobless claims to slip to 445,000 from the 456,000 originally reported for the previous week.

On the corporate front today, Palm (PALM) has been trading notably higher after Hewlett-Packard (HPQ) said it will purchase the firm for $1.2 billion in cash. The deal, announced just after the closing bell yesterday, comes after months of speculation as to potential suitors for the struggling smartphone maker.

Among the slew of corporate results reported this morning, Procter & Gamble Co. (PG) reported third-quarter net income of $0.83 per share, topping projections for $0.82 per share. Quarterly sales rose to $19.18 billion but fell short of the $19.52 billion estimated by analysts.

Oil giant Exxon Mobil Corp. (XOM) said its first-quarter net income attributable to the company rose to $1.33 per share but missed estimates for $1.41 per share. Total revenues for the quarter were $90.25 billion but were also short of the consensus estimate, which called for $96.41 billion.

After the markets closed for trading in the previous session, credit card service provider Visa Inc. (V) and Xilinx Inc. (XLNX) released quarterly results that topped Wall Street estimates.

The major averages have seen some further upside in recent dealing and are currently near their best levels of the day. The Dow is up 95.30 points or 0.9 percent at 11,140.57, the Nasdaq is up 20.41 points or 0.8 percent at 2,492.14 and the S&P 500 is up 12.28 points or 1 percent at 1,203.64.

Sector News

Health insurance stocks are showing notable strength in mid-morning trading, as earnings news from sector component Aetna (AET) are boosting buying interest in the sector. The Morgan Stanley Healthcare Payor Index is up by 2.5 percent, further eroding recent losses.

Aetna is up by 3 percent, moving further off of Tuesday's seven-week closing low. The move comes after the firm blew away earnings estimates and just edged out revenue forecasts. Aetna also raised its full year guidance.

Housing stocks are also moving notably higher, with the Philadelphia Housing Sector Index posting a gain of 2.1 percent, moving back towards this month's nineteen-month highs.

Commercial real estate, railroad, biotechnology and gold stocks are also seeing considerable strength, reflecting the day's broad-based buying interest.

Stocks Driven By Analyst Comments

Oil and gas services firm RPC Inc. (RES) is on the rise after being upgraded at FBR Capital from Underperform to Outperform. The broker also raised its target on the stock from $11 to $19. The stock is currently up 1 percent after reaching its best intraday price in nineteen months.

Communications firm Premiere Global Services, Inc. (PGI) is also moving higher following an upgrade by Oppenheimer from Perform to Outperform. Shares are currently up by 6.7 percent, climbing to an eight-month intraday high.

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TSX May Recover From 2-day Slump On Bargain Hunting

Bay Street stocks may recover from a 2-day slump Thursday morning amid firm commodities prices and on hopes for a resolution for the Greece debt crisis. A fairly upbeat assessment of the U.S. economy by the Federal Reserve and bargain hunting might also help lift sentiment.

The FOMC, at the end of a two-day policy meeting Wednesday, kept interest rates near zero for an 'extended period.' The central bank also said the labor market is beginning to improve and noted that housing starts have edged up.

On Wednesday, the S&P/TSX Composite Index lost 69.85 points or 0.58% to 12,076.89. The main index shed 1.67% in the past two sessions after closing at a fresh 18-month high on Monday. Analysts attribute this fall to a knee-jerk reaction for the S&P's downgrade of Spain after Greece and Portugal.

The price of crude oil edged up $0.94 to $84.16 a barrel, recovering for a 4-week low hit intraday previous session.

The price of gold was trading almost flat at around $1,170 an ounce, holding on to its previous session's gains.

Research In Motion may be in play after Hewlett Packard yesterday announced a $1.2 billion deal to acquire Palm Inc., the ailing company that manufacturers smart phones.

In corporate news, fertilizer maker Potash Corp. reported improved first-quarter earnings of $1.47 per share, compared with $1.01 per share earned in the same period last year. Analysts were expecting the company to record earnings of $1.32 per share for the quarter. For fiscal 2010, the company revised up its net income guidance to a range of $4.50 - $5.25 per share, from the earlier $4.00 to $5.00 per share.

Gold miner Goldcorp slipped to loss in first-quarter, reporting net loss of $0.07 per share, compared to net income of $0.40 per share in the same quarter last year. Analysts were expecting the company to earn US$0.25 per share for the quarter.

Gold explorer Centerra Gold swung to profit in first quarter, reporting net earnings of $0.52 per share, compared to a net loss of $0.09 per share in the same quarter last year.

Fuel cell products maker Ballard Power reported narrower first quarter net loss of $0.12 per share, compared to $0.23 per share in the year ago period.

Integrated oil firm Imperial Oil announced improved first-quarter net income of C$0.56 a share, compared to C$0.33 a share for the same period last year.

Oil and natural gas firm Cenovus Energy reported first- quarter net earnings of C$0.70 per share, compared to C$0.69 in the year ago quarter. The company has declared a quarterly dividend of C$0.20 per share.

Entertainment company IMAX Corp. swung to profit in first-quarter, reporting net earnings of $0.40 per share versus a loss of $0.06 per share last year. Analysts were expecting the company to report $0.37 per share for the quarter.

In economic news from the U.S., the Labor Department said weekly jobless claims fell to 448,000 from the previous week's revised figure of 459,000. Economists were expecting jobless claims to slip to 445,000 from the 456,000 originally reported for the previous week.

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Asian Markets End Mixed Amid Cautious Trading

Mixed trading was witnessed among the Asian markets open for trading on Thursday as traders turned cautious and moved to the sidelines awaiting more clues about the strength of global economic recovery. While the markets in Australia, China, Hong Kong, South Korea and Taiwan ended in negative territory, the markets in India, Indonesia and Singapore ended in positive territory. The market in Japan was closed for a public holiday. Fears of contagion effect of the debt crisis that has prompted S&P action, downgrading its debt ratings for Greece, Portugal and Spain was partly offset by better than expected earnings from the U.S and Federal Reserve's resolve to keep the interest rates at lower rates for an extended period.

In Australia, the benchmark S&P/ASX200 Index slipped 37.20 points, or 0.77% to close at 4,786, while the All-Ordinaries Index ended at 4,816, representing a loss of 38.10 points, or 0.78%.

On economic front, a report released by the Australian Property Monitors, or APM, revealed that median house prices in the country grew 3.1% quarter-over-quarter to A$542,000 in the March quarter, lower than the 4.8% increase reported for the preceding fourth quarter of 2009. APM said strong population growth, rising incomes, and falling unemployment were offsetting the impact of the Reserve Bank of Australia's interest rate hikes and were continuing to push up house prices. The report further noted that, on a yearly basis, house prices surged 16.2% in the March quarter - the fastest pace in six years. This follows a 12.1% increase in the December quarter.

In a separate release, the Conference Board revealed that its Leading Economic Index for Australia declined 0.3% in January. The Board also reported that its Coincident index for February declined 0.2% from January. The Conference Board said a substantial drop in building approvals in February more than offset small positive contributions in the Leading index from other components. The board said weakness among the leading indicators have become "far more widespread than the strengths in recent months."

Banks led the decline after ANZ Bank reported lower than expected earnings for the first half. The stock fell 2.62%. Among others, Commonwealth Bank of Australia slipped 0.28%, National Australia Bank shed 1.44% and Westpac Banking declined 0.52%. Investment banker Macquarie Group lost 1.87%.

Mining and metal stocks also ended in negative territory. BHP Billiton shed 1.39%, Rio Tinto lost 2.49%, Fortescue Metals slipped 2.27%, Gindalbie Metals slumped 2.82%, Iluka Resources fell 1.09%, Macarthur Coal declined 1.07% and Mincor Resources plunged 2.74%.

Gold stocks also declined on profit taking. Lihir Gold fell 1.53% and Newcrest Mining lost 1.74%.

Oil stocks also ended lower. Woodside Petroleum slipped 0.87%, Santos shed 1.38%, Oil Search fell 0.87% and ROC Oil plunged 3.30%. However, Origin Energy bucked the trend and ended in positive territory with a gain of 0.63%.

In Hong Kong, the benchmark Hang Sang Index ended in negative territory with a loss of 170.48 points, or 0.81%, at 20,779, having witnessed sell-off in late trading session following news that Spain's credit rating has been downgraded by Standard & Poor's, fearing contagion effects in other parts of Europe. Mixed trading across other markets in the region and caution ahead of earnings and economic data in the U.S also kept traders on tenterhooks. As many as 35 of the 42 components in the index ended in negative territory.

Federal Reserve's upbeat assessment of U.S. economic growth prospects and short covering on the expiry day of near-month derivative contracts helped the Indian market rebound after a two-day slide on Thursday. Meanwhile, India's annual food inflation declined to 16.61 percent in the week ended April 17 from 17.65 percent a week ago due to lower prices of fruits and vegetables, government data showed Thursday, helping lift sentiment to some extent. The 30-share Sensex average ended up 123 points or 0.71% at 17,503, while the 50-share Nifty rose 39 points or 0.74% to 5,254.

Among the other major markets open for trading, China's Shanghai Composite Index ended in negative territory with a loss of 31.90 points, or 1.10%, at 2,868, and Taiwan's Weighted Index shed 27.50 points, or 0.34%, to close at 8,054. However, Indonesia's Jakarta Composite ended in positive territory with a gain of 23.54 points or 0.81% to close at 2,927, and Singapore's Strait Times Index advanced 22.19 points, or 0.76%, to close at 2,954.

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The major European averages are advancing on Thursday following two days of losses, with earnings providing a much-needed boost despite the negativity surrounding the recent credit rating downgrade in Europe. The French CAC 40 Index and the German DAX Index are advancing 0.94% and 0.68%, respectively, while the U.K.’s FTSE 100 Index is gaining 0.82%.

In corporate news, Sanofi-Aventis reported that its first quarter earnings rose to 1.71 billion euros from 1.58 billion euros last year, as revenues increased 3.9% to 7.39 billion euros.

Steel giant Arcelor Mittal (MT) said its first quarter EBITDA rose to $1.89 billion from $883 million last year, with the increase trailing estimates of some analysts. Winter weather in Kazakhstan and Ukraine impacted production. German chemical firm BASF reported a 174% increase in first quarter profits to 1.03 billion euros and its sales climbed 26% to 15.5 billion euros.

On the economic front, the results of a housing survey done by Nationwide showed that house price inflation in the U.K. returned to double-digits in April for the first time since June 2007. Average house prices rose 10.5% year-over-year in April and were up 1% on a monthly basis.

Meanwhile, the number of people unemployed in Germany declined for the fifth straight month in April, dropping by 68,000, a government report showed. Consequently, the unemployment rate declined to 7.8% from 8% in March, marking the lowest unemployment rate since December 2008. A separate report released by the European Commission showed that the economic sentiment index for the euro zone region rose to 100.6 in April from 97.9 in March.

U.S. Economic Reports

First time claims for unemployment benefits saw a modest decrease in the week ended April 24th, according to a report released by the Labor Department, with the drop in initial jobless claims coming in roughly in line with economist estimates.

The report showed that weekly jobless claims fell to 448,000 from the previous week's revised figure of 459,000. Economists had been expecting jobless claims to slip to 445,000 from the 456,000 originally reported for the previous week.

Earnings

Aetna (AET) said its first quarter operating earnings, excluding prior-period development, were 77 cents per share compared to $1.01 per share last year. Revenues, excluding net realized capital gains, fell 1% to $8.54 billion. Analysts estimated earnings of 72 cents per share on revenues of $8.59 billion.

AstraZeneca (AZN) said its first quarter revenues rose 11% to $8.6 billion. The company’s earnings rose to $2.9 billion from the year-ago’s $2.3 billion.

Bristol-Myers Squibb (BMY) first quarter non-GAAP earnings from continuing operations rose to 56 cents per share from the year-ago’s 42 cents per share and revenues rose 11% year-over-year to $4.81 billion. Analysts estimated earnings of 51 cents per share on revenues of $4.74 billion. The company updated its 2010 non-GAAP earnings per share guidance, now expecting earnings of $2.10-$2.20 per share, while the Street estimated earnings of $2.22 per share.

Among oil giants, ConocoPhillips (COP) reported that its first quarter earnings rose to $1.40 per share from 54 cents per share last year. On an adjusted basis, the company reported earnings of $1.47 per share, ahead of the $1.38 per share consensus estimate. At the same time, Exxon Mobil’s (XOM) earnings rose to $1.33 per share from 92 cents per share last year, although they missed the consensus estimate of $1.41 per share.

Motorola (MOT) said its first quarter sales fell to $5.04 billion from $5.37 billion last year. The company reported earnings from continuing operations of 3 cents per share compared to a loss of 13 cents per share last year, with the latest quarter’s earnings including 3 cents per share in charged on a net basis. Analysts estimated a loss of 1 cent per share on revenues of $5.10 billion. For the second quarter, the company expects earnings of 7-9 cents per share, while analysts estimate earnings of 3 cents per share.

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Palm (PALM) could move to the upside after it announced that it has agreed to be taken over by Hewlett-Packard (HPQ) for $1.2 billion in cash. Shareholders of Palm will get $5.70 in cash for each share they own in the smart phone maker.

Baidu (BIDU) may rally after it said its first quarter revenues rose 59.6% to $189.6 million. The company’s adjusted earnings were $2.10 per share. Analysts estimated earnings of $1.50 per share on revenues of $180.11 million. For the second quarter, the company expects revenues of $268.1 million to $274 million, while analysts estimate revenues of $240.07 million.

Xilinx (XLNX) receded in Wednesday’s after hours session after it reported fourth quarter sales of $529 million, up 34% year-over-year. The company reported earnings of 54 cents per share, including a charge of 1 cent per share and a tax benefit of 8 cents per share. Analysts’ estimates, which typically exclude one-time items, called for earnings of 45 cents per share on revenues of $521.45 million. For the first quarter, the company expects 5%-9% sequential sales growth, while analysts estimate a slight dip in sales compared to the previous quarter.

Covance (CVD) is likely to be in focus after it reported that its first quarter earnings fell to 60 cents per share from 63 cents per share last year. The company’s net revenues rose 9.2% to $481.9 million. The consensus estimates called for earnings of 60 cents per share on revenues of $493.19 million.

Akamai Technologies (AKAM) could gain ground after it reported that its first quarter revenues rose 14% year-over-year to $240 million, ahead of the $232.43 million consensus estimate. The company’s normalized earnings rose to 35 cents per share from 31 cents per share last year. The company also said its board has authorized a $150 million extension of its share repurchase program.

Insurer ACE Ltd. (ACE) is likely to be in focus after it reported that its first quarter net income, excluding net realized gains/losses, fell to $1.70 per share from $1.99 per share last year. Analysts estimated earnings of $1.90 per share for the quarter.

Lincoln Financial (LNC) may see some activity after it reported that its first quarter operating earnings rose to 83 cents per share from 64 cents per share last year. Analysts’ estimates, which typically exclude one-time items, called for earning of 87 cents per share.

LSI Corp. (LSI) receded in Wednesday’s after hours session despite reporting first quarter sales that rose 32% year-over-year to $637 million. On a non-GAAP basis, the company reversed to a profit of 14 cents per share from a loss of 3 cents per share. Analysts estimated a profit of 10 cents per share on revenues of $642.83 million. For the second quarter, the company expects non-GAAP earnings of 8-14 cents per share on revenues of $635 million to $665 million. The consensus estimates call for earnings of 12 cents per share on revenues of $688.32 million.