US & World Daily Markets Financial Briefing 30-04-2010

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Stocks Move Lower Even As Data Surprises To The Upside

Stocks are down by moderate margins in mid-morning trading on Friday, despite the release of a series of largely upbeat economic reports. The major averages are all in negative territory after a wobbly start to the session.

A short time ago, Reuters and the University of Michigan released a report showing that their consumer sentiment index for April was revised up to a reading of 72.2 from the preliminary reading of 69.5, although it remains below the final March reading of 73.6. Economists had expected the index to be revised up to a reading of 71.0.

Also this morning, the Institute for Supply Management - Chicago After said its index of manufacturing activity in the Chicago area jumped to a reading of 63.8 in April from 58.8 in March, with a reading above 50 indicating growth in the sector. Economists had been expecting the index to edge up to a reading of 59.9.

Before the start of trading, the Commerce Department reported that GDP increased at an annual rate of 3.2 percent in the first quarter compared to the 5.6 percent growth seen in the fourth quarter. The increase came roughly in line with the estimates of economists, who had expected 3.3 percent growth.

In earnings news, Chevron Corp. (CVX) reported first-quarter income of $2.27 per share, exceeding expectations that called for earnings of $1.94 per share. Total revenues for the quarter came in at $48.18 billion, up from $36.13 billion in the prior year quarter but short of the $53.25 billion estimated for the quarter.

Homebuilder D.R. Horton, Inc. (DHI) said its second-quarter net income was $0.04 per share, beating forecasts that called for a loss of $0.01 per share. Homebuilding revenue for the quarter increased 16 percent to $896.8 million, topping projections for $862.98 million.

After the markets closed for trading yesterday, life insurance provider MetLife, Inc. (MET) reported a profit in the first quarter, driven mainly by higher premiums and fees both from the U.S. and its international businesses. Earnings for the quarter were in line with Street estimates, while revenues exceeded expectations.

The company reported first quarter net income of $805 million or $0.97 per share, compared to a loss of $574 million or $0.71 per share in the same quarter a year ago.

In other news from the corporate front, Goldman Sachs (GS) is under pressure once again on news that the U.S. government is now conducting a criminal investigation of the firm's employees after the alleged securities fraud charges filed by the Securities and Exchange Commission.

The major averages have moved off their worst levels of the day in recent trading, but they currently remain stuck in the red. The Dow is down 25.39 points or 0.2 percent at 11,141.93, the Nasdaq is down 15.17 points or 0.6 percent at 2,496.75 and the S&P 500 is down 6.02 points or 0.5 percent at 1,200.76.

Sector News

Oil service stocks are some of the morning's worst performers, driving the Philadelphia Oil Service Sector Index down by 3.2 percent. With the pullback, the index has fallen to its lowest intraday level in just over two weeks.

The retreat comes after the White House indicated that plans for new offshore oil drilling would be put on hold until the completion of an investigation of the Gulf of Mexico disaster.

Electronic storage, semiconductor and steel stocks are also under pressure, while gold stocks are bucking the downtrend by the broader markets. The NYSE Arca Gold Bugs Index is up by 2.4 percent, rising to a fresh three and a half month intraday high.

The advance by gold stocks comes amid an increase in the price of the precious metal, with gold for June delivery currently by $11.10 to $1,179.90 an ounce.

Stocks Driven By Analyst Comments

Landauer, Inc. (LDR) is moving lower after being downgraded at Robert W. Baird from Outperform to Neutral. The stock is currently down by 2.7 percent, pulling back off of the nearly one and a half year closing high reached in the previous session.

EMCOR Group (EME) is also down after being downgraded by analysts at Morgan Joseph from Buy to Hold. Shares are currently down by 0.7 percent after ending the previous session at its highest closing level in roughly twenty months.

On the other hand, Huron Consulting (HURN) is moving higher after Stifel Nicolaus upgraded the stock from Hold to Buy. The stock is currently up by 1 percent after setting a two-month intraday high earlier.

TSX May Hold On To Gains On Firm Commodities Prices

Bay Street stocks may hold on to recent gains Friday morning amid firm commodities prices and on increasing hopes for a quicker resolution for the Greece debt crisis.

Just released GDP data from the US and Canada confirmed that economies on both sides of the border continue to rebound, albeit at a slower pace than previous readings.

However, profit taking at higher levels may cap gains, as the main index was near its 18-month high On Thursday, the S&P/TSX Composite Index gained 123.43 points or 1.02% to 12,200.32.

The price of oil moved higher for a third session, adding $0.44 to $85.61 a barrel and the price of gold was hovering near its 4-month, gaining $7.2 to $1,176.0 an ounce.

In corporate news, gold producer Agnico-Eagle Mines reported lower first quarter net income of $0.14 per share, compared to $0.35 per share in the same quarter last year. Analysts were expecting the company to post net income of $0.29 per share in the quarter. The company attributed the reduction in income to a non-cash foreign currency translation loss of $0.06 per share, and a non-cash stock-based compensation expense of $0.11 per share in the quarter.

Mining company Boliden AB said it has acquired Kemira's sulphuric acid plant and business in Kokkola, Finland, effective as of 1st May 2010.

Property and casualty insurance company Fairfax Financial Holdings swung to profit in first-quarter, reporting net income of $14.02 per share, compared to a loss of $3.55 per share in the same quarter last year.

Enterprise content management solutions provider Open Text reported lower third-quarter net income of $0.23 per share, compared to $0.41 per share in the year ago period. Analysts were expecting the company to record $0.74 per share for the quarter.

Paper manufacturer Domtar Corp. swung to profit in first quarter, reporting net earnings of $1.34 per share, compared to a net loss of $1.05 per share last year.

Logistic business solutions provider Canadian Utilities reported first-quarter earnings of C$1.18 per share compared to C$1.16 per share for the quarter in 2009.

Distribution utility company Fortis Inc. said its first-quarter net earnings increased to C$0.56 per common share from C$0.52 per common share in the prior year quarter. In addition, the company said that the corporation's significant capital program, which is expected to be about C$1.1 billion in 2010 and approach C$5 billion over the 5-year period from 2010 through 2014, should drive growth in earnings and dividends.

Media and entertainment company Corus Entertainment said it would sell the Corus Quebec radio stations to COGECO Inc. a telecommunication services providing company, in a transaction valued around C$80 million.

In economic news, Statistics Canada said the country's real gross domestic product increased 0.3% in February, largely helped by growth in manufacturing and mining. The manufacturing sector grew 1.2% and the mining sector increased 0.4% in February.

In other report, the agency said the Industrial Product Price Index declined 0.4% and the Raw Materials Price Index rose 0.8% in March The IPPI declined in March after advancing in the past four months. The agency noted that the 3.3% gain in the value of the Canadian dollar versus the U.S. dollar had impacted the IPPI.

From the U.S., the Commerce Department said today gross domestic product increased at an annual rate of 3.2% in the first quarter compared to the 5.6% growth seen in the fourth quarter. The increase came roughly in line with the estimates of economists, who had expected 3.3% growth.

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Asian Markets End Higher On Wall Street Cues

The markets across Asia ended the last trading session of the month Friday on a positive note, taking cues from Wall Street. Higher oil and commodity prices also lifted market sentiment while traders preferred to adopt a cautious approach ahead of the key GDP data in the U.S later in the day.

In Japan, the benchmark Nikkei-225 Index ended rose 132.61 points, or 1.21%, to 11,057.40, while the broader Topix index of all First Section issues was up 9.40 points, or 0.96%, to 987

On the economic front, a report released by the Ministry of Economy, Trade and Industry revealed that an index measuring industrial production in Japan increased a seasonally adjusted 0.3% in March compared to the previous month, posting a score of 94.0. That was below expectations for a 0.8% increase following the 0.7% contraction in February. On an annual basis, industrial output surged 30.7% - again missing expectations for a 31.1% increase following the 31.3% spike in the previous month.

The policy board of the Bank of Japan unanimously decided to retain the overnight call rate at 0.10%, in line with market expectations. The last change in the rate was a 0.10% cut in interest rates at the December 2008 meeting. The central bank said in a statement that it would be necessary to strengthen the foundations for economic growth and that it was considering further easing measures to support the economy.

Real estate stocks advanced on hopes of economic recovery. Mitsubishi Estate surged up 5.38%, Sumitomo Realty & Development climbed 4.02%, Mitsui Fudosan rose 3.86%, Tokyu Land Corp. gained 4.38% and Heiwa Real Estate rose 4.21%.

Shipping related stocks also advanced. Mitsui OSK Lines surged up 4.12%, Nippon Yusen gained 2.65% and Kawasaki Kishen Kaisa climbed 4.40%.

The major gainer was warehousing stock, Mitsubishi Logistics, which has surged up 7.83%.

Banking stocks ended in negative territory. Sumitomo Mitsui Financial lost 2.04%, Resona Holdings shed 1.46%, and Mitsubishi UFJ Financial slipped 1.00%. However, Mizuho Financial ended unchanged from previous close.

Electric Machinery stocks and exporters advanced on weaker local currency. Kyocera Corp. added 1.28%, Fanuc Ltd advanced 1.09%, Tokyo Electron gained 0.65%, Canon Inc. climbed 1.87%, Sharp Corp. edged up 0.16% and Panasonic Corp. increased 1.02%.

In Australia, the benchmark S&P/ASX200 Index added 21.80 points, or 0.46% to close at 4,807, while the All-Ordinaries Index ended at 4,834, representing a gain of 17.80 points, or 0.37%.

On economic front, data released by the Reserve Bank of Australia revealed that the amount of credit extended to private sector recipients in the country increased 0.5% in March 2010 compared to the preceding month. The RBA further noted that for the full year to March, total private sector credit was up 2.1%.

A report released by the Housing Industry Association in Australia revealed that new home sales in the country increased 0.9% month-on-month in March, following a sharp 5.2% decline in the previous month. The report further noted that private sector detached house sales increased by 1.9%, while multi-unit sales fell 8.7% during the recent month.

Light sweet crude oil futures for June delivery ended at $85.58 a barrel in electronic trading, up $0.41 per barrel from previous close at $85.17 a barrel in New York on Thursday.

Finance stocks advanced after investment banking company Macquarie Group reported better than expected results. The stock surged up 4.01%. Among other major banks in the country, ANZ Bank remained unchanged from previous close, Commonwealth Bank of Australia rose 1.63% and Westpac Banking Group advanced 0.74%. However, National Australia Bank bucked the positive trend and ended in negative territory with a loss of 0.04%.

Oil stocks advanced following rise in crude oil prices in the international market. Woodside Petroleum added 0.11%, Santos climbed 2.29%, Oil Search advanced 0.18% and Origin Energy rose 1.80%. ROC Oil remained unchanged from previous close.

Mixed trading was witnessed among mining and mineral stocks. BHP Billiton added 0.62%. However, Fortescue Metals fell 3.17%, Gindalbie Metals shed 2.07%, Iluka Resources slipped 0.43%, Macarthur Coal lost 1.65%, Mincor Resource slumped 2.35%, Murchison Metals plunged 4.96%, Oz Minerals declined 3.35% and Rio Tinto was down by 0.68%.

Gold stocks also declined. Lihir Gold lost 1.30% and Newcrest Mining shed 1.58%.

In Hong Kong, the benchmark Hang Sang Index snapped 3-day losses and ended in positive territory with a gain of 329.57 points, or 1.59%, at 21,109, taking cues from Wall Street where the major averages ended in positive territory and Dow posted a 3-digit gain, lifted by slight decline in weekly jobless claims, positive earnings and optimism that the debt crisis in Greece will be resolved over the next few days. Positive trading across other markets in the region on higher commodity prices also lifted market sentiment. As many as 33 stocks of the 42 components ended with gains during the session.

Strong global cues amid optimism that the European Union Will agree on a bailout package for cash-strapped Greece within days helped the Indian market end higher for a second day in a row Friday. A steady stream of corporate earnings and the passage of fiance bill 2010 in the Lok Sabha on Thursday also helped improve sentiment. Realty, auto, healthcare, consumer durable and IT stocks led the gainers. The 30-share Sensex pared its gain to close off the day's high at 17,559, up 55 points or 0.32% and the 50-share Nifty also ended up 24 points or 0.45% at 5,278,

Among the other major markets open for trading, China's Shanghai Composite Index added 2.18 points, or 0.08%, to close at 2,871, Indonesia's Jakarta Composite advanced 44.39 points or 1.52% to close at 2,971, and Singapore's Strait Times Index rose 15.60 points, or 0.53%, to close at 2,975. However, Taiwan's Weighted Index bucked the trend and ended in negative territory with a loss of 49.80 points, or 0.62%, at 8,004.

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The major European markets are seeing a mixed trend on Friday after the rebound seen in the previous session. The French CAC 40 Index and the U.K. FTSE 100 Index are moving down 0.27% and 0.39%, respectively, while the German DAX Index is advancing 0.18%.

On the economic front, market research firm GfK NOP said its consumer confidence index for the U.K. stood at -16 in April compared to -15 in the previous month and -14 in February. Analysts had expected the sentiment indicator to remain at -15. The annual moving average of the consumer sentiment index also decreased and stood at -20.

French statistical office INSEE said today that French producer prices rose 0.6% on a monthly basis in March compared to the 0.1% increase in the previous month. The increase was in line with expectations. On a year-over-year basis, producer prices climbed 2%, faster than the 1.9% increase expected by economists.

Eurostat reported that the euro area’s unemployment rate came in at 10% in March, the same as in the previous month and also in line with economists’ expectations. In the year-ago period, the unemployment rate was at 9.1%.

Meanwhile, flash estimates released by the agency showed that the euro area’s annual inflation rate stood at 1.5% in March, slightly faster than the 1.4% rate in the previous month. However, the inflation rate was in line with expectations.

U.S. Economic Reports

The U.S. economy expanded at a slightly slower than anticipated rate in the first quarter, according to advance estimates released by the Bureau of Economic Analysis. First quarter-GDP rose 3.2% compared to the 5.6% rate in the fourth quarter. Economists had expected a more modest 3.3% rate of expansion in the first quarter.

The GDP growth was aided by positive contributions from personal consumption expenditures, which rose at a 3.6% rate, faster than the 1.6% growth in the previous quarter. Private inventory investment, exports and non-residential fixed investment also increased compared to the previous quarter.

However, the deceleration in GDP growth compared to the previous quarter was due to decelerations in private inventory investment and in exports, a downturn in residential fixed investment and bigger decreases in state and local government spending. On a year-over-year basis, the economy expanded 2.5%, building on the 0.1% growth in the previous quarter.

The Labor Department reported that compensation costs for civilian workers rose 0.6% on a seasonally adjusted basis in the first quarter compared to the fourth quarter. The consensus estimates had called for a more modest 0.4% increase. Wages and salaries, making up about 70% of compensation costs rose 0.4%, while benefits increased1.1%.

The results of the Institute for Supply Management-Chicago's business survey for April are scheduled to be released at 9:45 AM ET. Economists expect the business barometer index based on the survey to come in at 59.9.

The ISM-Chicago's regional manufacturing index fell 3.8 points to 58.8 in March. Economists had expected a more modest drop to 60. The new orders index declined to 61.8 in March from 62.2 in the previous month and the index of order backlogs fell 4.2 points to 54.3. At the same time, the employment index rose 0.1 points to 53.1.

The Reuters/University of Michigan's final report on the consumer sentiment index for April is scheduled to be released at 9:55 AM ET. The consumer sentiment index is expected to be revised up to 71 from the mid-month of reading of 69.5.

Earnings

Barnes Group (B) reported that its first quarter net sales rose 6% to $278.1 million. The company reported earnings of 21 cents per share compared to 22 cents per share last year. Analysts estimated earnings of 19 cents per share on revenues of $266.74 million. The company raised its earnings estimate for the year to 90 cents to $1 per share, while analysts estimate earnings of $1.01 per share for the year.

Coventry Healthcare (CVH) said its first quarter operating revenues fell to $2.86 billion from the year-ago’s $3.53 billion, although they fell short of the $2.90 billion consensus estimate. The company’s earnings per share from continuing operations rose to 66 cents per share from 26 cents per share last year. On an adjusted basis, the company reported earnings of 49 cents per share, ahead of the 32 cents per share consensus estimate. The company also raised its full year earnings per share guidance to $2.35-$2.50 from its earlier estimate of $2.10-$2.25. Analysts estimate earnings of $2.20 per share for the year.

DR Horton (DHI) reported second quarter earnings of 4 cents per share compared to a loss of 34 cents per share last year. Revenues rose 16% to $896.8 million. Analysts estimated a profit of 1 cent per share on revenues of $862.98 million.

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Tesoro (TSO) could be in focus after it reported a first quarter net loss of $1.11 per share compared to earnings of 37 cents per share last year. The recent quarter’s results included a charge of 14 cents per share due to the enactment of the healthcare bill. Revenues rose to $4.61 billion from the year-ago’s $3.3 billion. Analysts estimated a narrower loss of 86 cents per share on revenues of $4.43 billion.

Mohawk Industries (MHK) is likely to see some activity after it reported that its first quarter adjusted earnings rose to 35 cents per share compared to 14 cents per share in the year-ago period. Net sales climbed to $1.35 billion from $1.21 billion in the same period last year, exceeding the $1.24 billion consensus estimate.

Callaway Golf (ELY) may react to its announcement that its first quarter sales rose 11% year-over-year to $272 million, while analysts estimated revenues of $302.01 million. The company’s earnings rose to 24 cents per share from 11 cents per share last year but missed the consensus estimate of 26 cents per share. For the full year, the company expects sales of $990 million to $1.05 billion and pro forma earnings of 25-35 cents per share. The consensus estimates call for earnings of 30 cents per share on revenues of $1.02 billion.

Expedia (EXPE) may gain ground after it reported that its first quarter revenues rose 13% to $717.9 million. The company’s adjusted earnings climbed to 26 cents per share from 21 cents per share in the year-ago period. Analysts estimated earnings of 22 cents per share on revenues of $722.35 million.

KLA-Tencor (KLAC) could also be in focus after it reported third quarter earnings of 41 cents per share compared to a loss of 34 cents per share in the year-ago period. Revenues rose to $478.30 million from $309.61 billion in the year-ago period. The consensus estimates had called for earnings of 35 cents per share on revenues of $472.36 million.

Fiserv (FISV) could also move in reaction to its announcement that its first quarter adjusted earnings from continuing operations rose 6% to 95 cents per share. Meanwhile, adjusted revenues declined 1% to $954 million. The Street estimated earnings of 97 cents per share on revenues of $1.04 billion. For the full year, the company continues to expect earnings from continuing operations of $3.96-$4.07 per share. The consensus estimate calls for earnings of $4.02 per share.

QLogic (QLGC) receded in Thursday’s after hours session despite reporting fourth quarter net revenues that rose 12% to $145.7 million. The company reported a profit of 28 cents per share on a non-GAAP basis compared to 20 cents per share last year. Analysts estimated earnings of 26 cents per share on revenues of $143.26 million.

Hartford Financial (HIG) may be in focus after it reported first quarter core earnings of 14 cents per share compared to a core loss of $3.66 per share in the year-ago period. Analysts estimated earnings of 11 cents per share for the quarter.

Meanwhile, MetLife’s (MET) shares may also react to the company’s announcement that its swung to a first quarter profit of 97 cents per share from a year-ago loss of 71 cents per share. Total revenues rose to $13.19 billion from $10.21 billion last year. The Street estimated earnings of 97 cents per share on revenues of $12.83 billion.

McAfee (MFE) could also be in focus after it reported that its first quarter revenues rose 12% year-over-year to $502.7 million. On a non-GAAP basis, the company reported earnings of 60 cents per share, higher than 57 cents per share last year. Analysts expected earnings of 63 cents per share on revenues of $513.12 million. For the second quarter, the company expects net revenues of $500 million to $520 million and non-GAAP earnings of 58-62 cents per share. The consensus estimates call for earnings of 66 cents per share on revenues of $526.17 million.

Maxim Integrated (MXIM) may see some activity after it reported that its third quarter net revenues rose 7.5% to $508.9 million. On a GAAP basis, the company reported earnings of 21 cents per share, including 6 cents per share in charges. Analysts’ estimates, which typically exclude one-time items, called for earnings of 27 cents per share on revenues of $512.31 million. The company also said it expects revenues of $550 million to $570 million for the fourth quarter, while analysts estimate revenues of $530.82 million.

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