US & World Daily Markets Financial Briefing 03-11-2010

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Stocks Little Changed Despite Upbeat Economic Data

Stocks are little changed in mid-morning trading on Wednesday, as traders are awaiting the Federal Reserve's commentary on a possible second round of quantitative easing, standing pat even after another upbeat set of economic reports. Service sector activity, factory goods orders and private sector employment data all came in higher than economists had anticipated.

The major averages have seen choppy movement in recent dealing, remaining near the flat line. While the Nasdaq is down 0.39 points or less than 0.1 percent at 2,533.13, the Dow is up 19.75 points or 0.2 percent at 11,208.47 and the S&P 500 is up 1.71 points or 0.1 percent at 1,195.28.

A short time ago, the Institute for Supply Management said its non-manufacturing index rose to 54.3 in October from 53.2 in September, with a reading above 50 indicating growth in the service sector. The index had been expected to show a more modest increase to a reading of 53.4.

The Commerce Department also released a separate report showing that orders for manufactured goods increased by 2.1 percent in September after coming in nearly unchanged in August. Economists had expected orders to increase by 1.7 percent compared to the 0.5 percent decrease originally reported for the previous month.

Earlier, Automatic Data Processing, Inc. (ADP) reported that private-sector employment increased by 43,000 jobs in October following a revised decrease of 2,000 jobs in September. Economists had expected employment to increase by 23,000 jobs compared to the loss of 39,000 jobs originally reported for the previous month.

The markets have largely shrugged off the influx of data, however, as traders are looking ahead to the Fed's statement regarding quantitative easing due for release at 2:15 p.m. ET.

In earnings news, Aetna (AET) topped both third quarter profit and revenue expectations, despite a $20 million drop in revenues.

CVS Caremark (CVS) reported a third quarter profit of $0.59 per share, six cents short of analyst forecasts, while the company's sales also failed to meet expectations after a 3 percent decline.

Pulte Homes (PHM) posted a much more substantial third quarter loss compared to the same period last year, while on an adjusted basis, the loss was slimmer than expected on Wall Street. Revenues were also able to beat analyst projections.

After the markets closed in the previous session, video-game publisher Electronic Arts (ERTS) said that its second quarter loss narrowed from last year, as lower costs and expenses offset a sharp drop in revenue. The company's adjusted earnings also came in better than expected.

Sector News

While most of the major sectors are showing only modest moves, some strength is visible among banking stocks, lifting the KBW Bank Index up 0.9 percent off of the two-month closing low it set at the close of trading on Tuesday.

Airline and electronic storage stocks are also elevated, while weakness among natural gas, housing and telecommunication stocks is offsetting some of those gains. The NYSE Arca Natural Gas Index is 0.9 percent off of the fresh six-month closing high set yesterday.

Stocks Driven By Analyst Comments

MCG Capital (MCGC) is trading higher after being upgraded at BB&T Capital Markets from Hold to Buy. Shares are up by 3.6 percent after reaching their best intraday level in just over six months in earlier trading.

Meanwhile, IT service provider CACI International (CACI) is under pressure after Stifel Nicolaus downgraded shares from Buy to Hold. The stock is posting a loss of 2.3 percent, falling from its best closing price in over seven months.

Other Markets

Overseas, stock markets in the Asia-Pacific region ended mostly higher on Wednesday. Hong Kong's Hang Seng Index gained 2 percent and India's BSE 30 Index moved up by 0.6 percent. The Japanese markets were closed on the day.

Meanwhile, the major European markets are little changed. The U.K.'s FTSE 100 Index and the German DAX Index are nearly flat, while the French CAC 40 Index is up by 0.3 percent.

In the bond markets, treasuries are showing modest gains. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.545 percent, posting a loss of 4.9 basis points.

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TSX Poised For Cautious Start Ahead Of FOMC

Bay Street stocks are poised for a cautious start Wednesday ahead of the outcome of the 2-day FOMC meeting, due out later in the day, with traders digesting a host of mixed earnings reports.

However, energy stocks may be in play, with crude oil prices moving near their 6-month high of $85. On Tuesday, the S&P/TSX Composite Index edged up 16.61 points or 0.13% to 12,681.42, near its 2-year peak.

The price of crude oil advanced near $85 as traders speculate that the U.S. Federal Reserves will announce further monetary easing measures today. The EIA will release its weekly crude oil report. Analysts expect crude inventories to rise by 1.2 million barrels and gasoline stocks to increase by 200,000 barrels in the week ended October 29. Crude for December was up $0.89 to $84.79 a barrel.

Meanwhile, the price of gold was little changed, with gold for December edged down $0.20 to $1,356.70 an ounce.

In corporate news from Canada, fertilizer maker Agrium Inc. reported higher third-quarter net earnings of $57 million or $0.37 per share compared to $26 million or $0.16 per share in the prior year quarter. Excluding certain items, net earnings came in at $111 million or $0.70 per share for the quarter. Analysts were expecting the company to report earnings of $0.87 per share.

Oil transportation company Enbridge Inc. reported lower third-quarter net earnings of C$157 million or C$0.42 per share compared to C$304 million or C$0.83 per share last year. However on an adjusted basis, earnings improved to C$196 million or C$0.53 per share from C$153 million or C$0.42 per share a year earlier. The company declared quarterly dividend of $0.425 per share.

Oil and gas royalty trust Daylight Energy reported a rise in third-quarter Funds From Operations reflecting higher revenue. However, FFO per share dropped on higher share count. FFO increased to C$67.65 million from C$50.24 million last year, while on a per share basis it decreased to C$0.31 from C$0.39 reported in the prior year.

Food products company Premium Brands Holdings reported lower third quarter earnings of C$5.88 million or C$0.33 per share, compared to C$6.88 million or C$0.39 per share last year.

Construction and infrastructure development company Aecon Group reported lower third quarter net profits despite increase in revenues. Net income declined to $17.22 million or $0.27 per share from $19.64 million or $0.35 per share in the same quarter last year. Revenues for the quarter increased to $800.18 million, from $707.09 million.

Media company Torstar Corp. reported flat third quarter net income of $4.10 million or $0.05 per share, compared to $4.04 million or $0.05 per share last year.

Home, auto and business insurances provider Intact Financial Corp. said it swung to profit in third quarter, reporting a profit of C$82.3 million or C$0.72 per share, compared to a loss of C$8.0 million or C$0.07 per share last year. The company declared a quarterly dividend of $0.34 per share.

Retail financial services company Home Capital Group reported a 18% jump in its third quarter net income at C$45.45 million or C$1.31 per share. The company declared quarterly dividend of C$ 0.18 per common share, up 12.5% from last year.

Forest products company Western Forest Products swung to profit in third quarter, reporting net income of C$6.9 million or C$0.01 per share compared to a net loss of C$16.6 million or C$0.04 per share in the same quarter last year.

Mining services company North American Energy Partners reported lower third-quarter net income of $2.37 million or $0.06 per share compared to $4.30 million or $0.12 per share last year. Analysts were expecting the company to report net income of $0.15 per share.

Construction products dealer Superior Plus slipped into the red, reporting third quarter net loss of C$4 million or C$0.04 per share compared to net earnings of C$33 million or C$0.37 per share last year. During the quarter, the company recorded C$1.2 million in unrealized losses on derivative financial instruments, compared to unrealized gains of C$33.9 million in prior year's third quarter.

Oil and gas industry services provider Calfrac Well Services reported higher third-quarter net income of C$31.19 million or C$0.72 per share compared to C$2.84 million or C$0.08 a year ago.

In economic news from the U.S., Automatic Data Processing, Inc. said private-sector employment increased by 43,000 jobs in October following a revised decrease of 2,000 jobs in September. Economists were expecting employment to increase by 23,000 jobs compared to the loss of 39,000 jobs originally reported for the previous month.

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Cautious progress

European markets have mostly built on early gains but with the US Federal Reserve due to make its pronouncement on quantitative easing later today investors are unprepared to go too far out on a limb.

The CAC in Paris is up 20 at 3,886. The Dax is 19 better at 6,673 but the IBEX in Madrid has shed 20 points at 10.742.

French bank SocGen's third-quarter net profit more than doubled to €896m on revenues up 5.5% to €6.3bn. Good growth in international retail banking, investment banking and a 39% reduction in provisions to €918m drove the improvement.

German car maker BMW also published bumper third-quarter earnings and increased its forecast for the year as well. Earnings climbed €874m from €78m this time last year. Revenues rose 36% to €15.9bn.

"We are currently aiming to achieve an EBIT margin of above 7% as a result of the strong sales volume performance in the automobile segment in 2010," said chairman Norbert Reithofer. The previous margin forecast was 5%.

Elsewhere in the car sector Fiat accelerates after UBS issued a buy note on the Italian firm. The switch from a neutral stance on the stock was prompted by a belief that “the market may be underestimating the value in Fiat post de-merger.”

Brewing giant Anheuser-Busch InBev saw its shares go flat after it said underlying earnings before interest, tax, depreciation and amortisation in the third quarter was $3.53bn, up 9.1% on a like for like basis compared to last year; the market had been expecting a 9.6% increase.

Switching focus to the Nordic countries, colostomy bag and catheter maker Coloplast announced net income of 368m kroner for its fourth quarter, topping market expectations of 345m kroner.

Swedish oil explorer Lundin Petroleum also topped market forecasts with its quarterly figures; net income was $26.6m, versus expectations of $21.8m.

Norwegian oil and gas firm Statoil fell back, however, after slicing its full-year production target. The news overshadowed an 87% year on year increase in net profits in the third quarter.

Lloyds Banking has appointed Antonio Horta-Osorio, the head of Spanish bank Santander's UK business, as its new chief executive replacing Eric Daniels who is stepping down.

CAC 40 - Risers
Societe Generale (GLE) € 43.97 +4.43%
Lafarge (LG) € 43.12 +4.02%
ArcelorMittal SA (MT) € 24.66 +2.47%
ST Microelectronics (STM) € 6.44 +2.06%
BNP Paribas (BNP) € 53.27 +2.03%
LVMH (MC) € 117.00 +2.01%
Bouygues (EN) € 32.26 +1.72%
Saint Gobain (SGO) € 34.76 +1.46%
Credit Agricole (ACA) € 12.13 +1.34%
AXA (CS) € 13.34 +1.06%

CAC 40 - Fallers
Cap Gemini (CAP) € 36.80 -1.50%
GDF Suez (GSZ) € 28.32 -1.48%
Unibail-Rodamco (UL) € 147.80 -1.40%
Carrefour (CA) € 38.38 -0.90%
Vallourec (VK) € 76.01 -0.89%
Lagardere SCA (MMB) € 31.73 -0.87%
EDF (EDF) € 32.43 -0.72%
EADS (EAD) € 19.17 -0.60%
Schneider Electric (SU) € 104.10 -0.48%
Suez Environnement Company (SEV) € 14.10 -0.42%

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Indian Market Rises Ahead Of Fed Meet

The Indian market ended Wednesday's range-bound session off the day's high, with metal, auto and financial stocks leading the gains. Second-line stocks also received good support, as investors eagerly awaited the outcome of a key U.S. Fed's two-day rate-setting meeting for clues on fresh foreign fund inflows into emerging markets.

With heavyweights such as ITC, BHEL, Hindalco, Tata Steel, HDFC, SBI, ACC, Tata Motors and Sterlite gaining between 1% and 4%, the 30-share BSE Sensex ended up 120 points or 0.59% at 20,466, while the broader Nifty rose by 41 points or 0.68% to 6,160.

The BSE mid-cap and small-cap indexes gained 0.60% and 0.68%, respectively. On the BSE, the market breadth was positive, with 1648 gainers versus 1322 decliners.

Select public sector stocks like BEML, Bharat Electronics, STC and HMT gained between 2.5% and 6% ahead of state-run Coal India's debut on the stock exchanges tomorrow. Hindustan Copper rallied 4% on reports that it is selling non-core assets.

If the global markets remain firm, the refund money of Coal India's $3.5 billion IPO, which was subscribed 15 times, could make way into the stock market in the next few sessions, analysts said.

Leading lenders like HDFC, ICICI Bank and SBI rose by 0.24%-2.19%. Realty stocks witnessed stock-specific buying following yesterday's sharp declines after the RBI tightened norms for home loans. Unitech climbed 2.61%, Sobha Developers added 0.54% and Indiabulls Real Estate closed barely changed, while Parsvnath Developers fell 2.86%, Ackruti City declined 2.26%, DB Realty eased 1.18% and HDIL edged down 0.54%.

Fertilizer stocks like GSFC, GNFC, Zuari Industries, Chambal, Nagarjuna, National and RCF rallied between 2% and 17% in anticipation of a new fertilizer policy ahead of a cabinet meeting scheduled on Thursday.

Tata Teleservices rose 0.65% after it launched 3G mobile services in nine circles. Fortis Healthcare advanced 1.43% after it posted nearly a six-fold rise in its quarterly net profit, bolstered by the proceeds from the sale of its stake in Singapore-based hospital chain Parkway.

IDBI Bank gained 0.94% as it hiked retail term-deposit rates by 10-50 basis points. GAIL India edged up 0.13% after the state-owned transmission and marketing firm posted a 29% rise in quarterly net profit.

Venus Remedies rose 1.58% after it received good manufacturing practices certification from Saudi Arabia for four of its injectable manufacturing facilities. KEC International added a percent after it received board approval for a 5-for-1 stock split.

Oriental Bank of Commerce fell 1.75% even as the public sector lender reported a 47% rise in second-quarter net profit. SpiceJet, which said it would buy 30 Bombardier aircraft for $900 million, ended down 2.61%.

Elsewhere, most Asian stocks edged higher on Wednesday, as a weaker dollar supported commodity prices and investors braced for another round of quantitative easing from the U.S. Federal Reserve to kick-start the lackluster U.S. recovery. Many analysts expect the Fed to commit to buying about $250 billion to $1.5 trillion government bonds to further lower borrowing costs and spur more spending.

The outcome of the U.S. mid-term elections, where Republicans made large gains to take control of the House of Representatives, also boosted sentiment, as the Republicans are often viewed as more business-friendly.

The Japanese market was closed in observance of the Culture Day holiday, while Chinese stocks extended losses for a second consecutive session to end about half a percent lower after the People's Bank of China said it would take further measures to tame inflation.

The People's Bank of China, in its third-quarter monetary policy report published Tuesday, said that it will gradually "normalize" monetary conditions from a stimulus-driven mode as it faces "relatively big" uncertainties over price trends.

European stocks were mixed in early trading, while the U.S. index futures fluctuated ahead of the FOMC meeting later this evening.

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Euro Holds Gains Versus Dollar As Fed Preps QE

The euro paused versus the dollar ahead of Wednesday's closely watched announcement on quantitative easing from the US Federal Reserve.

The Fed is set to print more money in order to support the economy with another round of asset purchase. While the size and scope of the latest program is expected to be smaller than the stimulus offered last year, the notion that the Fed will continue its accommodative policy has weakened the dollar.

The euro fetched $1.4050 in New York's late morning trading, about a penny from October's 9-month high of $1.4058.

Traders shrugged off industry data from ADP showing US private sector employment increased by 43,000 jobs in October following a revised decrease of 2,000 jobs in September. Economists had expected employment to increase by 23,000 jobs compared to the loss of 39,000 jobs originally reported for the previous month.

Activity in the U.S. service sector expanded for the tenth consecutive month in October, the Institute for Supply Management revealed in a report on Wednesday, with the pace of growth in the sector accelerating by more than economists had been anticipating

The euro rose sharply against the yen, hitting a 3-week high of Y114.20.

The euro pared some of its overnight losses versus the sterling, edging up to 0.8720 from 0.8695. In October, the euro hit a multi-month high above 0.89.

UK's service sector growth unexpectedly improved in October, according to a survey from Markit Economics.

The seasonally adjusted Markit/CIPS Purchasing Managers' Index for the service sector rose to a four-month high of 53.2 in October, the report showed Wednesday. Economists had expected the index to fall to 52.6 from 52.8.

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