US & World Daily Markets Financial Briefing 09-11-2010

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Stocks are largely on the upside in mid-morning trading on Tuesday amid a positive reaction to a September wholesale inventory growth number that more than doubled expectations. Nonetheless, movement remains limited amid the lack of first-tier economic reports.

The major averages have pulled back off their highs for the session in the past few minutes but currently remain positive. The Dow is up 9.84 points or 0.1 percent at 11,416.68, the Nasdaq is up 11.12 points or 0.4 percent at 2,591.17 and the S&P 500 is up 3.16 points or 0.3 percent at 1,226.41.

A short time ago, the Commerce Department reported that wholesale inventories in the U.S. increased by much more than expected in the month of September, helped by a jump in inventories of non-durable goods.

Wholesale inventories increased by 1.5 percent in September following a revised 1.2 percent increase in August. Economists had expected inventories to increase by 0.6 percent compared to the 0.8 percent growth originally reported for the previous month.

On the corporate front, energy giant Chevron (CVX) signed a deal to purchase Atlas Energy, Inc. (ATLS) for approximately $4.3 billion, including debt. Through the deal, Chevron will gain access to a natural gas resource position primarily in southwestern Pennsylvania's Marcellus Shale.

In earnings news, Dean Foods Co. (DF) reported that its third-quarter net income came in at $0.13 per share, 8 cents short of average expectations. Meanwhile, net sales totaled $3.1 billion, beating forecasts for $3.04 billion for the period.

The firm also revealed a fourth-quarter earnings estimate nearly a dime under Wall Street expectations and announced the resignation of VP and CFO Jack Callahan.

Also today, U.K.-based mobile phone network operator Vodafone Group Plc (VOD) reported a surge in its first-half profit, driven by gains from sale of its interest in China Mobile and a tax resolution.

Vodafone also announced a deal to sell its interests in Japanese telecom and media company SoftBank Corp. of Japan for roughly $5 billion. Looking ahead, Vodafone lifted its adjusted earnings outlook for the full year.

After the markets closed for trading on Monday, online travel company Priceline.com (PCLN) said that its third-quarter profit declined by 30 percent from last year due to a non-cash tax benefit recorded in the year-ago period. On an adjusted basis, earnings came in well ahead of expectations, driven by double-digit growth in travel bookings.

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Bay Street stocks were hovering in the positive territory Tuesday morning as resource stocks extend gains amid a rally in commodities prices, with gold stocks turning in a particularly strong performance.

Meanwhile, the Canadian dollar rose above parity with its U.S. counterpart.

The S&P/TSX Composite Index moved up 33.50 points or 0.26% to 13,085.98, its fresh 2-year peak.

The price of gold continued to extend rally, surging to a fresh record high of above $1,400. Gold for December gained $17.20 to $1,420.40 an ounce.

The Global Gold Index gained over 2%, with Barrick Gold (ABX.TO), Alamos Gold (AGI.TO) and Yamana Gold (YRI.TO) adding around 3% each.

Silver streaming company Silver Wheaton (SLW.TO) added nearly 4%. The company reported higher third quarter net earnings of $69.23 million or $0.20 per share, up from $33.57 million or $0.11 per share last year. Analysts were expecting the company to report earnings of $0.19 per share. The company said it remains on track to meet production guidance of 23.5 million silver equivalent ounces in 2010, growing to about 40 million ounces by 2013.

Among base-metals stocks, First Quantum Minerals (FM.TO), Lundin Mining (LUN.TO) and Taseko Mines (TKO.TO) gained nearly 3% each.

Metal mining company Minefinders Corp. (MFL.TO) edged up over 1% even after reporting a wider a third-quarter net loss of $4.8 million or $0.07 per share, compared to a loss of $0.07 million or $0.01 per share in the same quarter a year-ago. Analysts were expecting the company to report a loss of $0.02 per share this quarter.

Meanwhile, Equinox Minerals (EQN.TO) lost over 8%. Yesterday, the company said it swung to profit in third quarter, reporting net income of $71.15 thousand or $0.10 per share compared to a loss of $56.27 thousand or $0.08 per share in the same quarter last year. Copper production grew 37% to 38,445 tonnes or 84.76 million pounds from the prior-year quarter, the company said.

The price of crude oil extended recent gains as traders await cues from the weekly inventories report from the API. Crude for December was up $0.27 to $87.33 a barrel.

In the oil patch, Crew Energy (CR.TO), Encana Corp (ECA.TO) and NuVista Energy (NVA.TO) gathered close to 2% each.

Uranium stocks were under the buyers' radar, with First Uranium Corp. (FIU.TO) and Mega Uranium (MGA.TO) adding close to 8% each. Uranium One (UUU.TO) rose close to 2%.

Information technology services provider CGI Group (GIB_A.TO) soared nearly 10%. The company said its fourth-quarter earnings increased to C$84.08 million or C$0.30 per share from C$82.64 million or C$0.27 per share in the year ago period. Excluding one-time expenses, earnings from continuing operations would have been $94.5 million or C$0.34 per share.

Heavy equipment dealer Toromont Industries (TIH.TO) gained over 5% after it said it would spin off Enerflex Ltd, a supplier of natural gas production & processing equipment, as a separate publicly traded company.

Meanwhile, financial stocks were down marginally. TD Bank (TD.TO), Bank of Montreal (BMO.TO) and CIBC (CM.TO) were down close to 1% each.

Wireless data services provider Wi-LAN Inc. (WIN.TO) plummeted nearly 5% after slipping into the red in third-quarter, reporting net loss of C$6.2 million, or C$0.06 per share, compared to net earnings of C$16.5 million or C$0.16 per share a year ago. Excluding the one-time tax benefit, net loss would have been C$3.1 million or C$0.03 per share. The company declared a dividend of C$0.0125 per share.

Farm and construction equipment dealer Rocky Mountain Dealerships (RME.TO) shed over 5% after reporting lower third quarter net profits of $3.8 million or $0.20 per share compared to $4.9 million or $0.34 per share for the same period last year.

Oil producer PetroBakken Energy (PBN.TO) was down over 1% after reporting lower third quarter net income of C$9.19 million or C$0.05 per share, compared to C$9.86 million or C$0.09 per share in the prior year quarter.

In economic news, Statistics Canada said New Housing Price Index (NHPI) increased 0.2% in September following a 0.1% increase in August. Economists were expecting the index to move up by 0.1% in September. Year over year, the NHPI was up 2.7% in September following a 2.9% increase in August.

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The French market is rising in afternoon trading Tuesday, ignoring largely negative cues from Asia. Sentiment was influenced by upbeat corporate statements from Europe. Carmakers, construction stocks and lenders are witnessing upside.

Crude for December delivery is trading at $87.39 per barrel, up $0.33 from the previous close, and gold is higher by $16.6 at $1419.8 an ounce.

In economic news, French trade deficit shrank to EUR 4.68 billion in October from EUR 4.98 billion in September, the country's customs office said. Economists had expected the deficit to fall to EUR 3.9 billion.

The German consumer price index rose 1.3% year-on-year, unchanged from September and confirming the preliminary estimate released on October 27, the Federal Statistical Office said.

Industrial production in the U.K. rose 3.8% year-over-year in September, the Office for National Statistics said. Economists had predicted a 3.6% rise following the 4.3% increase in August. Separate data showed that the country's visible trade deficit narrowed to GBP 8.2 billion in September from a revised deficit of GBP 8.5 billion in August. Economists had forecast GBP 8 billion deficit.

The CAC 40, which opened lower at 3,904, followed its German counterpart and rose sharply later. The index is currently adding 0.85%.

Carmakers are gaining on the index with Renault adding 2.4% and Peugeot gaining 1.7%. Cement giant Lafarge is rising 2.3%, steel maker ArclorMittal is adding 2% and building naterials maker Saint-Gobain is advancing 1.7%. Heavy construction firms Bouygues and Vinci are rising 2.1% and 0.8%, respectively.

Lenders Natixis, BNP Paribas and Crdeit Agricole are notably higher while Societe Generale is moderately rising.

Those on the losing side include oil & gas services firm Technip, airplane maker EADS, dairy products maker Danone as well as water utilities Suez Environnement and Veolia Environnement.

Elsewhere in Europe, the UK's FTSE 100 is adding 0.81% and the German DAX is gaining 0.69%.

Across Asia/Pacific, most major markets ended in the red. Australia's All Ordinaries lost 0.71% and China's Shanghai Composite Index dropped 0.78%. Hong Kong's Hang Seng and Japan's Nikkei 225 lost 1% and 0.4%, respectively. However, India's BSE Sensex gained 0.4%.

In the U.S., futures point to a slightly higher open on Wall Street. In the previous session, the Nasdaq rose slightly, while the Dow slid 0.3% and the S&P 500 declined 0.2%.

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The Indian market ended a volatile session modestly higher on Tuesday, with heavyweights such as Hindustan Unilever, HDFC Bank, TCS, Sterlite, Bharti Airtel, ITC, DLF, Tata Steel, ICICI Bank and Infosys leading the gains.

Tracking lackluster global cues, the 30-share BSE Sensex moved choppily in a range of 20,984- 20,763 before ending up 80 points or 0.38% at 20,932, with 20 of its components edging higher. Likewise, the broader Nifty reversed its early loss to end about half a percent higher at 6,302, while the BSE mid-cap and small-cap indexes gained 0.38% and 0.85%, respectively.

IT, metals, construction, consumer goods and telecom stocks saw strong - buying, while continued profit taking in stocks like Maruti Suzuki, Reliance Infrastructure, ONGC, Tata Power, HDFC, Reliance Industries, Hero Honda Motors, BHEL and Jaiprakash Associates limited the upside.

State-run lender SBI tumbled 4.40% after it announced quarterly profit that lagged estimates. HDFC eased 0.41%, extending its loss for a third consecutive session. ICICI Bank advanced 1.11% after it raised $1 billion from international bond market.

Ramco Systems (up 5%) and Subex (up 12.41%) rallied on bagging new orders. GVK Power and Infrastructure rose 2.63% after it sealed a deal to sell a 21.1% stake in its energy unit GVK Energy to 3i Infrastructure Fund.

SKS Microfinance slumped 4% after it proposed to cut its lending rates to 24% across all states. Coal India fell 1.33%, extending its loss for a second straight session. Central Bank of India shed 0.88% after it tied up with commercial vehicles-maker Asia MotorWorks for financing vehicles.

Himatsingka Seide advanced 3% after the company convened a board meet on November 11 to consider fund raising. Power Grid Corporation jumped 5.5% after the company launched its follow-on public offering.

Tata Teleservices edged up 0.65%, after the telecom company, which has DoCoMo of Japan as its partner, announced a call tariff of just 0.66 paise per second for its 3G mobile services.

Apollo Hospitals (up 0.28%) JK Tyre & Industries (down 0.69%) and Sundram Fastners (up 3.05%) closed mixed after the companies unveiled their quarterly earnings. Shares of oil-marketing companies rose after the state-run companies raised petrol prices. BPCL advanced 0.28%, HPCL gained 0.29% and IOC added 0.67%. Mahindra Satyam gained 2.78%, extending its recent gains, ahead of its quarterly results due next week.

Elsewhere, the stock markets in Japan, China, Hong Kong and Australia closed lower on Tuesday, as the euphoria over the Fed's monetary easing faded and a rebound in the dollar index dragged down base metal and oil prices. Caution ahead of this week's Group of 20 meeting in South Korea also weighed on sentiment to some extent.

Heightened worries about fiscal positions in some euro zone countries and a possible Ireland debt default dragged the euro down against the dollar, while a stronger yen dragged down exporter shares such as Canon.

However, European stocks moved higher, reversing early losses, as companies from Vodafone Group Plc to Adecco SA reported strong earnings. Crude oil futures declined due to strength in the dollar index, while the U.S. index futures pointed to a sluggish start on Wall Street Tuesday morning.

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Wholesale Inventory Growth Far Exceeds Estimates In September

Wholesale inventories in the U.S. increased by much more than expected in the month of September, according to a report released by the Commerce Department on Tuesday, with the increase due in large part to a jump in inventories of non-durable goods.

The report showed that wholesale inventories increased by 1.5 percent in September following a revised 1.2 percent increase in August. Economists had expected inventories to increase by 0.6 percent compared to the 0.8 percent growth originally reported for the previous month.

A notable increase in inventories of non-durable goods contributed to the stronger than expected growth, with inventories of non-durable goods surging up by 2.8 percent in September due largely to a 14.8 percent jump in inventories of farm products.

Inventories of durable goods also contributed to the overall growth, rising by 0.7 percent. The increase was partly due to a 3.0 percent increase in inventories of miscellaneous durable goods.

The Commerce Department also said that wholesale sales increased by 0.4 percent in September after rising by 0.5 percent in August. Sales of durable goods edged up by 0.2 percent, while sales of non-durable goods rose by 0.6 percent.

With inventories increasing at a much faster rate than sales, the wholesale inventories/sales ratio
inched up to 1.18 in September from 1.17 in August. Nonetheless, the ratio remains below the 1.22 seen in September of 2009.

Next Monday, the Commerce Department is due to release a separate report on total business inventories, which include wholesale inventories as well as inventories at manufacturers and retailers. Business inventories are expected to rise by 0.6 percent in September, matching the increase seen in August.