US & World Daily Markets Financial Briefing 11-05-2009

Get our Daily Trade Signals and Grain Newsletter along with a copy of the CBOT Introduction to Agricultural Futures and Options Book for Free! The grain trading professionals at MF Global can guide you in the right direction with your trading. Click here to Get your Free Grain Trading Kit Today

Rally’s Momentum May Be Lost As Traders Search for Clues

In recent trading, the Nasdaq has pulled back off its high for the session, although it is currently posting a modest gain, up 0.92 at 1,739.92. Meanwhile, the Dow remains down 105.62 at 8,469.03 and the S&P 500 is down 12.61 at 916.62.

The major U.S. index futures are pointing to a notably lower opening on Monday. Profit taking may manifest itself in full swing following splendid performances by the markets in the past week. The financial space, which ran up sharply in recent sessions, looks ripe for profit taking in the absence of any other fresh news on the sector. U.K. banking giant HSBC Holdings gave a weak prognostication for the year, which could generate some selling pressure in the space.

A rally in the price of commodities such as oil and gold could stall on belief that the gains may be overdone. The absence of any major economic news could also lead to some uncertainty, giving no clue to traders to gauge the economy’s strength.

U.S. stocks rose again in the week ended May 8th, extending their gains, primarily due to unexpected positive news on the housing and job markets. The encouraging readings generated significant buying interest, with traders picking up stocks on revival hopes. Financial stocks led from the front, while the resource space also saw significant buoyancy.

For the week, the Dow Industrials and the S&P 500 Index were up 4.41% and 5.89%, respectively, while the Nasdaq Composite gained 1.15%.

Among the sector indexes, the KBW Bank Index and the Amex Securities Broker/Dealer Index showed weekly gains of 36.13% and 10.67% for the week. The Amex Oil Index and the Philadelphia Oil Service Index advanced 9.01% and 10.73%, while the Amex Gold Bugs Index ended up 13.93% for the week.

The Amex Airline Index rallied 11.50%, while the Dow Jones Transportation Average rose 6.31% for the week. On the other hand, the Philadelphia Semiconductor Index ended down 3.31%.

On Monday, the major U.S. averages advanced sharply in reaction to the better than expected pending home sales and construction spending data. However, traders focused on the bank stress test results on Tuesday in the absence of any other major catalysts and consequently the indexes ended the session with modest losses.

The markets cheered the positive private sector jobs data released on Wednesday and also expressed relief over the leaks about the stress test results, which suggested no grave threats to the financial system. The major averages ended higher, with the Dow Industrials and the S&P 500 Index ending with notable gains, while the Nasdaq Composite, which remained subdued for the bulk of the session, ended with a modest gain.

On Thursday, uncertainty ruled the roost, putting traders the defensive, with some choosing to take profits ahead of the release of the stress test results. The major averages showed steep losses in the session. However, on Friday, fewer-than-expected job losses reported by the Labor Department led to a rally.

You can now manage your positions directly from your web browser, whether you use PC or Mac.  Test-drive VT Trader™ Web with your free practice account! Click Here

Toronto Stocks Surrender Some Of Recent Gains

Bay Street's main index may give back some of its recent gains on Monday morning as lower commodities could drag resource stocks into negative territory. Markets in Europe are also experiencing weakness and U.S. futures are pointing lower.

The Energy Index could decline after a strong surge last week, with crude oil prices sliding $1.04 to $57.33 in overnight trading. Gold has lost $2.90 to $912.60 and copper has declined 7.35 cents to $2.0725 in early Comex transactions.

On the earnings front, Ivanhoe Energy reported a first-quarter net loss of US$12.3 million or US$0.04 per share, compared to a loss of US$8.5 million or US$0.03 per share in the same quarter last year.

Ensign Energy Services Inc. reported that its first quarter net income was C$72.7 million or C$0.47 per share, compared to C$81.80 million or C$0.53 per share in the year ago quarter.
 
In corporate news, Agrium announced it is substantially increasing its exchange offer to acquire all of the outstanding shares of CF Industries Holdings to $85.20 per CF share.

Meanwhile, CanWest is reviewing options to avoid bankruptcy, according to a report in the Globe and Mail, and is reviewing proposals from up to four investors.

Celtic Exploration announced that its first quarter net loss was C$5.04 million or C$0.12 per share, compared to a loss of C$7.38 million or C$0.20 per share in the year ago quarter.

On Friday, the S&P/TSX Composite Index added 270.94 points or 2.71% to close at 10,237.99. This marks the highest close for the index since October 3.

Click Here

The major European averages are turning in a mixed performance following the previous week’s strong advance. The French CAC 40 Index and the German DAX Index are receding 1.82% and 1.17%, respectively, while the U.K.’s FTSE 100 Index is moving up 0.43%.

On the economic front, the German Federal Statistical Office reported that Germany’s manufacturing turnover fell by 22% year-over-year in real terms in March following a revised 23.7% drop in the previous month. On a monthly basis, retail sales rose 1.5% following a revised 4.8% decline in February.

Another report released by the French Institute of National Statistics and Economic Studies showed that French industrial production fell 1.4% month-over-month in March. Manufacturing output slid 1.1%, with a dip in the production of coke and refined petroleum products, electrical and electronic equipment and machine equipment and other manufacturing items more than offsetting a 1.3% increase in the production of transport equipment. Mining and quarrying output slid 2.9%.

U.S. Economic Reports

The economic calendar for the unfolding week is fairly heavy, with a few key first-tier releases such as the Commerce Department's retail sales report for April, the New York Fed's Empire manufacturing survey for May and the Federal Reserve's industrial production report for April scheduled to be released during the week.

Additionally, traders may focus on the University of Michigan's consumer sentiment index for May, the Labor Department's consumer and producer price inflation reports for April, the weekly jobless claims report and the Commerce Department's trade balance report for March. Apart from these reports, market participants may also pay attention to the Fed speeches scheduled to be delivered during the week, the Labor Department's import and export prices for April and the Commerce Department's business inventories report for March.

In April, retail sales may have benefited from strong performances by discount and drug stores, as consumers seek bargains to meet their pent-up demand. Gasoline prices also perked up in April relative to the previous month. However, motor vehicles sales could see continued weakness. The report assumes importance because the bottoming of retail sales along with a reduction in business inventories are important preconditions to a recovery.

Industrial production for April could show a decline, although the rate of decline is likely to see a slowdown. The regional and the national manufacturing surveys confirmed the same thinking. Capacity utilization is also likely to remain weak, with the lower utilization expected to hurt corporate profits in coming quarters due to the fact that manufacturers' pricing power will mostly be eliminated.

The trade balance report is likely to show the first widening of the deficit since July, as higher oil prices should push up the value of mport bill and the decline in import volumes will slow down. Exports may also show a small retreat. IHS Global Insight believes that the trade deficit is likely to continue to widen over the rest of the year, as the U.S. economy revives sooner than most of its trading partners as a result of which imports revive before exports.

Come Into the LIVE Online Trading Session and Watch Us Make at Least 1 Point ($500 - $2000 a Day). The LIVE Trading Session is Completely FREE! - Sign Up Now here!

The major Asian averages ended Monday’s session on a mixed note, with the underlying sentiment reflecting a lot of caution due to the uncertain outlook. The Australian, the Chinese, the Honk Kong, the Indian, the News Zealand, the Malaysian, the Indonesian and the Singaporean markets closed lower, while the Japanese, the South Korean and Taiwanese markets advanced.

Japan’s Nikkei 225 average opened higher and moved lower by late morning trading amid apprehensions in the minds of traders. Although selling pressure kept the index below the unchanged line for much of the remainder of the session, it managed to close the session with a modest gain.

Financial, pharma, real estate and resource stocks advanced in the session. Mizuho Securities surged up 14.68%. On the other hand, Bridgestone, Clarion and Teijin were among the notable losers. The auto space saw marked weakness, with most stocks in the sector closing with losses. Toyota fell 4.77% on concerns over the company suffering a possible net loss of 550 billion yen in the year ending March 2010.

Australia’s All Ordinaries opened higher and saw some early strength, but it reversed course thereafter and traded below the unchanged line for the rest of the session before closing off the lows of the session. The index ended down 9.10 points or 0.23% at 3,911.

Consumer staple stocks came under significant selling pressure, while energy and healthcare stocks gained ground. In the banking space, ANZ Bank, Commonwealth Bank, National Australia Bank and Westpac receded. Minesrs BHP Billiton and Rio Tinto also traded lower, while gold miners saw some strength.

Here are 10 simple Dos and Don’ts any investor can follow which may contribute to potential for success in trading futures. This FREE guide can provide some of the basic principles that traders inherently live by.

Click Here to Request Your Free Guide!

Crude oil futures are receding $1.70 to $56.93 a barrel after advancing strongly in the week ended May 8th. The commodity climbed $5.43 or 10.21% to $58.63 in the week, which saw oil rise to its highest level since November 11th.

The previous week’s buoyancy was built on the back of better-than-expected economic readings, which cemented hopes of seeing an end to the downturn. Strong U.S. housing reports, better than expected U.S. jobs data and a strong rebound in Chinese manufacturing data encouraged traders to bid up oil.

Last Monday, oil rose sharply, benefiting from the weakness of the U.S. dollar before pulling back modestly on Tuesday. A drop in gasoline stockpiles generated some buying interest in the commodity on Wednesday, as the commodity rose by over $2-a-barrel. Oil rose yet again on Thursday, although modestly, before closing the week with a solid advance on Friday.

Gold futures are moving down $3.50 to $911.40 an ounce. In the previous week, the precious metal climbed $27.30 or about 3% to $914.90 an ounce, primarily due to the dollar weakness.

On the currency front, the U.S. dollar fell against both the yen and the euro in the week ended May 11th. The greenback fell 0.83% against the yen to 98.47 yen, while it declined 2.75% against the euro to $1.3634 a euro, as the common currency strengthened following the release of strong economic readings from Germany and the ECB’s announcement that it will buy covered bonds.

Currently, the U.S. dollar is trading at 97.74 yen and is valued at $1.3581 versus the euro.

Our informative 24”x36” wall chart explores 40 years of historical market data on Crude Oil, Gold and S&P500 markets, and includes historical event call-outs. It’s a great trading and analytic tool for professional and beginner traders.

Sign up here to receive your chart today!

Dish Network reported that its first quarter profit was 70 cents per share compared to 57 cents per share last year. Revenues rose 2.1% to $2.91 billion. Analysts estimated earnings of 57 cents per share on revenues of $2.90 billion. That said, the company lost 94,000 subscribers on a net basis during the quarter.

King Pharma said its first quarter total revenues declined to $429 million from $432 million last year. The company reported a loss of 4 cents per share compared to net earnings of 35 cents per share last year. On an adjusted basis, the company reported earnings of 26 cents per share, significantly below the adjusted earnings of 51 cents per share last year. The consensus estimates had called for earnings of 12 cents per share on revenues of $450.81 million.

Stocks in Focus

AT&T could be in focus after it said it would buy the assets of Verizon Wireless in 79 areas for $2.35 billion. The sale is a regulatory pre-condition for Verizon for its purchase of Alltel. AT&T expects the deal to close in the fourth quarter, while anticipating that it will take less than a year to convert the areas to its own network technology.

U.S. Airways may react to its announcement that it has priced its offering of 15.2 million shares at an offer price of $3.97 per share. The company also said that the pricing of its offering of $150 million worth of convertible senior notes due 2014 from the previously announced $75 million. The company expects net proceeds from the common stock and convertible notes offering of $203 million.

Medtronic and Johnson & Johnson are likely to move in reaction to their announcement that they have settled the royal disputes concerning the licensed use of Palmaz, Schatz and Pinchuk patents by Medtronic, which are related to coronary angioplasty stent design and balloon material patents. According to the agreement, Medtronic paid Johnson & Johnson $270 million to settle the royalty claims and will reflect the charges in its fiscal fourth quarter.

Wells Fargo could also be in focus after it said it raised $8.6 billion through a common stock offering of 392.15 million shares at $22 a share. The proceeds are in excess of the $7.5 billion amount it had planned originally. Wells Fargo was found wanting $13.7 million in capital following the stress tests conducted by the U.S. government.

Another stock that could move in reaction to an offering is CBS Corp. which announced that it has priced a debt offering of $400 million of 8.20% senior notes due 2014 and $350 million worth of 8.875% senior notes due 2019. The company said it would use the net proceeds to fund the company’s pending purchase of its outstanding 7.70% senior notes due 2010 and for general corporate purpose.

Berkshire Hathaway could see some action after reported a steep loss of $1.53 billion for the first-quarter compared to a profit of $940 million last year, hurt by a drop in revenues as well as huge investment and derivative losses primarily on write-downs on investment in ConocoPhillips shares. Excluding investment and derivative gains and losses, operating earnings for the quarter declined to $1.71 billion or $1,100 per Class A share from $1.93 billion or $1,247 per Class A share in the prior-year quarter.

Bank of America is likely to move in reaction to reports that it may be close to selling a majority of its 16.7% investment in China Construction Bank, as it strives to shore up its capital after being found needing $33.9 billion in additional capital.

Investors Hub Services