US & World Daily Markets Financial Briefing 13-10-2010

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Stocks Seeing Solid Gains In Mid-Morning Trading

Stocks are up by notably margins in mid-morning trading on Wednesday, helped by upbeat quarterly earnings results from a number of bellwether firms, including chipmaker Intel (INTC).

The major averages have seen choppy movement in recent dealing and remain near session highs. The Dow is currently up 81.02 points or 0.7 percent at 11,101.42, the Nasdaq is up 17.85 points or 0.7 percent at 2,435.77 and the S&P 500 is up 7.40 points or 0.6 percent at 1,177.17.

The upside has come as the markets feed on healthy earnings news, with Intel saying that its third quarter profit rose 59 percent from last year based on revenue and margin improvements. The company's quarterly earnings came in above analysts' expectations as did its revenues.

Additionally, railroad operator CSX Corp. (CSX) said that its third-quarter profit soared 43 percent over last year, reflecting strong volume and sales growth. Quarterly earnings and sales figures also topped Wall Street forecasts.

JPMorgan Chase & Co. (JPM) also reported third-quarter net income of $1.01 per share, easily topping expectations for $0.88 per share for the quarter. Total revenues declined by 29 percent and missed expectations.

Meanwhile, Chevron Corp. (CVX), the second largest U.S. oil firm, said that it expects its profit for the third quarter to be lower than the previous quarter due to a weaker U.S. dollar and higher expenses.

On the economic front, the Labor Department reported that import prices fell 0.3 percent in September, with the decrease largely due to a drop in fuel prices. Prices excluding fuel rose 0.3 percent. Export prices rose 0.6 percent during the month.

The Treasury Department will release its monthly treasury budget for September at 2:00 p.m. ET. Economists expect the treasury budget to show a deficit of $33.5 billion for the month.

In other global economic news, a report released by the Cabinet Office in Japan revealed that core machinery orders in Japan jumped a seasonally adjusted 10.1 percent in August compared to the previous month. That was much better than analyst expectations for a 3.9 percent decline.

A separate report released by the Government in China revealed that the country's trade surplus fell to $16.9 billion in September from $20 billion in August. The decrease was mainly due to a slower rate of increase in exports, which rose 25.1 percent from a year ago.

Import growth slowed to 24.1 percent from 35.5 percent. Nonetheless, the high trade surplus is likely to add more pressure from the U.S. to let the Chinese currency appreciate more freely.

Sector News

Railroad stocks have more than offset yesterday's losses, surging higher on the day in response to the strong earnings from CSX. The Dow Jones Railroads Index is up by 3 percent and has set its best intraday level in more than two years.

Gold stocks are also turning in strong performances, driving the NYSE Arca Gold Bugs Index up by 2.4 percent. The upward move comes as the price of gold has surged up by $14.30 to $1,361.00 an ounce, extending its recent record run-up.

Oil service, airline, and steel stocks are also seeing notable gains, among most other sectors, while modest weakness is visible among healthcare provider stocks.

Stocks Driven By Analyst Comments

Progress Software (PRGS) is trading higher after being upgraded at Longbow from Neutral to Buy. The stock is up by 2.4 percent, rising to an all-time intraday high.

Alcatel-Lucent (ALU) is also seeing strength after analysts at Jefferies boosted their rating on the stock from Underperform to Buy. Shares are currently up by 3 percent, climbing to a nine-month intraday high.

Meanwhile, Continental Resources (CLR) is under pressure after CapitalOne Southcoast dropped its rating on the stock from Add to Neutral. The stock is down by 2 percent, pulling back further off of Monday's three and a half month closing high.

Other Markets

Overseas, stock markets in the Asia-Pacific region ended mostly higher. Japan's benchmark Nikkei 225 Index gained 0.2 percent, while Hong Kong's Hang Seng Index surged up by 1.5 percent.

The major European markets are also seeing strength on the day. The U.K.'s FTSE 100 Index is up by 1.4 percent, while the German DAX Index and the French CAC 40 Index are both up by 1.9 percent.

In the bond markets, treasuries are showing modest weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.458 percent, posting a gain of 3.6 basis points.

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TSX Poised To Extend Gains At Open Wednesday

Toronto stocks are poised for decent gains at the opening bell Wednesday amid firm commodities prices and positive cues from the global equity markets. The latest batch of encouraging earnings reports from the US might also lift trader sentiment.

While the price of gold was hovering near its record high, copper surged to a 27-month peak and oil advanced near its 5-month high.

Meanwhile, the Canadian dollar rose to its highest level in 7 months against its US counterpart amid a relatively solid housing report.

On Tuesday, the S&P/TSX Composite Index rose to a fresh 2-year high, adding 40.05 points or 0.32% to 12,575.64, after the U.S. officials hinted on more monetary easing measures before long.

The price of crude oil moved up near its 5-month high amid firm global equities and weak U.S. dollar. Crude for November was up $1.10 to $82.77 a barrel.

Earlier today, the IEA upwardly revised its global oil demand forecast by 300,000 barrels per day, or mbd to 86.90 mbd for 2010 on much stronger-than-expected 3Q10 readings, notably in the OECD. For 2011, the agency revised up the growth forecast by a similar 0.30 mbd on average to 88.20 mbd. The report came in after a day the OPEC upped its forecast for world oil-demand growth by 100,000 bpd to 85.59 million bpd for 2010.

The price of gold moved up back near its record high, with gold for December gaining $13.40 to $1,359.10 an ounce.

Bank stocks may be in play after JP Morgan reported a 23% jump in its third quarter profits at $4.42 billion, or $1.01 per share. It earned $3.59 billion, or $0.82 a year ago. Analyst were expecting the company to report Analyst were expecting the company to report net earnings of $0.90 per share.

In corporate news from Canada, Oil and gas industry data services provider Pulse Seismic said it entered into a C$10 million seismic data library licence agreement with a major oil and natural gas firm. Year-to-date seismic data library sales moved up to $23.5 million, compared to $23.4 million recorded in 2009.

Bio-pharmaceutical company Theratechnologies slipped into the red in third-quarter, reporting net loss of C$3.27 million or C$0.05 per share, compared to a net income of C$5.82 million or C$0.10 per share in the year-ago quarter.

Telecommunications industry services provider EXFO Inc. swung to profit in fourth quarter, reporting net earnings of $5.0 million or $0.08 per share compared with a net loss of $1.2 million or $0.02 per share last year. Analysts were expecting the company to report earnings of $0.05 per share for the quarter.

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Stocks Gain In France

The French market is rising in afternoon trading Wednesday, as investors derived confidence from optimism that the Fed would announce quantitative measures to support economic recovery.

Crude for November delivery is rising $1.20 at $82.87 per barrel and gold is higher by $13.7 at $1360.4 a troy ounce.

In economic news, data released today by the French statistical office Insee showed that French consumer prices dropped 0.1% in September from the previous month following an increase of 0.2% in August.

Eurozone industrial production rose 1% month-on-month in August following a revised growth of 0.1% in July, Eurostat said. Economists had forecast a 0.8% increase.

An index measuring consumer confidence in the U.K fell to an 18-month low of 53, Nationwide said. The September score was well below analyst expectations for a score of 59 following the revised 62 in August.

Separately, data from the Office for National Statistics showed that the number of people claiming jobseeker's allowance in the U.K. rose 5,300 to 1.47 million in September. This is the second consecutive monthly gain in the number of claimants. Economists had forecast an increase of 4,500.

The Conference Board leading economic index for the U.K. rose 0.1% in August from July following the 0.2% increase in the previous month.

The CAC 40 opened at 3,769 and has been rising nearly consistently. The index is currently adding 1.78%.

Chipmaker STMicroelectronics is leading the gainers by adding 3.5% after Intel announced encouraging quarterly numbers in the U.S.

Department stores operator PPR is rising 3.4% and insurer Axa is advancing 3.3%. Oil & gas services firm Technip and hotel group Accor are up 3.3% and 3.1%, respectively.

Peugeot is rising 2.5% and Renault is up 0.5%. Drugmaker Sanofi-Aventis is gaining 2.5%. Heavy construction firms Vinci and Bouygues are rising 2.4% and 1.4%, respectively.

Banks are trading mixed. Natixis is gaining 1.4% and BNP Paribas is rising 1%. However, Societe Generale is down 1% and Credit Agricole is losing 0.8%.

Elsewhere in Europe, the UK's FTSE 100 is gaining 1.45% and the German DAX is rising 1.88%.

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Asian Markets End In Positive Territory

Asian markets open for trading on Wednesday ended the trading session in positive territory, lifted by positive cues from Wall Street where the minutes of the FOMC meeting reaffirmed Federal Reserve's resolve to provide required assistance to support economy. Buoyant results revealed after the markets closed by bellwether Intel Corp. and better than expected machinery orders from the world's third largest economy also lifted market sentiment.

In Australia, the benchmark S&P/ASX200 Index added 1.70 points, or 0.04%, and closed at 4,620 points, while the All-Ordinaries Index ended at 4,691, representing a gain of 4.80 points, or 0.10%.

On the economic front, results of a new survey conducted jointly by the Westpac Bank and the Melbourne Institute revealed that consumer confidence in the country rebounded in October following the Reserve Bank of Australia's surprise decision to keep rates unchanged for a fifth straight month. The Westpac-Melbourne Institute consumer confidence index rose 3.3% to 117.0 from 113.2 in the previous month. This follows a sharp 5% fall in September. A reading above 100 means optimists outnumber pessimists. The index is now 15% above its long-term average. Commenting on the latest reading, Bill Evans, chief economist of Westpac Bank said that the rebound in confidence was expected after the RBA's decision to retain interest rates at 4.5%. Markets had been expecting a quarter percentage point hike after a string of positive economic reports.

Resource related stocks ended in positive territory. BHP Billiton edged up 0.20%, Rio Tinto advanced 0.96%, Fortescue Metals surged up 5.00%, Gindalbie Metals climbed 2.50%, Iluka Resources gained 2.31%, Macarthur Coal rose 3.18%, and Oz Minerals was higher by 2.54%.

Mixed trading was witnessed among oil-related stocks. Woodside Petroleum declined 0.73% and Santos shed 0.55%. ROC Oil Ltd remained unchanged from previous close. However, Oil Search Ltd bucked the trend and ended in positive territory with a gain of 0.37% and Origin Energy advanced 0.37%.

Banks ended in negative territory offsetting the gains from resources stocks. ANZ Bank declined 0.80%, Commonwealth Bank of Australia slipped 0.85%, and National Australia Bank edged down 0.59%. However, Westpac Banking bucked the negative trend and managed to end in positive territory with a gain of 0.14%. Investment banker Macquarie Group ended in negative territory with a loss of 1.10%.

In Japan, the benchmark Nikkei 225 Index rose 14.87 points, or 0.16%, to 9,403.51, while the broader Topix index of all First Section issues was down 1.95 points, or 0.24%, to 823.

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On the economic front, a report released by the Cabinet Office revealed that core machinery orders in Japan jumped a seasonally adjusted 10.1% in August compared to the previous month. That was sharply higher than analyst expectations for a 3.9% monthly decline following the 8.7% increase in July. The report further noted that, on an annual basis, core machinery orders surged 24.1% - again blowing past expectations for an 8.7% increase following the 15.9% gain in the previous month.

A statement released by Bank of Japan revealed that overall bank lending in Japan was down 1.8% on year in September, standing at 394.2 trillion yen following the 2.0% annual contraction in August. Including trusts, bank lending also declined 1.8% on year, standing at 456.8 trillion yen following the 1.9% decline in the previous month. Adjusted bank lending was down 1.6% on year after falling an annual 1.7% a month earlier.

All Nippon Airways, the leading airline company in the country, gained 2.46%.

Mining and exploration company Inpex Corp. ended in positive territory with a gain of 0.69%.

Stocks of non-ferrous metals ended in positive territory. Sumitomo Metal Mining climbed 2.57%, DOWA Holdings gained 1.38%, Toho Zinc Ltd rose 1.97%, Sumitomo Electric Industries added 0.69% and Toyo Seikan Kaisha Ltd edged higher by 0.28%.

Large banks ended in negative territory on concerns about the strengthening local currency against the US dollar and the euro. Sumitomo Mitsui Financial Group declined 2.19%, Resona Holdings plunged 5.41%, Mitsubishi UFJ Financial Group fell 1.99% and Mizuho Financial was down 4.00%. After ending down notably in the previous session, the Indian market bounced back sharply on Wednesday on hopes of more inflow of funds into higher-yielding emerging-market assets after the minutes from the U.S. Federal Reserve's September meeting indicated that the Fed will take further action to shore up the global recovery. Besides, strong global cues following a surprise rise in Japanese machinery orders for August, reports showing a rebound in Australian consumer confidence for October and Intel Corp's upbeat fourth-quarter earnings outlook also contributed to the bullish mood.

The dollar came under broad selling pressure versus major world currencies today, after the Fed signaled it was ready to pump more cash into the U.S. economy.

The BSE Sensex, which saw some consolidation in recent sessions, rebounded strongly on Wednesday to end up about 485 points or 2.40% at 20,688, with 29 of its components edging higher. The broader Nifty climbed 143 points or 2.35% to 6,234.

Among the other markets in the region, China's Shanghai Composite Index added 19.95 points, or 0.70% to close at 2,861, Hong Kong's Hang Seng Index surged up 335.99 points, or 1.45%, to 23,458, Jakarta Composite Index in Indonesia gained 64.73 points, or 1.82%, to 3,612, the Strait Times Index in Singapore rose 52.80 points, or 1.68%, to close at 3,202, Seoul Composite Index in South Korea was up 8.11 points, or 0.43%, to close at 1,876, and Taiwan Weighted Index edged higher by 16.44 points or 0.20% to 8,107.

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