US & World Daily Markets Financial Briefing 14-09-2010

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While stocks moved mostly lower in early trading on Tuesday, the markets have staged a recovery attempt since then. The major averages have moved well off their worst levels of the day, although they remain currently in the red.

The Dow is currently down 4.55 points or less than 0.1 percent at 10,539.58, the Nasdaq is down 2.09 points or 0.1 percent at 2,283.62 and the S&P 500 is down 1.79 points or 0.2 percent at 1,120.11.

Recently released data from the Commerce Department showed that business inventories rose by 1.0 percent in July following an upwardly revised 0.5 percent increase in June. Inventories had been expected to increase by 0.7 percent compared to the 0.3 percent growth originally reported for the previous month.

In a separate report released before the start of trading this morning, the Commerce Department said that retail sales increased by 0.4 percent in August following a revised 0.3 percent increase in July. Economists had expected sales to edge up by 0.3 percent compared to the 0.4 percent growth originally reported for the previous month.

Excluding a 0.7 percent decrease in sales by motor vehicle and parts dealers, retail sales rose by a more substantial 0.6 percent in August compared to a 0.1 percent increase in July. The increase in ex-auto sales exceeded economist estimates for 0.3 percent growth.

In corporate news, Best Buy (BBY) reported second-quarter net income of $0.60 per share, topping forecasts for $0.46 per share for the quarter. Revenues for the quarter totaled $11.34 billion, up from $11.02 billion in the prior year quarter. Analysts had a consensus revenue estimate of $11.65 billion.

Best Buy also raised its fiscal 2011 earnings guidance to a range of $3.55 to $3.70 per share and set its revenue forecast at $52 billion. Analysts expect the company to report full year earnings of $3.43 per share on revenues of $52.34 billion.

Meanwhile adhesives and specialty chemicals maker H.B. Fuller Co. (FUL) reported third quarter earnings that came in below analysts' expectations along with its quarterly revenue. H.B. Fuller also downwardly revised its fiscal year 2010 revenue outlook.

Sector News

Banking stocks are among the day's worst performers thus far, giving back a portion of yesterday's rally. The KBW Bank Index is down by 1.4 percent, pulling back off of the monthly high set in the previous session.

Profit taking is also contributing to notable weakness among health insurance, housing and steel stocks, which are partly offsetting yesterday's gains.

Meanwhile, substantial strength is visible among gold stocks, boosting the NYSE Arca gold Bugs Index up by 4.8 percent. The advance has propelled the index to its best intraday level in four months.

The strength among gold stocks comes as the price of the precious metal has jumped by $19.60 to $1,266.70 an ounce.

Airline and semiconductor stocks have also shown strong moves the upside, helping to lift the major averages well off their worst levels of the day.

Stocks Driven By Analyst Comments

Campbell Soup (CPB) is trading lower after being downgraded at Goldman Sachs from Neutral to Sell. The broker cited the firm's struggle to grow sales as a reason for the ratings change. The stock is down by 1.5 percent after falling to its lowest intraday level in two months.

On the other hand, medical equipment specialist Hologic (HOLX) is seeing upside after Soleil raised its rating on the stock from Hold to Buy. The stock is up by 2.5 percent and has reached its best intraday price in a month.

Other Markets

Overseas, stock markets in the Asia-Pacific region saw a mixed close on Tuesday. Japan's benchmark Nikkei 225 Index slid by 0.2 percent, while Hong Kong's Hang Seng Index inched up by 0.2 percent.

Meanwhile, the major European markets are showing modest losses. The U.K.'s FTSE 100 Index and the German DAX Index are both down by 0.1 percent, while the French CAC 40 Index is down by 0.2 percent.

In the bond markets, treasuries are showing moderate strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.692 percent, posting a loss of 4.9 basis points.

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TSX May Edge Up At Open Tuesday

Toronto stocks may edge up at open Tuesday amid better-than-expected August retail sales data from the U.S., Canada's largest trading partner, and firm bullion prices.

However, cues from the global equity market were mixed. While most Asian markets ended higher, European stocks were lower after German investor confidence plunged.

On Monday, the S&P/TSX Composite Index gained for a second session adding 52.76 points or 0.44% to 12,149.86.

The price of crude oil pulled back from its 4-week high hit in the previous session, ahead of weekly inventories data. Crude for October was down $0.28 to $76.91 a barrel.

The price of gold moved up amid a mixed dollar, with gold for December adding $13.20 to $1,260.30 an ounce.

In corporate news from Canada, dollar store operator Dollarama Inc. reported lower second quarter net income of C$20.98 million or C$0.28 per share, compared to C$26.58 million or C$0.61 per share in the year ago quarter. Normalized net earnings per share decreased to C$0.37 from C$0.63 last year.

Gold miner Kirkland Lake Gold reported improved first quarter net income of C$3.31 million or C$0.05 per share, compared to C$1.62 million or C$0.03 per share last year. For fiscal 2011, the company guides production to be between 90,000 and 100,000 ounces of gold.

Real estate company Becker Milk Company reported lower first-quarter net income of C$326 thousand or C$0.18 per share, compared with C$472 thousand or C$0.26 per share in the year ago period. The company declared regular dividend of C$0.30 per share.

Diagnostics services provider DiagnoCure, Inc. reported a narrower third quarter net loss of C$1.65 million or C$0.04 per share, compared to a net loss of C$4.06 million or C$0.09 per share in the year-ago quarter.

Bio pharmaceutical company MethylGene Inc. said Donald Corcoran has resigned as President and CEO and as director of the company, effective September 13.

Gaming software solutions provider Chartwell Technology reported wider third-quarter loss of C$1.1 million or C$0.06 per share compared to a net loss of C$475,000 or C$0.02 per share a year ago, mainly due to to a one-time goodwill impairment charge and lower revenues

In economic news, Statistics Canada said capacity utilization rose 1.6% compared to the first three months of year, the fourth consecutive quarterly gain. Industries operated at 76% of the production capacity, official data revealed, beating economists' expectation for an utilization of 74.8%.

Separately, the agency said the number of new motor vehicle sold increased 2.4% to 135,154 units in July, helped by strong volume growth in the truck segment.

From south of the border, the U.S. Commerce Department said that retail sales increased by 0.4% in August following a revised 0.3% increase in July. Economists were expecting sales to edge up by 0.3% compared to the 0.4% growth originally reported for the previous month. Excluding a 0.7% decrease in sales by motor vehicle and parts dealers, retail sales rose by a more substantial 0.6% in August compared to a 0.1% increase in July.

Elsewhere, the ZEW economic research institute said its German economic expectations index fell to -4.3 in September, its lowest level since February 2009.

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Asian Markets End Mostly Higher

Asian markets open for trading on Tuesday ended mostly in positive territory with modest gains but off the highs as traders paused to lock in profit following recent gains and moved to the sidelines awaiting more cues on US economy. The Japanese market ended in negative territory with modest losses as the yen strengthened against the dollar even as optimism about sustaining global economic recovery was in tact.

In Japan, the benchmark Nikkei 225 Index slipped 22.51 points, or 0.24%, to 9,299, while the broader Topix index of all First Section issues was down 2.78 points, or 0.33%, to 835.

Profit taking following recent gains, anxiety over the outcome of the DPJ elections and strengthening of the local currency against the US dollar impacted market sentiment, despite positive cues from Wall Street in the previous session and other neighboring markets in the region.

Securities related stocks ended in negative territory. Daiwa Securities Group slipped 0.57%, Mizuho Securities lost 1.02%, Matsui Securities fell 1.02% and Nomura Holdings was down 1.29%.

Large banks extended mixed on profit taking. Sumitomo Mitsui Financial advanced 1.20%, and Mitsubishi UFJ Financial advanced 0.73%. However, Mizuho Financial slipped 0.73% on huge volumes and Resona Holdings slipped 0.43%

Shipping transport stocks ended mixed on profit taking. Kawasaki Kisen Kaisha slipped 1.28%, and Mitsui OSK Lines lost 1.06%. However, Nippon Yusen bucked the trend and added 0.58%.

In Australia, the benchmark S&P/ASX200 Index added 11.60 points, or 0.25%, and closed at 4,626 points, while the All-Ordinaries Index ended at 4,669, representing a gain of 14.90 points, or 0.32%.

On the economic front, results of a latest survey released by National Australia Bank revealed that business confidence in the country surged in August. The Bank's business confidence index reading for August was 11.0 in August compared to 2.0 in July. Business conditions was flat, NAB said. Its index of the current business climate held at 5.0, unchanged from July.

Light sweet crude oil futures for October delivery ended at $77.15 a barrel in electronic trading, down $0.04 per barrel from previous close at $77.19 a barrel in New York on Monday.

Mining and metal stocks ended in positive territory. BHP Billiton advanced 1.27%, Fortescue Metals added 1.01%, Macarthur Coal surged up 6.71%, Minara Resources edged up 0.61%, Oz Minerals gained 0.71% and Murchison Metals surged up 14.85%. However, Rio Tinto bucked the trend and ended in negative territory with a loss of 0.21%.

Oil related stocks also witnessed mixed trading. Woodside Petroleum slipped 0.16% and Oil Search Ltd declined 0.65%. However, Santos Ltd surged up 3.31% and Origin Energy ended in positive territory with a modest gain of 0.64%.

Mixed trading was witnessed among the banking stocks. ANZ Bank edged up 0.04%, Commonwealth Bank added 0.17%, and National Australia Bank remained unchanged from previous close. However, Westpac Banking ended in negative territory with a loss of 0.09%. Investment banking company Macquarie Group climbed 1.28%.

Firm buying in consumer durable, IT and auto stocks lifted the Indian market higher for a sixth consecutive session on Tuesday, with a bigger-than-expected drop in inflation for August and momentum-based buying on the back of heavy FII inflows bolstering sentiment. Jaiprakash Associates, Sterlite Industries, DLF, HDFC Bank, Bharti Airtel, ONGC and HDFC also rose sharply, contributing to the rise. Shrugging off mixed Asian cues, the 30-share Sensex opened higher at 19,218 and rose to a fresh 32-month high of 19,487 before finally ending up about 140 points or 0.72% higher at 19,347. The broader Nifty climbed 36 points or 0.62% to 5,796.

Among the other major markets open for trading, China's Shanghai Composite Index ended in positive territory with a marginal gain of 0.20 points or 0.01%, at 2,689, and Taiwan's Weighted Index gained 41.30 points, or 0.51%, to close at 8,133. However, Singapore's Strait Times Index bucked the trend and ended in negative territory with a loss of 18.16 points, or 0.59%,to 3,049.

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Stocks Fluctuate In France

The French market is moving across either side of the unchanged line in afternoon trading Tuesday. A slightly more than expected rise in August retail sales in the U.S. mitigated the worries caused by the disappointing investor confidence report from Germany.

Crude for October delivery is trading lower by $0.23 at $76.96 per barrel on the New York Mercantile Exchange, while December gold is adding $13 at $1260.1 an ounce.

In economic news, French annual inflation eased to 1.4% in August from 1.9% in July, data from the statistical office Insee revealed. Consensus forecast was for a 1.5% increase. Month-on-month, consumer prices rose 0.2% after decreasing 0.3% in July.

German investor confidence slumped more than expected in September, according to ZEW Center for European Economic Research, reflecting fears that the blistering growth recorded in the second quarter would not last. The ZEW index of economic sentiment fell to a negative reading of -4.3 from 14.0 in August, its lowest level since early 2009.

Germany's wholesale price inflation increased in August, a report by the Federal Statistical Office showed. The wholesale price index rose 6.4% year-on-year in August, faster than a 5.3% growth in the previous month, increasing for the ninth consecutive month. A year earlier, wholesale prices were down 8.3%.

U.K. consumer price annual inflation remained at 3.1% in August, above the central bank's 2% target, the Office for National Statistics said. Economists had expected the annual rate to slow to 3%.

Meanwhile, the U.K. house prices increased 8.4% in July from the previous year, in line with economists expectations, the Department of Communities and Local Government said. This follows a 9.9% increase in June.

In the Eurozone, seasonally adjusted industrial production remained stable on a monthly basis in July, following a 0.2% fall in June, Eurostat said. Economists had expected an increase of 0.1%.

In Japan, Ministry of Economy, Trade and Industry said industrial production slid a revised 0.2% month-on-month in July, in contrast to a 0.3% increase estimated earlier.

In the U.S., the Commerce Department said in a report that retail sales increased by 0.4% in August following a revised 0.3% increase in July. Economists had expected sales to edge up by 0.3% compared to the 0.4% growth originally reported for the previous month.

After opening at 3,767, the CAC 40 has been swinging between gains and losses. The index is currently losing 0.02%.

Gas utility GDF Suez is losing 2.7% and Air France-KLM is falling 1.8%. Airbus maker EADS is sliding 1.3%. Water utility Veolia Environnement is losing 1%, while peer Suez Environnement is surging 2.8% on an analyst upgrade.

Car maker Renault is down 1.4% and peer Peugeot is slipping 0.5%.

Computer firm Cap Gemini and chip maker STMicroelectronics are each adding 1.4%.

Among lenders, Societe Generale is rising 0.9%. BNP Paribas and Credit Agricole are seeing modest gains, while Dexia is marginally down.

Elsewhere in Europe, the UK's FTSE 100 is slipping 0.09% and the German DAX is losing 0.06%.

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URS Corp. (URS) is likely to be in focus after its board approved an increase and the extension of its common stock repurchase program. The authorization provides for the company to repurchase up to 3 million shares from the period starting January 2nd, 2010 through January 2nd, 2015.

Cliffs Natural Resources (CLF) may see some activity after it updated its full year 2010 North American coal outlook to reflect the contribution from coal operations of INR Energy, which it acquired recently. While it expects an incremental 1 million ton-contribution from the INR unit, sales volume expectations from its legacy coal operations in West Virginia and Alabama were reduced by 0.6 million tons to 2.8 million tons. The company now expects North American coal revenue per ton to be $115-$120, down from its earlier guidance of $110-$115 per ton.

Zumiez (ZUMZ) is expected to see buying interest after it raised its earnings guidance for the third quarter to 25-27 cents per share from 21-24 cents per share, while analysts estimate earnings of 24 cents per share. The company attributed the optimism to expectations for an increase in comparable store sales for the remainder of the third quarter in the mid-single digit range. The company also noted that its comparable store sales in the month-to-date period were up 15.3%.

HB Fuller Co. (FUL) reported that its third quarter net income declined to 38 cents per share from 72 cents per share last year, which included a gain of 24 cents per share. However, net revenues rose 7.4% year-over-year to $338.6 million. The consensus estimates called for earnings of 44 cents per share on revenues of $348.50 million. For 2010, the company expects net revenues of $1.365 billion to $1.361 billion, while analysts estimate revenues of $1.37 billion.

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