US & World Daily Markets Financial Briefing 15-09-2010

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Stocks Turn Mixed After Seeing Early Weakness

Stocks have partially recovered from early weakness and are mixed in mid-morning trading on Wednesday, as the markets are digesting tepid data on New York State manufacturing activity and national industrial production.

The major averages are currently lingering near the unchanged line, well off their lows for the session. While the Dow is up 20.13 points or 0.2 percent at 10,546.62, the Nasdaq is down 0.18 points or less than 0.1 percent at 2,289.59 and the S&P 500 is down 0.59 points or less than 0.1 percent at 1,120.51.

Contributing to the early weakness was a report from the New York Fed showing that its general business conditions index fell to 4.1 in September from 7.1 in August, although a positive reading indicates continued growth in the manufacturing sector. Economists had expected the index to edge down to a reading of 6.4.

Peter Boockvar, equity strategist at Miller Tabak, said, "Bottom line, lackluster remains the adjective for describing our recovery and the inventory boost to manufacturing is key to watch if its petering out."

"Today is the 1st September industrial number out and we need to see more to reach any definitive conclusions," he added.

The initial downside also came as the Federal Reserve reported that that industrial production edged up by 0.2 percent in August, which was lower than the 0.3 percent increase projected by economists.

The Federal Reserve also said that the capacity utilization rate edged up to 74.7 percent in August from a revised 74.6 percent in the previous month. Capacity utilization had been expected to rise to 75.0 percent from the 74.8 percent that had been reported for July.

In global economic news, Japanese authorities intervened in the currency exchange market for the first time since 2004 to halt the strengthening of the Yen against the U.S. dollar.

Japan's Finance Minister Yoshihiko Noda didn't specify the amount of intervention, which helped to launch the dollar back above 85 yen after yesterday's fresh fifteen-year low of 83.07 yen.

On the corporate front, packaged food giant Kraft Foods said it plans to deliver at least 5 percent organic revenue growth and earnings per share growth in a range between 9 and 11 percent.

Sector News

Most sectors are showing lackluster movement in morning trading amid the lack of conviction in the wake of the uninspiring economic reports.

Healthcare provider and computer hardware stocks are seeing some buying interest, while weakness is visible among semiconductor and defense stocks.

The Philadelphia Semiconductor Index is down by 1.2 percent, pulling back off of the one-month closing high set in the previous session.

Stocks Driven By Analyst Comments

Oil and gas drilling firm Rowan is trading higher after being upgraded by analysts at UBS from Neutral to Buy. The stock is up by 1.9 percent and is on pace for a four-month high.

Meanwhile, Nokia is under pressure after being downgraded by Citigroup from Hold to Sell based on peer firm valuation. Shares are currently down by 0.8 percent and are pulling back further off of Monday's three-month closing high.

Industrial products firm Tyco is also trading lower after Bank of America lowered its rating on the stock from Buy to Neutral, citing valuation. The stock is down by 2.2 percent, slipping further away from last week's four-month closing high.

Other Markets

Overseas, stock markets in the Asia-Pacific region ended mostly higher on Wednesday. Japan's benchmark Nikkei 225 Index shot up by 2.3 percent, while Hong Kong's Hang Seng Index inched up by 0.1 percent.

Meanwhile, the major European markets are modestly lower. The U.K.'s FTSE 100 Index, German DAX Index and the French CAC 40 Index are all down by roughly 0.3 percent.

In the bond markets, treasuries are little changed after rebounding from early weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.670 percent, nearly flat on the day.

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Bay Street stocks may struggle to sustain recent gains Wednesday morning amid falling energy prices. Also, cues from the global equity market were mixed.

Most Asian markets ended higher, with the Japanese market turning in a particularly strong performance after the government intervened to weaken the yen for the first time since 2004. Meanwhile, European stocks were trading lower.

On Tuesday, the S&P/TSX Composite Index gained for a third session, adding 43.13 points or 0.36% to 12,192.98.

The price of crude oil pulled back from its 4-week high as traders turned cautious ahead of official weekly inventories data from the EIA. Yesterday after the markets closed, the API said U.S. crude inventories were up by 3.3 million barrels in the week ended September 10, sharply contrasting analysts' expectation for a 2.6 million barrel draw-down. Crude for October was down $1.50 $75.30 a barrel.

Meanwhile, the price of gold holding on to its previous session's smart gains even as the U.S. dollar was trading firm. Gold for December edged down $3.50 to $1,268.20 an ounce.

According to media reports, China's state owned Sinochem Corp. will not make a bid to rival BHP Billiton's offer for fertilizer maker Potash Corp.

Last month, BHP made a hostile $130 per share bid to Potash Corp.

In corporate news from Canada, metals mining company First Quantum Minerals said that it has commenced legal action against all subsidiaries of Eurasian Natural Resources Corp. plc in relation to the Kolwezi tailings project in the Democratic Republic of Congo.

Interior design technology solutions provider 20-20 Technologies Inc. reported lower third quarter net income of $0.8 million or $0.04 per share, compared to $1.0 million or $0.06 per share in the year-ago quarter.

Forestry products company West Fraser Timber said it would double its quarterly dividend to $0.06 per share, from the previous qaurtely dividend of $0.03 per share. The Company also announced a new $125 million capital spending program which is expected to be carried out over the next 18 months.

Electronic manufacturing services company Adeptron Technologies said it has appointed Trent Carruthers as its interim CEO. Carruthers has been senior vice president at Adeptron since January 2009 and joined the company in 2004.

RockBridge Resources said that it has started diamond drilling operations for mineral samples on its property located near southern Newfoundland.

In economic news, Statistics Canada said manufacturing sales decreased 0.9% in July to $44.3 billion. Motor vehicle manufacturing sales fell 8.0% in July, reflecting larger-than-usual production declines at several plants during the month. Weaknesses were also seen among paper products and furniture and related products. However, sales were 15.5% higher than their low reached in May 2009.

From the U.S., the Federal Reserve Bank of New York said its general business conditions index fell to 4.1 in September from 7.1 in August, although a positive reading indicates continued growth in the manufacturing sector. Economists had expected the index to edge down to a reading of 6.4.

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Indian Market Extends Uptrend For Seventh Session

Positive data on exports, indirect tax collections and reports of advance tax payments by companies lent support to the Indian market on Wednesday. Shrugging off lackluster global cues, the 30-share BSE Sensex rose to a fresh 32-month high of 19,555 before finally ending up about 155 points or 0.80% at 19,502. Seventeen of its components closed in the green.

Likewise, robust FII inflows lifted the broader Nifty up by about 65 points or 1.13% to 5,861. Data showed that FIIs have bought over Rs.8,300 crore worth of shares on a net basis in the past six sessions.

With the action largely confining to frontline stocks, second-line stocks underperformed their counterparts by a wide margin. The BSE mid-cap and small-cap indexes closed mostly unchanged, and in the broader market, declining shares outpaced gaining ones by 1702 to 1253 shares.

While most analysts remain bullish on the Indian economy, they point out that the market is in the overbought zone and investors should exercise caution at current levels.

Heavyweight Reliance Industries rose 2.30% after it reportedly sought 25% higher price for its natural gas produced from the eastern offshore Krishna-Godavari or KG Basin. State-run oil explorer ONGC gained 1.14% on the buzz that it may consider a bonus issue and a stock-split. However, oil marketing companies like BPCL, HPCL and IOC slipped about half a percent each.

Automaker Tata Motors touched a 52-week high of Rs 1,077.20 before paring gains and ending 2.86% lower on profit taking. The company said it has posted a 29% rise in its global vehicle sales for August.

Utility vehicles manufacturer Mahindra & Mahindra rose about a percent after rating agency CRISIL revised its rating outlook on long-term bank facilities of the company to 'positive' from 'stable'.

FMCG giant Hindustan Unilever slipped 0.38% after its second-quarter advance tax payment reportedly dropped around 18% year-over-year.

IT stocks witnessed firm buying interest, after better-than-expected U.S. data on retail sales and business inventories eased concerns about faltering growth in the world's largest economy. Bellwether Infosys gained 2.49% and Wipro rose 2.25%. TCS added 2.18% after it entered into a multi-year deal with North American grocery retailer SUPERVALU for a full services engagement.

In the metal pack, Tata Steel advanced 1.11% after it decided to invest Rs.1,350 crore in a Canadian JV to secure its iron ore supplies. Aluminum maker Hindalco Industries gained 1.61% on reports that is has paid second-quarter advance tax of Rs 140 crore this year versus Rs. 70 crore last year. Steel maker SAIL added 2.08% after it entered into a 50:50 joint venture with Indian Railways arm RITES to build a wagon-making unit.

With the market on a roll and experts predicting more FII allocation to Indian equities, brokerage stocks rallied across the board. India Infoline (up 1.92%), Reliance Capital (up 2.63%), Geojit BNP Paribas (up 3.11%)and Edelweiss Capital (up 4.57%) were some of the prominent gainers.

Corporation Bank, which said it would open up to 1,000 branches over the next five years, ended up 1.81%. Property developer D B Realty edged up 0.39% after it bought a 100% stake in L&T Bombay Developers Pvt.

Power utility player CESC declined 0.69% after it signed a pact with an Australian firm to secure its coal supplies. Cement stocks like ACC (down 1.14%), and Grasim (down 0.11%) weakened on reports that they have paid lower advance taxes for the second quarter this year.

Elsewhere, most Asian stocks rose on Wednesday, led by Japan, after Japan's monetary authorities intervened in the currency market for the first time in six years, pushing down the value of the yen by over 2% against the dollar. However, China's Shanghai average fell 1.34% on the buzz that the government may announce new measures to curb property prices.

European stocks showed modest losses in early trading, dragged down by drugmakers, and the Dow futures fluctuated as investors looked ahead to a slew of economic data related to manufacturing, export & import prices, industrial production and customary oil inventory to assess the pace of economic recovery.

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The French market is falling in afternoon trading Wednesday, led by banks. The market shrugged off firm cues from most Asian economies and reflected weak sentiment in other major European countries.

Crude for October delivery is trading lower by $1.70 at $75.10 per barrel on the New York Mercantile Exchange ahead of the weekly inventory data from the Energy Information Administration. Gold is dipping $3.3 at $1268.4 an ounce.

In economic news, in the U.K., number of people claiming Jobseeker's allowance rose 2,300 in August from July to reach 1.47 million in the first monthly increase since January, the Office for National Statistics said. Economists were expecting a fall of 3,000.

Meanwhile, Eurozone's employment remained unchanged sequentially in the second quarter, a report by Eurostat showed. According to another report, Eurozone annual inflation slowed from a 20-month high in August, on the back of lower prices for communication and recreation & culture.

The CAC 40 opened slightly higher at 3,776, but has been in negative territory for most part of the session. The index is currently losing 0.78%.

Lender Credit Agricole is leading the decliners by falling 3%. BNP Paribas is down 1.5%, Dexia is losing 1.2% and Societe Generale is dipping 1.1%.

Heavy construction firm Vinci is falling 1.9%, while peer Bouygues is down 0.1%. Drug maker Sanofi-Aventis is down 0.7%.

Media firm Lagardere and Vivendi, telecom equipment maker Alcatel Lucent, utility GDF Suez, Air France-KLM, hotel group Accor and oil giant Total are declining notably.

Car manufacturers are witnessing upward momentum. Peugeot is rising 3.9% and Renault is adding 2.2%. Machinery and equipment firm Alstom is rising 2.1%.

Elsewhere in Europe, the U.K.'s FTSE 100 is losing 0.36% and the German DAX is dipping 0.59%.

Across Asia/Pacific, most major markets ended higher. Australia's All Ordinaries added 0.72%, Japan's Nikkei 225 climbed 2.34% and India's BSE Sensex gained 0.80%.However, China's Shanghai Composite Index dropped 1.34%.

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Pall Corp. (PLL) could be in focus after it reported that its fourth quarter pro forma earnings rose to 72 cents per share from 57 cents per share last year. Sales rose 4.1% to $678.6 million. Analysts estimated earnings of 64 cents per share on revenues of $671.02 million. For fiscal 2011, the company expects pro forma earnings in the range of $2.35-$2.55 per share, while analysts estimate earnings of $2.31 per share.

Savient Pharma (SVNT) could rally after the company said the FDA approved KRYSTEXXA, its treatment for chronic gout in adult patients.

Monolithic Power Systems (MPWR) may see some buying interest after Standard & Poor’s announced that the company will replace Micrus Endovascular (MEND) in the S&P SmallCap 600 Index after the close of trading on September 17th. Micrus is being acquired by Johnson & Johnson (JNJ).

MasterCard (MA) is also likely to trade higher after it announced that its board has approved a stock buyback program to buy up to $1 billion of its Class A common stock in open market transactions.

On the other hand, Sonic Corp. (SONC) receded in Tuesday’s after hours session after the company reported a 6.4% drop in its system-wide same store sales. The company also said it expects to open 40-50 new franchise drive-ins in 2011 and also sees a sequential improvement in its same store sales throughout the year.

Steel Dynamics (STLD) lost over 2% in Tuesday’s after hours session after it said it expects third quarter earnings to be in the range of 5-10 cents per share compared to 30 cents per share in the year-ago period. The company attributed to the weakness to reduced margins within its steel segment due to lower per ton selling values. Analysts estimate earnings of 21 cents per share for the quarter.

RealNetworks (RNWK) may move in reaction to its announcement that it has acquired Canadian social games company Backstage Technologies.

Google (GOOG) could also be in focus after reports quoted the company’s CEO Eric Schimdt as saying that the company plans to introduce social networking elements in its core offering. The move is seen as an aim at social netw

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