US & World Daily Markets Financial Briefing 18-11-2009

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Traders May Stay On The Sidelines Amid Lingering Uncertainty

The major U.S. index futures are pointing to a roughly flat open on Wednesday, as traders digest the latest batch of economic data. While a report from the Commerce Department showed an unexpected decrease in housing starts, analysts have pointed out that the drop came at a time when homebuilders where still facing an imminent expiration of the first-time home buyers tax credit. A separate report from the Labor Department showed a slightly bigger than expected increase in consumer prices, although traders have largely shrugged off the data.

As was the case in the previous session, stocks may show a lack of direction throughout the trading day on Wednesday amid some uncertainty about the outlook for the markets. Following the recent strength in the markets, a number of traders seem to have moved to the sidelines, waiting for more significant catalysts.

U.S. stocks opened Tuesday’s session lower, hurt by lukewarm economic data, but they attempted to stage a recovery in early trading. However, selling pressure reemerged, pushing the major averages to new intraday lows. Thereafter, the markets began moving steadily higher, popping into positive territory in mid-afternoon trading and closing modestly higher.

The Dow Industrials rose 30.46 points or 0.29% to 10,437, it best closing level in over a year. The S&P 500 Index ended at 1,110, up 1.02 points or 0.09%, and the Nasdaq Composite Index advanced 5.93 points or 0.09% to 2,204.

Twenty-two of the thirty Dow components ended the session higher, with Verizon Communications (VZ), Microsoft (MSFT), Merck (MRK), Hewlett-Packard (HPQ), Alcoa (AA) and DuPont (DD) posting gains in excess of 1% each. On the other hand, Home Depot (HD) fell 2.39% and McDonald’s (MCD) receded 1.49%.

Among the sector indexes, the Dow Jones U.S. Basic Materials Average climbed 1.08% and the KBW Bank Index ended up 1.05%. Meanwhile, the S&P Retail Index slid 1.38%, and the Philadelphia Housing Sector Index and the NYSE Arca Securities Broker/Dealer Index declined about 0.9% each.

After breaking above the 1,100 level on Monday, the S&P 500 Index added to its gains on Tuesday. In the eventuality of profit taking emerging, the index may find support around the 1,098 and 1,087 levels.

On the economic front, the industrial production report released by the Federal Reserve on Tuesday showed that industrial production rose 0.1% month-over-month in October compared to expectations for 0.4% growth. The slowdown in industrial production growth compared to the previous month reflected a 1.7% decline in the production of motor vehicles and parts. Mining output fell by 0.2%, while utility output climbed 1.6%. Capacity utilization increased two-tenths of a percentage point to 70.7%.

The Labor Department’s producer price inflation report showed a 0.3% month-over-month increase in producer prices in October, while the core producer price index fell by 0.6%. Economists had estimated a 0.5% increase in total prices and a 0.1% increase in core prices, which exclude food and energy prices. Intermediate good prices rose 0.3%, although they fell 0.2% excluding food and energy.

Meanwhile, the National Home Builders Association’s housing market index remained unchanged at 17 in November, while economists had estimated a 2-point increase to 19. The index measuring sales expectations for the next 6 months rose 2 points to 28, while the indexes gauging current sales conditions and prospective buyer traffic rose 2 points each to 17 and 13, respectively.

However, the association noted that the readings reflect confidence levels that were prevalent at the beginning of the month, when homebuilders were facing the imminent expiration of the $8,000 first-time homebuyer tax credit.

Bay Street Stocks Look To Continue Rally

Canadian stocks will look to build on their best close of 2009 in early trading on Wednesday. Traders will consider data showing Canadian inflation rose for the first time since May as well as gold prices near $1,150.

Statistics Canada reported the consumer price index rose 0.1% in October, marking its first increase in five months. Economists had expected a rise of 0.3%.

Across the border, the U.S. Labor Department showed the consumer price index increased by 0.3 percent in October following an unrevised 0.2 percent increase in September. Economists had been expecting a somewhat more modest increase of 0.2 percent.

On the commodity front, oil rose 45 cents to $79.59 per barrel ahead of the Energy Information Administration's inventory report. Gold is up $6 to $1,145.60 after earlier challenging $1,150.
 
In corporate news, Metro reported that its fourth-quarter net earnings were C$84.4 million, up 16.4% from C$72.5 million for the corresponding quarter last year. Net earnings per share rose 18.5% to C$0.77 from C$0.65 last year.

Niko Resources announced it has reached a deal to Black Gold in transaction worth about $310 million.

On Tuesday, the S&P/TSX Composite Index rallied 117.74 points to finish at 11,630. The index also added more than 100 points on Monday.

Currency, Commodity Futures

Crude oil futures are trading up $0.54 at $79.67 a barrel after rising $0.24 to $79.14 a barrel in Tuesday’s session. After edging up $0.20 to $1,139.40 an ounce in the previous session, gold futures are moving up $6.40 to $1,145.80 an ounce.

On the currency front, the U.S. dollar is trading at 89.184 yen compared to the 88.64 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.4942.

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Indian Market Snaps 3-day Winning Streak

After moving sideways in a tight range throughout the session, the Indian market finally ended modestly lower on Wednesday, weighed down by profit taking amid mixed global cues.

The benchmark BSE closed at 16,999, down 52 points or 0.30% and the S&P CNX Nifty fell 8 points or 0.15% to 5,055. However, second-line stocks witnessed good buying support.

On the BSE, the mid-cap index moved up 0.29% and the small-cap index by 0.80%. The market breadth was fairly positive, with 1598 gainers versus 1166 decliners. Oil/gas, banking and capital good stocks fell notably, while metal, FMCG, IT and realty stocks bucked the declining trend, restricting the losses to some extent.

Reliance Infrastructure(down 3.20%), Larsen & Toubro (down 1.72%), ICICI Bank (down 1.47%), Reliance Industries (down 1.47%), Grasim Industries (down 1.17%), Sun Pharma (down 1.13%), SBI (down 0.88%) and Sterlite Industries (down 0.80%) were some of the prominent losers.

On the flip side, Tata Motors rallied 3.14%, Tata Steel advanced 1.68%, ITC gained 1.61%, Infosys rose 1.54% and Jaiprakash Associates added 1.06%. DLF, Tata Power, Maruti Suzuki, Reliance Communication, Wipro, ONGC and ACC also closed in positive territory.
 
GMR Infrastructure fell 1.46% on reports its unit GMR Energy plans to bid for select ultra mega projects. Wockhardt eased 1.53% despite receiving the final approval from the U.S Food and Drug Administration for marketing its generic version of Nicardipine injections.

IOC declined 1.56% on reports it is losing Rs. 92 crore a day on fuel sales. Exide Industries tumbled nearly 5% on concerns about earnings dilution after the company's board approved a private placement of shares to institutional investors. BHEL slipped 0.19% after it signed an agreement to set up a thermal power plant in Madhya Pradesh.

Prathiba Industries jumped over 18% on heavy volume after it bagged a Rs.294 crore contract from UP Jal Nigam. JSW Steel rallied over 4% on speculation Japan's Nippon Steel is in talks for buying a stake in the company.

JK Lakshmi Cement rose 1.30% on reports it plans to set up a new cement plant in Chhattisgarh. Aban Offshore advanced 2% after it raised Rs 697.5 crore via a qualified institutional share placement.

Shipping stocks advanced, tracking a sharp rise in the Baltic dry index. Great Eastern Shipping rallied nearly 5%, Mercator Lines jumped 7.84%, and Essar Shipping climbed 11.56%.

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The major European markets are moving back to the upside after seeing some weakness in the previous session. The U.K.’s FTSE 100 Index is currently up 0.2 percent, while the French CAC 40 Index and the German DAX Index are both up 0.4 percent.

In the U.K., the minutes of the Bank of England’s November meeting showed that the members were somewhat divided on the increase in the bank’s asset purchase program. Among the nine policy makers, seven voted to raise the size of the asset purchase by 25 billion pounds, while one a member sought a bigger increase and another chose to maintain status quo.

Most members thought that purchases totaling an additional 25 billion pounds would be appropriate given the balance of risks to inflation, the minutes said. The members agreed that any extension to the asset purchase program should last three months.

Additionally, the European Central Bank said the Eurozone recorded a current account deficit of 5.4 billion euros in September, on a working day and seasonally adjusted basis, after registering surpluses in the previous two months. In August, the surplus stood at 0.6 billion euros, smaller than 5.1 billion euro surplus in July.

U.S. Economic News

Consumer prices increased for the third consecutive month in October, according to a report released by the Labor Department on Wednesday, with the continued price growth partly due to a notable increase in energy prices.

The report showed that the consumer price index increased by 0.3 percent in October following an unrevised 0.2 percent increase in September. Economists had been expecting a somewhat more modest increase of 0.2 percent.

Core consumer prices, which exclude food and energy prices, increased by 0.2 percent in October, matching the increase that was seen in the previous month. The modest increase in core prices came in slightly above economist estimates of a 0.1 percent increase.

Meanwhile, the Commerce Department released its report on new residential construction in the month of October, showing that housing starts unexpectedly showed a notable decrease compared to the previous month.

The report showed that housing starts fell 10.6 percent to an annual rate of 529,000 in October from the revised September estimate of 592,000. The drop surprised economists, who had expected starts to edge up to 600,000 from the previous month’s initial estimate of 590,000.

Additionally, the Commerce Department said building permits, an indicator of future housing demand, fell 4.0 to an annual rate of 552,000 in October from the revised September rate of 575,000. Economists had expected building permits to increase to 580,000 from the 573,000 originally reported for the previous month.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended November 13th at 10:30 AM ET.

Crude oil inventories rose by 1.8 million barrels in the week ended November 6th to 337.7 million barrels. With the increase, crude oil stockpiles rose above the upper limit of the average range for this time of the year.

Gasoline inventories increased by 2.5 million barrels and were above the upper limit of the average range, while distillate fuel stockpiles edged up by 0.3 million barrels, remaining above the upper boundary of the average range for this time of year.

Refinery capacity utilization averaged 80.8% over the four weeks ended November 6th compared to 81.1% in the previous week.

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Chico’s FAS (CHS) could be in focus after it reported that its third quarter earnings rose to 13 cents per share from 1 cent per share last year, as sales rose 13% to $446.9 million. The Street had estimated earnings of 7 cents per share on revenues of $414.71 million.

AutoDesk (ADSK) is receding in pre-market trading after it said it expects fourth quarter adjusted earnings of 19 to 24 cents per share on revenues of $420 million to $440 million. Analysts expect earnings of 25 cents per share on revenues of $433.5 million. The company reported third quarter adjusted earnings of 27 cents per share, while revenues declined 31% year-over-year to $416.9 million.

La-Z-Boy (LZB) is likely to see some activity after it reported second quarter adjusted earnings of 12 cents per share, in line with the consensus estimate. Revenues fell 9% to $300.7 million but exceeded the $285 million consensus estimate.

Salesforce.com (CRM) could react to its announcement that its third quarter net income rose to 16 cents per share from 8 cents per share a year ago. Revenues climbed 20% to $331 million. Analysts estimated earnings of 14 cents per share on revenues of $334.58 million. The company also raised its full year earnings estimate to 62-63 cents per share from its earlier estimate of 60-61 cents per share.

Smith International (SII) may be in focus after it said it has priced its previously announced public offering of 28 million shares at $26.50 per share. The company expects the offering to close on or about November 23rd, 2009.

Sysco (SYY) could gain ground after it announced that its board has approved a 4 percent increase in its quarterly cash dividend to 25 cents per share from 24 cents per share.

Coldwater Creek (CWTR) is likely to react to its announcement that its Senior Vice President and CFO Tim Martin is resigning, effective November 25th, 2009. The company named John Hayes, its Senior VP and General Counsel, as its interim CFO.

Concur Technologies (CNQR) could also be in focus after it said its fourth quarter earnings rose to $5.9 million from $5.6 million in the year-ago period. The company’s earnings per share remained flat at 11 cents per share amid 13% revenues growth to $64.8 million. Analysts’ estimates, which typically exclude one-time items, called for earnings of 18 cents per share on revenues of $64.4 million. The company expects first quarter adjusted pre-tax earnings of 27 cents per share.

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