US & World Daily Markets Financial Briefing 19-03-2010

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Stocks Seeing A Moderate Pullback In Mid-Morning Trading

After an initial move to the upside, stocks have turned lower over the course of morning trading on this quadruple witching Friday. The move comes as the markets have focused on corporate news, while the upcoming vote on healthcare reform and some overseas credit concerns are providing some of the other undercurrents in today's session.

With no significant news on the economic front, corporate developments have taken stage today, as a Chinese newspaper has reported that Google Inc. (GOOG) has decided to cease operations in China beginning in early April. The web giant is expected to make the announcement on Monday, one day after the company's employees receive their year-end bonuses.

"We've gotten news saying Google will leave China on April 10th, but this piece of news has not yet been confirmed by the Google side," an unidentified Google business agent reportedly told China Business News.

Tensions between Google and China began earlier this year, when the company began claiming it had been the victim of hacking attacks in China and announced that it would no longer censor its search engine in China if the attacks continued.

Also on the corporate front, Smartphone maker Palm Inc. (PALM) reported a third quarter loss of $0.61 per share after the bell Thursday, compared to the loss of $0.86 per share last year. The consensus estimate was for a loss of $0.42.

Looking forward, Palm forecast fourth quarter revenues of about $150 million, well below analyst estimates for revenues of about $306 million.

Meanwhile, uniforms and business services provider Cintas Corp. (CTAS) posted third quarter net income of $0.32 per share, topping Wall Street expectations for $0.30 per share. Revenues for the third quarter were $861.8 million, also beating projections.

UK-based Lloyds Banking Group (LYG) also said that the full year 2010 will be profitable on a combined businesses basis, and the company's stock has subsequently gained nearly 10 percent on the news.

The major averages have seen further downside in recent trading, falling to new lows for the session. The Dow is currently down 25.47 points or 0.2 percent at 10,753.70, the Nasdaq is down 14.98 points or 0.6 percent at 2,376.30 and the S&P 500 is down 4.69 points or 0.4 percent at 1,161.13.

Sector News

Oil service stocks are some of the morning's worst performers, as reflected by the 2.8 percent retreat by the Philadelphia Oil Service Sector Index. With the loss, the index is pulling back further off of the two and a half month closing high set on Wednesday.

The index is being dragged lower by shares of Global Industries (GLBL), which have slipped by 2.9 percent and set a more than one-month intraday low. The weakness in the sector comes as the price of crude oil for April delivery is down by $0.22 to $81.98 a barrel.

Computer hardware, airline and semiconductor stocks are also under pressure, giving back recent gains, while health insurance stocks are seeing notable upside ahead of this weekend's vote on the healthcare reform bill.

The Morgan Stanley Healthcare Payor Index is currently up by 1.7 percent after setting a fresh two-month intraday high in earlier dealing.

Stocks Driven By Analyst Comments

DirecTV (DTV) is retreating in mid-morning trading after being downgraded at Citigroup from Buy to Hold. The stock has slipped by 2.1 percent, sinking to its lowest intraday price in nearly three weeks.

Humana Inc. (HUM) is also moving lower following a downgrade by Argus Research to Hold from Buy. Shares are currently down by 0.7 percent, pulling back off of yesterday's six and a half week closing high.

On the other hand, Tetra Tech (TTEK) is on the rise after being upgraded to Buy from Neutral at Janney Montgomery Scott. The stock has gained 5 percent, breaking out to its best intraday level in nearly a month.

TSX May Dip Further On Rate Hike Concerns

Canadian stocks may open lower Friday on easing commodities prices. Also the just released inflation data, which came in above the economists' expectations, could increase speculation for a sooner-than-expected rate hike and in turn put pressure on the stocks, in general. Moreover profit taking at higher levels as the main index was hovering near its calendar year high could also put pressure.

On Thursday, the S&P/TSX Composite Index was down 60.65 points or 0.50% to 12,040.01, after having closed at its calendar year high of 12,100.66 in the previous session.

The price of oil eased for the second day, slipping $0.52 to $81.68 a barrel and bullion eased $3.5 to $1,124 an ounce.

Oil and gas industry services provider Flint Energy Services turned to profit reporting fourth quarter net income of C$0.32 per share, compared to a loss of C$4.44 per share in the prior year period.

Transportation services provider Student Transportation said it has acquired Wilkerson Transportation Co. Inc., and expects this to add annualized revenues of $3.0 million.

Retail stores operator Dollarama Inc. announced the appointment of Michael Ross as new Senior Vice President, CFO and Secretary, effective April 12.
 
African Barrick Gold plc announced that it will price its initial public offerings of 101.08 million new Ordinary Shares to institutional investors in the UK and elsewhere at 575 pence per Ordinary Share. The net proceeds, expected to be approximately £547 million, will be used to repay loans outstanding to Barrick Gold Corp. and its subsidiary companies.

Gold explorer Eldorado Gold reported net income of $0.26 per share for the full year 2009, compared to $0.46 per share for the full year 2008.

Gold producer Aurizon Mines turned to profit reporting fourth quarter net earnings of C$0.06 per share, compared to a net loss of C$0.03 per share last year.

Agnico-Eagle Mines announced a private placement of senior secured notes aggregating $600.0 million.

Iron ore mining company Baffinland Iron Mines said that its President and CEO, Gordon McCreary, has resigned as an executive of the Company, effective immediately, and will continue as a director of the company.

Base and precious metal miner Anvil Mining swung to profit in fourth-quarter reporting net income of $0.08 per share, compared to a loss of $2.12 in the prior year quarter.

Footwear retailer Sterling Shoes Income Fund reported lower net income for the fourth quarter at C$0.82 per share, compared to C$0.90 per share for the year-ago quarter.

Infrastructure sector services provider Armtec Infrastructure Income Fund reported earnings from operations of C$6.0 million for the fourth quarter, down from C$11.7 million in the year-ago quarter. However, earnings per unit improved to C$0.40 from C$0.36 in the prior year quarter.

Oil and natural gas firm Iteration Energy reported narrower fourth quarter net loss of C$0.04 per share, compared to net loss of C$1.48 per share last year.

In brokerage updates, UBS hiked its price target on Agrium to $83 from $72 and Raymond James upped MacDonald Dettwiler price target to C$44 from C$42.

In economic news, Statistics Canada reported that consumer prices rose 1.6% in the 12 months to February, following a 1.9% jump in January. The growth in inflation surpassed economists' expectations for a rise of 1.4%, putting pressure on the Bank of Canada to hike interest rates sooner than expected.

In other report the agency said retail sales rose 0.7% in January to $35.70 billion, largely due to sales in home improvement products.

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The major Asian markets ended higher in Friday’s session, as traders focused on the positive U.S. economic reports. The Malaysian market was an exception, however, with the KLSE Composite Index ending down 0.41%.

Japan’s Nikkei 225 average opened higher, with some buying evident in the morning session. However, the index moved sideways in the afternoon, ending the session up 80.69 points or 0.75% at 10,825.

Most sectors moved to the upside, with exporters advancing on the yen’s weakness. Fukuoka Financial, Mitsubishi Chemicals, Nippon Light Metal and Taiyo Yuden were among the major gainers in the session. On the other hand, real estate stocks extended their declines. Securities firms also came under selling pressure.

On the economic front, a government report showed that the all industry activity index rose 3.8% month-over-month in January following a 0.2% drop in December. The upside was primarily attributed to strength in the tertiary sector.

Australia’s All Ordinaries ignored a weak start and recovered in early trading, remaining above the unchanged line for the rest of the session to record its fourth straight session of gains. The index closed up 12.40 points or 0.25% at 4,890.

Energy stocks led the advance, with healthcare and consumer staple stocks joining in the rally. However, material stocks showed weakness. Rio Tinto (RTP) receded after it announced it has signed a non-binding joint venture agreement with Chinalco that covers developing an iron ore project in Guinea.

Hong Kong's Hang Seng showed a lack of direction over the course of the trading day, bouncing back and forth across the unchanged line. The index showed a notable move to the upside going into the close, ending the session up 40.15 points or 0.19% at 21,371.

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The major European markets are moving to the upside after ending the previous session modestly lower. The U.K.'s FTSE 100 Index is advancing by 0.7 percent, while the French CAC 40 Index and the German DAX Index are both up by 0.4 percent.

UK-based Lloyds Banking Group Plc is turning in a particularly strong performance after the company said its trading performance for the first 10 weeks of 2010 has been strong against each area of its recent guidance and the banking net interest margin is trending in line with its recent forecast. Lloyds believes that the full year 2010 will be profitable on a combined businesses basis.

In economic news from the region, Germany's producer price index fell 2.9% annually in February, the Federal Statistical Office said. Economists had forecast a decline of 2.8%. In January, prices fell 3.4%. On a monthly basis, producer prices were flat in February.

Separately, France's Labor Ministry said the monthly wages of all employees rose 0.2% sequentially in the fourth quarter, slower than the 0.5% increase in the third quarter. The ministry confirmed a preliminary report released on February 12. A year ago, wages grew 0.3% in the final quarter.

On an annual basis, wages were up 1.9% in the final three-month period of 2009. That also matched the preliminary estimate.

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Palm tumbled in Thursday’s after hours trading after it reported third quarter revenues of $349.93 million compared to $90.62 million last year, while its non-GAAP adjusted revenues were $366 million. The company’s non-GAAP net loss was 61 cents per share, narrower than the 86 cents per share loss reported for the year-ago period. Analysts estimated a narrower loss of 42 cents per share on revenues of $316.19 million. Although the company said shipments rose 300% year-over-year, sell-through fell 15%.

Cintas edged down modestly in after hours trading after saying its third quarter revenues declined to $861.81 million from $908.64 million in the year-ago period, exceeding the consensus estimate of $853.61 million. The company’s earnings declined to 32 cents per share from 47 cents per share last year. The consensus estimate called for earnings of 30 cents per share. The company maintained its fourth quarter revenue guidance of $870 million to $890 million and its earnings guidance of 30-34 cents per share. Analysts estimate earnings of 33 cents per share on revenues of $878.58 million.

Boston Scientific may gain ground after a FDA Advisory Panel unanimously recommended the approval of an expanded indication for the company’s cardiac resynchronization therapy defibrillators, including the COGNIS CRT-D. The expansion includes the MADIT-CRT trial, which evaluated the ability of these devices to slow the progression of heart failure in patients with asymptomatic or mild heart failure.

Honeywell could see activity after it announced that it has been awarded a $8.4 million 5-year U.S. Army contract for the operation and maintenance of the U.S. President’s Washington-Moscow Presidential Hotline.

Cerner could move to the upside after Standard & Poor’s announced that the company would replace BJ Services (BJS) in the S&P 500 Index. MEDNAX will replace Cerner in the S&P MidCap 400 and MicroStrategy will replace MEDNAX in the S&P SmallCap 600 Index after the close of trading on a date to be announced.

Chesapeake Lodging Trust and Hyatt Hotels are expected to be in focus after the former said it has acquired the 498-room Hyatt Regency Boston for a purchase price of $112 million or about $225,000 per key. Chesapeake Lodging also said it would invest additional capital to renovate the hotel and continue to operate it under the Hyatt Regency flag.

CryoLife may move in reaction to a letter the company sent to the board of Medafor, in which it communicated its intention to withdraw its $2 per share offer for Medafor in 5 business days. The company said the decision was taken in light of the share offer agreement Medafor reached with Magle Life Sciences, which CryoLife believes will have a dilutive impact.

Computer Sciences Corp. is likely to see buying interest after it announced a 5-year extension of its global IT outsourcing agreement with United Technologies. The company noted that the extension adds over $1.5 billion in value to the existing contract. The extension runs through December 2019.

ACE Limited may also be in focus after it said the net after-tax losses in the first quarter for the ACE Group of insurance and reinsurance companies from natural catastrophes would be $125 million, including reinstatement premiums.

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