US & World Daily Markets Financial Briefing 19-11-2010

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Stocks Posting Modest Losses In Mid-Morning Trading

Stocks are down by modest margins in mid-morning trading on Friday, with traders doing some profit taking following yesterday's rally while looking towards overseas news including a move by China to curb runaway economic growth.

The major averages have all seen choppy movement in recent dealing as they bounce around near session lows. The Dow is currently down 48.67 points or 0.4 percent at 11,132.56, the Nasdaq is down 11.25 points or 0.5 percent at 2,503.15 and the S&P 500 is down 5.63 points or 0.5 percent at 1,191.06. Traders have looked overseas amid a light day on the economic front in the U.S. The People's Bank of China stated that it would raise the reserve ratio by 50 basis points, effective November 29th, in an effort to manage its surging growth by limiting the flow of cheap cash in its economy. Meanwhile, at a European Central Bank conference in Germany, Federal Reserve Chairman Ben Bernanke said that China's efforts to under-value its currency are hampering the global recovery, while he defended his own decision for additional Fed stimulus in the U.S.

The Fed chief argued that further quantitative easing measures are necessary to lower unemployment, which would in turn backstop the value of the dollar as the growth of the U.S. economy returns to normal levels.

In other global news, investors continue to watch Ireland amid speculation that the emerald isle is coming closer to accepting a bailout package to deal with its debt problems.

With earnings season winding down, computer maker Dell Inc. (DELL) said that its third quarter profit more than doubled from last year, as revenues surged and margins improved amid strong corporate demand and solid supply-chain execution. The company's quarterly earnings came in above analysts' expectations.

H.J. Heinz Co. (HNZ) reported second-quarter net income that beat estimates by 2 cents, while its revenues fell short of estimates. Ann Taylor Stores Corp. (ANN) posted adjusted third-quarter net income and revenues that topped projections along with its fourth quarter and full-year guidance.

Sector News

Oil service, housing and utility stocks are among the day's most heavily sold sectors. The 1 percent decline by the Philadelphia Oil Service Index comes as the price of oil has dropped by $1.04 to $80.81 a barrel amid concerns about lower demand from China.

Banking stocks are also trading lower, pulling the KBW Bank Index down by 0.8 percent. The decline has the index on pace for its lowest close in three weeks.

Meanwhile, gains by electronic storage stocks are helping to offset some of the downside in the other market segments. The NYSE Arca Disk Drive Index is up by 0.8 percent but remains in a recent trading range.

Stocks Driven By Analyst Comments

Sunpower (SPWRA) is trading lower after being downgraded by Wedbush Morgan from Neutral to Underperform. The broker also lowered its price target on shares from $11 to $7. The stock is down by 6.7 percent, sinking to a two-month intraday low.

Patterson-UTI Energy Inc. (PTEN) is also under pressure after Dahlman Rose dropped its rating on the stock from Buy to Hold. The stock is posting a loss of 1.2 percent, slipping to a three-week intraday low.

On the other hand, Nice Systems (NICE) is posting a notable gain after HSBC Securities raised its rating on the stock from Neutral to Overweight. The price target was raised from $37 to $41. Shares are up by 1.8 percent, bouncing back further off this week's six-week closing low.

Other Markets

In overseas trading, stock markets in the Asia-Pacific region ended on a mixed note on Friday. Japan's benchmark Nikkei 225 Index inched up 0.1 percent, while Hong Kong's Hang Seng Index edged down by 0.1 percent.

Meanwhile, the major European markets remain down by varied margins. The German DAX Index and the French CAC 40 Index are down by 0.5 percent and 1 percent, respectively, while the U.K.'s FTSE 100 Index is down by 1.4 percent.

In the bond markets, treasuries are little changed, with the yield on the benchmark ten-year note holding at 2.893 percent.

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TSX May Edge Down At Open Amid Flat Commodities

Toronto stocks may edge down at open Friday after a big rally in the previous session following higher commodities prices. Meanwhile, China today said it would hike the reserve ratio requirements for its banks.

The People's Bank of China today said the reserve ratio would go up by a further 50 basis points on November 29, in an effort to control its spiraling inflation that had hit a two-year high of 4.4% last week. The move also cemented speculation that the nation will raise its key interest rates soon to check inflation.

On Thursday, the S&P/TSX Composite Index surged 212.18 points or 1.68% to 12,870.01 as commodities surged after fears over Ireland's debt situation eased.

The price of crude oil edged down amid China's credit tightening move. Crude for December was down $0.33 to $81.52 a barrel.

The price of gold was paring its prior session's gains, with gold for December edging down $4.50 to $1,348.50 an ounce.

In corporate news from Canada, construction and infrastructure development company Aecon Group said a group led by Aecon has been awarded a C$279 million contract by the Toronto Transit Commission to complete the first leg of the Toronto-York Spadina Subway Extension.

Mineral mining company Romarco Minerals said its shares will commence trading on the TSX at market open on Friday, November 19 under the symbol "R" after getting delisted on the TSX Venture Exchange at market close on Thursday, November 18. The stock closed Thursday at C$2.440, gaining 1.24%.

Insurer Manulife Financial, at its annual Institutional Investor Day in Toronto today, will present its strategic direction and objectives to increase net income to C$4 billion in 2015 and improve return on common shareholders' equity to 13% by 2015.

News services provider Thomson Reuters Corp. said it has acquired Pangea3, a legal process outsourcing provider serving corporate legal departments and law firms worldwide.

Natural gas firm Perpetual Energy said it has, through a series of three transactions, disposed certain assets in northeast Alberta for combined gross proceeds of $40.0 million.

Oil and gas firm Forent Energy reported a wider third quarter net loss of C$0.51 million compared to C$0.46 million prior year. However, loss per share remained same at C$0.01.

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The major European averages are moving to the downside on Friday, with the French CAC 40 Index and the German DAX Index moving down 0.60% and 0.27%, respectively, while the U.K.’s FTSE 100 Index is receding 1.08%.

In economic news, Germany’s Federal Statistical Office showed that producer price index rose 4.3% year-over-year in October following 3.9% growth in the previous month. Economists had expected a producer price inflation rate of 4.1%.

U.S. Economic Reports

Federal Reserve Chairman Ben Bernanke has launched a strong defense of the central bank's new asset purchase program amid a barrage of criticism at home and abroad. He argued that more monetary easing was necessary to bring down high unemployment in U.S., even as he admitted there were limits to what can be achieved by the central bank alone.

"On its current economic trajectory the United States runs the risks of seeing millions of workers unemployed or underemployed for many years," Bernanke said in prepared remarks for delivery at a banking conference in Frankfurt. "As a society, we should find that outcome unacceptable."

The Fed's new $600 billion bond buying program - the printing of fresh money to buy up government debt - has sparked condemnation from around the world, with many emerging economies claiming the stimulus will weaken the dollar and flood their economies with speculative hot money. Germany's finance minister Wolfgang Schaeuble blasted the Fed's decision as "clueless."

Stocks in Focus

Earnings

Dell (DELL) reported third quarter non-GAAP earnings of 45 cents per share, higher than 23 cents per share last year. Revenues rose 19% to $15.39 billion. Analysts estimated earnings of 32 cents per share on revenues of $15.76 billion.

Foot Locker (FL) reported third quarter earnings of 33 cents per share compared to a loss of 4 cents per share last year, which included a charge of 14 cents per share. Sales rose 5.4% to $1.28 million. Analysts estimated earnings of 17 cents per share on revenues of $1.22 billion.

Marvell Technology (MRVL) said its third quarter non-GAAP net income rose to 45 cents per share from 35 cents per share last year. Net revenues rose 20% to $959 million. The consensus estimates had called for earnings of 43 cents per share on revenues of $848.59 million.

Salesforce.com (CRM) said its third quarter non-GAAP earnings rose 14% year-over-year to 32 cents per share. Revenues climbed 30% to $429 million. Analysts estimated earnings of 31 cents per share on revenues of $410.46 million. The company raised its 2011 revenue guidance to $1.647 billion -$1.649 billion, while it estimates non-GAAP earnings of $1.18-$1.19 per share. The consensus estimates call for earnings of $1.18 per share on revenues of $1.61 billion.

Blue Coat Systems (BCSI) reported second quarter non-GAAP earnings of 38 cents per share compared to 29 cents per share last year. Net revenues rose 1% to $121 million. Analysts estimated earnings of 37 cents per share on revenues of $121.03 million. For the third quarter, the company expects earnings of 33-39 cents per share on revenues of $121 million to $128 million. The Street estimates earnings of 40 cents per share on revenues of $126.54 million. The company also announced that its board has approved the buyback of up to $50 million of its common stock.

Dress Barn’s (DBRN) first quarter non-GAAP earnings rose to 63 cents per share from 38 cents per share last year. Net sales rose 77% to $713.3 million. Analysts estimated earnings of 62 cents per share on revenues of $702.66 million. The company reaffirmed its full year earnings guidance of $2.05-$2.15 per share, surrounding the consensus estimate of $2.10 per share.

Intuit (INTU) reported a loss of 12 cents per share on a non-GAAP basis for its first quarter compared to a loss of 10 cents per share last year. The company’s revenues rose to $532 million from $474 million last year. Analysts estimated a loss of 12 cents per share on revenues of $520.45 million. The company reiterated its full year revenue guidance, which calls for revenues of $3.74 billion to $3.84 billion, while analysts estimate revenues of $3.80 billion.

Autodesk (ADSK) said its third quarter non-GAAP earnings rose to 32 cents per share from 26 cents per share last year, in line with the consensus estimate. Revenues rose 14% year-over-year to $477 million, exceeding the $471.10 million mean analysts’ estimate. For the full year 2011, the company expects non-GAAP earnings of $1.27-$1.30 per share on revenues of $1.924 billion to $1.944 billion. Analysts estimate earnings of $1.31 per share on revenues of $1.92 billion.

Gap (GPS) reported third quarter earnings of 48 cents per share, up from 44 cents per share last year. Net sales rose 2% to $3.65 billion. Analysts estimated earnings of 48 cents per share on revenues of $3.58 billion.

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Asian markets open for trading on Friday, the last day of the trading week, ended mixed despite positive cues from Wall Street where the major averages ended with gains on easing debt concerns in Europe and better than expected economic data. Concerns that the People's Bank of China might hike interest rates to cool off its economic growth impacted market sentiment as traders exercised caution and moved to the sidelines. Japanese market, however, managed to end in positive territory with modest gains as weaker yen offset concerns of rate hike.

In Australia, the benchmark S&P/ASX200 Index slipped 11.00 points, or 0.24%, and closed at 4,629 points, while the All-Ordinaries Index ended at 4,718, representing a loss of 5.10 points, or 0.11%.

Light sweet crude oil futures for December delivery ended at $81.65 a barrel in electronic trading, down $0.20 per barrel from previous close at $81.85 a barrel in New York on Thursday.

Mixed trading was witnessed among resource related stocks amid concerns about possible rate hike by China. BHP Billiton slipped 0.43%, Rio Tinto edged down 0.12%, Fortescue Metals shed 0.45%, Gindalbie Metals was down 0.26%, and Minara Resources lost 1.28%. Gindalbie Metals and Oz Minerals remained unchanged from previous close. However, Macarthur Coal managed to end in positive territory with a gain of 2.68%, Mincor Resources advanced 0.57% and Murchison Metals surged up 4.72%.

Oil related stocks also displayed mixed trading. Santos Ltd slipped 0.87%, Origin Energy shed 0.38% and Oil Search Ltd declined 0.75%. However, Woodside Petroleum added 0.07% and ROC Oil gained 2.63%.

Banks ended in negative territory on concerns about global economy. ANZ Bank slipped 0.40%, Commonwealth Bank of Australia fell 1.43%, National Australia Bank fell 1.23% and Westpac Banking Corp. was down 0.83%. Investment banking company Macquarie Group edged down 0.11%.

In Japan, the benchmark Nikkei 225 Index closed up 8.76 points, or 0.1%, to 10,022, while the broader Topix index of all First Section issues also rose 0.71 point, or 0.1%, to 869.

Light sweet crude oil futures for December delivery ended at $81.65 a barrel in electronic trading, down $0.20 per barrel from previous close at $81.85 a barrel in New York on Thursday.

Brokerage stocks ended in positive territory with modest gains. Matsui Securities surged up 3.39%, Nomura Holdings gained 1.63%, Daiwa Securities Group advanced 0.75% and Mizuho Securities added 0.50%.

Mixed trading was witnessed among automotive stocks. Toyota Motor Corp. gained 1.56%, Mazda Motor climbed 1.72% and Mitsubishi Motor Corp. surged up 2.61%. However, Honda Motor Corp. slipped 0.48% and Suzuki Motor was down 1.15%.

Trading companies also displayed mixed trading. Itochu Corp. gained 1.43%, Sumitomo Corp. advanced 0.63% and Marubeni Corp. edged higher by 0.19%. However, Mitsubishi Corp. ended in negative territory with a loss of 0.19% and Sojitz Corp. slipped 0.66%.

Year-end profit taking by foreign funds dragged the Indian market sharply lower on Friday. Despite positive Asian cues, the 30-share BSE Sensex moved choppily in negative territory all through the day before ending down 345 points or 1.73% at 19,585, while the broader Nifty lost 108 points or 1.81% to end at 5,890.

Among the other markets in the region, China's Shanghai Composite Index added 23.11 points, or 0.81% to close at 2,889, Jakarta Composite Index in Indonesia advanced 47.14 points, or 1.28%, to close 3,725, Taiwan Weighted Index gained 22.67 points or 0.27% to close at 8,306.and Seoul Composite Index in South Korea ended in positive territory with a gain of 13.10 points, or 0.68%, at 1,941. However, Hong Kong's Hang Seng Index ended in negative territory with a loss of 31.68 points, or 0.13%, at 23,605.71, and the Strait Times Index in Singapore slipped 17.85 points, or 0.56%, to close at 3,197.

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Dollar Giving Back Recent Gains Versus Euro

The dollar was uncertain Friday morning after China's central bank hiked its reserve requirements -- another measure designed to cool off its economy.

The buck lost ground to the euro but was only slightly weaker against the sterling and yen.

The People's Bank of China will raise the reserve ratio by 50 basis points later this month in an effort to step up liquidity management and appropriately control credit and loans.

Meanwhile, Fed Chairman Ben Bernanke was in Europe responding to criticism that the US central bank's latest round of asset purchases was designed to weaken the dollar.

He argued more monetary easing was necessary to bring down high unemployment in U.S., and that the best way to support the dollar was with economic growth.

"The best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in a context of price stability in the United States," Bernanke told a European Central Bank conference in Germany.

The dollar fell further versus the euro amid speculation that Ireland is prepared to accept a massive sovereign debt bailout and allow an emergency fund to backstop its banking system.

The buck slipped to $1.3725 against the euro, moving back toward a 10-month low near $1.43 set earlier this month.

Germany's producer price inflation accelerated in October from the previous year, the Federal Statistical Office said on Friday.

The producer price index rose 4.3% year-on-year in October, faster than a 3.9% growth in the previous month. Producer prices increased for the seventh consecutive month. Economists had expected inflation to rise to 4.1%.

The dollar was steady near $1.6000 against the sterling, after fighting back from some overnight losses.A lack of direction versus the yen left took the dollar to Y83.45, near yesterday's monthly high of Y83.77. There is no first-tier economic data on tap from the United States today

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