US & World Daily Markets Financial Briefing 22-10-2009

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Mixed Earnings May Increase Anxiety of Traders

The major U.S. index futures are pointing to a lower opening on Wednesday, with apprehensions about recovery and some mixed earnings reports dampening sentiment. In reaction to the muted outlook, commodity prices have turned lower. The oil space may see some volatility ahead of the release of the EIA's oil inventory report. Traders may also closely watch the Fed's Beige Book to read between lines, as they are confronting an uncertain economic outlook.

U.S. stocks declined on Tuesday, as a lukewarm housing report stirred the hornet's nest, re-igniting concerns about the economic recovery. The markets largely ignored upbeat earnings from some bellwether companies and succumbed to profit taking following the recent run-up. The major averages, which climbed to fresh highs for the year in the previous session, opened lower and saw a steady decline throughout the morning. After bottoming out by the mid-session, the indexes recouped some of their losses but still ended moderately lower.

The Dow Industrials retreated 50.71 points or 0.50%, but held above the 10,000 level, ending the day at 10,042. The Nasdaq Composite ended down 12.85 points or 0.59% at 2,164, while the S&P 500 Index receded 6.85 points or 0.62% to 1,091.

Twenty-four of the thirty Dow components ended the session lower, with the decline spearheaded by Boeing (down 2.92%), DuPont(down 2.17%), Home Depot (down 2.39%) and Alcoa (down 1.99%). On the other hand, Caterpillar, which reported better than expected third quarter results and upwardly revised its guidance for the full year, rallied 3.04%.

Among the sector indexes, the Dow Jones Utility Average fell 1.49% and the Dow Jones U.S. Basic Materials Average slipped 1.02%. The NYSE Arca Biotechnology Index declined 2.91%, the Philadelphia Oil Service Index receded 1.59% and the NYSE Arca Gold Bugs Index declined 2.38%. The NYSE Arca Securities Broker/Dealer Index slid 1.39% compared to a 1.66% drop by the S&P Retail Index and a 1.23% decline by the Philadelphia Housing Sector Index. However, the NYSE Arca Airline Index gained about 1%, and helped by a nearly 5% rally by Apple the NYSE Arca Computer Hardware Index rose 2.26%.

On the economic front, the Commerce Department's housing starts report showed a smaller-than-expected 0.5% month-over-month increase in starts to 590,000 in September. Although housing starts have bounced back from their all time lows in April, they were down 28% from the year-ago period. On a mildly positive note, single-family starts rose a solid 3.9%. However, building permits, an indicator of future housing activity, declined 1.2%, probably in nervous reaction to the November 30 deadline for the first time home buyers credit.

Producer prices fell 0.6% month-over-month in September and core producer prices edged down 0.1%. The decline in the headline number was primarily due to a 2.4% drop in energy prices. However, with commodity prices rising in October, the deflationary trend is likely to reverse in the coming months.

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Bay Street Stocks Turn Notably Lower

Canadian stocks fell on Wednesday, experiencing a notable drop in the final hour of trading. The decline pulled the market away from its best level in nearly a month.

The S&P/TSX Composite Index fell 96.10 points or 0.83% to close at 11,442.02.

Healthcare stocks declined 2.2%. Biovail and MDS both dropped about 1.4%.

Technology stocks fell 1.7%. Blackberry-maker Research in Motion declined 1.5% on the session.

Financials lost 1.4% to drag the market lower. CIBC lost 1.9%, Toronto-Dominion dropped 1.7% and Scotiabank declined 1.8%.

Manulife dropped 2.5% as the stock was initiated at Sector Perform at National Bank.

In other corporate news, First Quantum gained 5.1%. According to Bloomberg, the company is considering seeking arbitation involving its dispute with the Congolese government, which backed out of a $553 million copper project with First Quantum last week.

Canadian National Railway dropped 1% after the company reported net income of C$461 million or C$0.97 per share for the third quarter, compared to C$552 million or C$1.16 per share in the year-ago quarter. Rival Canadian Pacific has slipped 0.7%.

Ivanhoe Energy added 1.1% after the company announced the appointment of David Dyck as President and CEO of Ivanhoe Energy Canada.

SemBioSys Genetics plunged 7.7% after the company announced it will acquire a 10% stake in Advitech.

Canadian Oil Sands dropped 2.6% after the stock was downgraded to Underweight from Equal Weight.

Potash is scheduled to report third quarter earnings before the bell tomorrow. The fertilizer maker is forecast to report earnings of $0.81 per share, compared to EPS of $3.93 a year ago. Revenues are expected to drop more than 65% to $1.06 billion.

Canadian retail sales data for August is due at 8:30 a.m. ET tomorrow. A rise of 0.1% is forecast, compared to a drop of 0.6% in July. Excluding autos, sales are expected to increase 0.2% after falling 0.8% in July.

Currency, Commodity Futures

Crude oil futures are trading down $0.51 at $80.86 a barrel after rising $2.25 to $81.37 a barrel in Wednesday's session. The price increase came amid a drop in the value of dollar and the release of the EIA's weekly inventory report, which showed that distillate fuel and gasoline inventories fell by 0.8 million barrels and 2.3 million barrels, respectively in the week ended October 16th.

The report also showed that crude oil stockpiles rose by 1.3 million barrels to 339.1 million barrels, remaining above the upper boundary of the average range for this time of the year. Refinery capacity utilization averaged 82.9% over the four weeks ended October 16th compared to 84% in the previous week.

Gold futures, which rose $5.90 to $1,064.50 an ounce in yesterday’s session, are currently moving down $5.60 at $1,059.10 an ounce.

On the currency front, the U.S. dollar is trading at 91.19 yen compared to the 90.972 yen it fetched at the close of New York trading on Wednesday. Currently, the U.S. dollar is trading at $1.4993 against the euro compared to yesterday's $1.5016.

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Stock markets across the Asia-Pacific region fell on Thursday, weighed down by the late-session retreat on Wall Street overnight. With the economic data from China offering little upside surprise, investors chose to take further profits.

The Japanese market lost further ground as investors expressed caution ahead of the earnings season. The benchmark Nikkei 225 dropped 66 points or 0.64% to 10,267, although it closed well off the day's lows.

Banking stocks fell following recent gains, while shipping stock Mitsui O.S.K fell 2.42% and Kawasaki Kisen gave up nearly 3% as China's economic growth left little upside surprise. Japan Airlines snapped a three-day winning streak and ended down 1.57% on reports it has sought 50-billion yen in debt relief from Development Bank of Japan.

Toshiba advanced 3.30% on reports it may report a consolidated operating profit of 1-2 billion yen for the April-September period. Likewise, Honda Motor added 1.80% on reports it may post a $660 million half-yearly operating profit.

China's key benchmark Shanghai Composite Index, which covers both A shares and B shares, dropped 19 points or 0.62% to 3,051 on concerns inflationary pressures and possible monetary tightening may derail economic recovery.

A government report showed that China's annual GDP growth rose to 8.9% in the third quarter from 7.9% in the April-June period, meeting analysts' forecasts. Meanwhile, deflation eased in September, with consumer prices falling only 0.8% from a year earlier compared with the 1.2% drop in August.

The Hong Kong market recouped some of its initial loss to finish moderately lower. The benchmark closed at 22,211, down 108 points or 0.48%, dragged down by telecom and property stocks. Investors shrugged off the positive economic data from China.

The Australian market fell as investors paused for earnings to catch up with recent gains. The benchmark S&P/ASX 200 index closed at 4,813, down 26 points or 0.53% and the All Ordinaries index dropped 27 points or 0.57% to 4,819.

Lend Lease led the real estate trusts lower, dropping nearly 4%. Westfield Group fell 2.14% and Stockland fell by around 2%. Among banks, National Australia Bank fell 1.54% and ANZ slipped 1.30%, while Common Wealth Bank and Westpac Banking ended on a positive note. Insurer AMP fell 2.79% after its third-quarter inflows declined to $103 million.

BHP Billiton edged down 0.43% on reports it may face a credit downgrade if it makes a full-cash funded bid for Potash Corp. of Saskatchewan Inc. Its rival Rio Tinto, however, gained 0.30%. Gold miner Lihir Gold rose 0.63%, but Newcrest Mining fell 1.72% after reporting a 5% drop in first-quarter gold production.

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European Stocks May Retreat

The European markets may see a gap-down opening on Thursday as a late-session sell-off following a wider-than-expected loss from Boeing and negative analysts' comments dragged U.S. stocks lower on Wednesday.

After surging to a new one-year high on the back of a build-up in weekly inventories, light sweet crude oil for December delivery is now trading modestly lower at near $81 a barrel.

Cues from Asia are also not encouraging. The markets across the Asia-Pacific region fell on Thursday as economic data from China offered little upside surprise. Investors fear that the rally since March may have outpaced economic and earnings growth.

The Dow futures are currently - trading down 9 points after online auctioneer eBay forecast fourth-quarter results at the lower end of predictions.

On the economic front, investors eye retail sales data from the United Kingdom and current account figures from Eurozone. Across the Atlantic, investors are likely to focus on the weekly customary jobless claims report from the Labor Department as well as the Conference Board's monthly report on leading economic indicators.

On Wall Street, the major averages ended Wednesday's session just off their worst levels of the day amid mixed earnings news and negative comments from influential financial analyst Dick Bove, which contributed to a substantial sell-off in financial stocks. The Federal Reserve's latest economic commentary indicating an essential standstill in the labor market also prompted the day's late session profit taking. The Dow and the S&P 500 fell by around 0.9% each, while the Nasdaq slipped 0.6%.

In corporate news, Credit Suisse Group reported Thursday that its third-quarter net income was CHF 3.304 billion, compared to last year's loss of CHF 1.597 billion.

British pharma giant GlaxoSmithKline Plc said that its cervical cancer drug Cervarix received a recommendation from U.S. Centers for Disease Control and Prevention or CDC.

ThyssenKrupp AG is is talks with Greek authorities to decide the fate of its Hellenic Shipyards, reports suggest.

COLT Telecom Group said its revenues for the three months ended 30 September 2009, declined to €400.1 million from €420.7 million in the prior-year period.

LM Ericsson Telephone Co. reported third-quarter net income of SEK 0.8 billion, down 74% from last year's SEK 2.9 billion

Petrofac in its interim management statement said as the year progresses it is increasingly confident that the group will deliver earnings growth for the full year of at least 20%.

Anglo American Plc reported that third-quarter copper production increased 13.4% to 168,500 tonnes, compared to the third quarter of 2008. Iron ore production increased 15.7% to 11.9 million tonnes as the Sishen jig plant continued to ramp up to full production.

National Express Group Plc said its board anticipates the Group's normalized pre-tax profit for the current year to be slightly below its prior expectations.

The European markets rose on Wednesday, as better-than-expected quarterly earnings from Morgan Stanley cheered investor sentiment and firmer crude oil prices lifted energy stocks.

The FTSEurofirst 300 index of pan-European blue chips closed 0.45% higher, while the narrower DJ Stoxx 50 index rose 0.68%. Around Europe, the U.K.'s FTSE 100 index rose 0.28%, France's CAC 40 index advanced 0.05% and Germany's DAX index added 0.37%.

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eBay traded lower in Wednesday's after hours session after it reported a drop in its third quarter profits to 27 cents per share from 38 cents per share last year. The company's adjusted earnings were 38 cents per share, ahead of the 37 cents per share consensus estimate. Revenues were down about 1% year-over-year to $2.2 billion. For the fourth quarter, the company expects adjusted earnings of 30-32 cents per share on revenues of $2.2 billion to $2.3 billion. Analysts estimate earnings of 40 cents per share on revenues of $2.26 billion.

General Electric may gain ground after its unit GE Oil & Gas announced that it has been awarded a competitive bid valued at $400 million to deploy advanced LNG for the development of Gorgon by Chevron.

Logitech is expected to be in focus after it announced that its second quarter sales declined 25% year-over-year to $665 million. The company's net income fell to 11 cents per share from 39 cents per share last year. For the third quarter, the company estimates sales of $575 million to $595 million compared to the $622.86 million consensus estimate.

Marshall & Iisley is likely to see activity after it announced that it has priced its offering of 136 million shares at $5.75 per share. The company expects to generate net proceeds of $750 million from the offering.

Terex could move in reaction to its announcement of a loss of 95 cents per share for its third quarter compared to net income of 96 cents per share last year. The recent quarter's results included a charge of 18 cents per share. Net sales fell 51.2% to $1.23 billion. Analysts estimated a loss of 34 cents per share on revenues of $1.31 billion.

Equifax may see activity after it reported a decline in third quarter earnings to 47 cents per share from 56 cents per share last year, as revenues declined 7% to $451.9 million. The company's adjusted earnings were 57 cents per share, above the mean analysts' estimate of 55 cents per share. The company guided fourth quarter earnings to 53-58 cents per share compared to the 56 cents per share consensus estimate.
QLogic Corp. may show weakness after it reported that its second quarter earnings fell to 14 cents per share from 20 cents per share last year. On an adjusted basis, the company reported earnings of 21 cents per share. Revenues declined 23% to $131.5 million. Analysts, on average, had estimated earnings of 18 cents per share on revenues of $125.7 million.

Amgen moved lower in Wednesday's after hours session despite reporting an increase in its third quarter earnings to $1.36 per share from $1.05 per share last year even as sales fell 2% to $3.8 billion. The company's adjusted earnings were $1.49 per share. The Street had estimated earnings of $1.49 per share on revenues of $3.79 billion. The company raised its full year earnings guidance to $4.90-$5.05 per share from its earlier estimate of $4.80-$4.95 per share, above the consensus estimate of $4.88 per share.

Novellus is expected to see activity after it reported that third quarter sales fell 29.3% to $176.9 million. The company reported a net loss of 4 cents per share compared to a net loss of 1 cent per share last year. The company's adjusted loss was 3 cents per share. Analysts estimated a loss of 4 cents per share on revenues of $172.43 million.

F5 Networks could move in reaction to its announcement that its fourth quarter revenues rose 2% to $175.1 million. The company's non-GAAP earnings were 50 cents per share, higher than 40 cents per share last year, with the company attributing the growth to the continuation of the trend toward more normal customer spending patterns. For the first quarter, the company expects non-GAAP earnings of 47-49 cents per share on revenues of $182 million to $187 million. Analysts estimate earnings of 41 cents per share on revenues of $163.91 million.

Lam Research may move to the upside after it reported September quarter revenues of $318.5 million, lower than $440.36 million last year, while analysts estimated revenues of $287.52 million. The company reported a profit of 13 cents per share compared to 7 cents per share last year. On an ongoing basis, the company reported a profit of 3 cents per share.

Trucker Knight Transportation is likely to be in focus after it reported a decrease in its third quarter earnings to 16 cents per share from 19 cents per share last year, as revenues declined to $173.1 million from last year's $209.7 million. Analysts estimated a profit of 16 cents per share on revenues of $164.6 million.

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