US & World Daily Markets Financial Briefing 23-04-2009

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Housing Market Report Awaited as Traders Cling to Recovery Hopes

The major averages have been unable to sustain any significant moves in morning trading and are currently mixed. While the Dow is down 3.98 at 7,882.59, the Nasdaq is up 1.33 at 1,647.45 and the S&P 500 is up 0.81 at 844.36.

The major U.S. index futures are pointing to a higher opening on Thursday. As has been the wont in recent sessions, markets are confronted with mixed news. Blue chips technology companies such as Apple  and eBay reported better-than-expected results, while Credit Suisse joined the bandwagon of financial firms that outperformed expectations in the first quarter.

However, markets are likely to take unkindly to the revelations by Bank of America’s CEO Kenneth Lewis that the government forced him to remain silent about the travails at Merrill Lynch. Additionally, reports that General Motors will shut down its plants for about two months could also trigger anxiety over more troubles at the company and its auto part suppliers. Most importantly, the housing market report could play a key role in determining the trading direction of today’s session.

U.S. stocks opened Wednesday’s session lower, dragged down by negative earnings reports. That said, some of the blue chips such as AT&T posted encouraging results, keeping recovery hopes intact. However, the major averages showed indecision throughout the session, reflecting the uncertainty surrounding the economic outlook, before closing in a mixed fashion.

The Dow Industrials ended down 82.99 points or 1.04% at 7,887 and the S&P 500 Index slipped 6.53 points or 0.77% to 844, while the Nasdaq Composite Index gained 2.27 points or 0.14% to close at 1,646.

Twenty-two of the thirty Dow components ended the session lower, with Bank of America (down 5.71%) leading the slide. Other notable decliners included Pfizer, Merck, McDonald’s, Procter-Gamble and Exxon Mobil.

Among the sector indexes, the KBW Bank Index fell 4.88%. On the other hand, the Philadelphia Housing Sector Index rose 2.25%. The Dow Jones Transportation Average did not confirm the Dow Industrials’ downward move and gained 1.64%. Semiconductor stocks showed a broad based advance, with the Philadelphia Semiconductor Index rising 4.33%. The Amex Disk Drive Index gained close to 5%.

Although we have not been seeing a large-scale correction following the rally seen since March, the momentum of the rally is fading, as indicated by the weakening of the slope of the advance.

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Canadian retail sales rise in February

Canadian retail sales edged up 0.2% in February to $33.7 billion, according to data released Thursday by Statistics Canada. Economists expected retail sales to drop 0.4%.

This comes after large declines in retail sales in November and December, followed by a partial recovery in January. February's slight increase was price-driven, as sales were down 0.3% in volume terms.

Sales rose in five of eight retail sectors. The largest contributors to the increase in February were building and outdoor home supplies stores (+3.0%) and food and beverage stores (+0.7%). Higher sales at building and outdoor home supplies stores did not offset the declines observed in the previous two months, which totaled about 7%. As for food and beverage stores, the increase mostly reflects higher sales at beer, wine and liquor stores.
 
The largest decline was a 1.9% decrease in sales at furniture, home furnishings and electronics stores in February. Sales in this sector have decreased each month since July 2008.

The automotive sector posted a 0.3% sales decrease, mainly reflecting a 1.6% decline in the value of sales at new car dealers. Partially offsetting this decline was increased sales at gasoline stations, which rose for the second month, mainly reflecting higher prices at the pump.

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The major European markets are trading on a mixed note on Thursday, with the French CAC 40 Index is trading down 0.24%, while the German DAX Index is rising 1.36% and and the U.K.’s FTSE 100 Index is moving up 0.93%.

In corporate news, Credit Suisse (CS) reported a first quarter profit of 2 billion Swiss Francs compared to a loss of 2.15 billion Swiss Francs last year. Total sales and trading revenues were 6.25 billion Swiss Francs compared to a negative revenue of 365 million Swiss Francs last year.

Eurostat, the European Commission’s statistical arm said in a report that the euro area’s industrial new orders dropped 0.6% month-over-month in February after falling 3.5% in January, revised from a 3.4% drop estimated initially. Economists expected a 2.2% decline. Annually, industrial new orders plunged 34.5% in February.

Meanwhile, the French statistical office said its business confidence indicator rose to 71 in April from 68 in March. Economists had expected an increase in the index to 69. The statistical office said the sentiment indicator increased slightly after 15 months of declines.

U.S. Economic Reports

The Labor Department is due to release its customary weekly jobless claims report for the week ended April 18th at 8:30 AM ET on Thursday. Economists expect a climb in jobless claims to 639,000 in the week.

A Labor Department report showed that initial jobless claims rose to 640,000 for the week ended April 18th, up 27,000 from the previous week's revised figure. Economists expected claims to increase to 639,000 from the originally reported figures of 610,000.

The 4-week moving average for initial claims, a statistic that flattens out week-to-week fluctuations, dipped 4,250 to a level of 651,000. The number of people receiving ongoing unemployment help, a statistic known as continuing claims, increased 93,000 to a level of 6.137 million.

The National Association of Realtors is scheduled to release its report on existing home sales for March at 10 AM ET. Economists estimate existing home sales of 4.65 million for the month.

Existing home sales rose 5.1% in February to a seasonally adjusted annual rate of 4.72 million units. Condominium and cooperative sales rose 11.4% compared to a 4.4% rise in single-family existing home sales. Sales rose across all regions, with the Northeast leading in terms of sales growth by showing a 15.6% jump in sales. The months supply of new homes remained unchanged at 9.7 months, while the median selling price declined 15.5% year-over-year to $165,400, although it rose $600 from the previous month.

Earnings

AmerisourceBergen (ABC) said its second quarter earnings per share from continuing operations rose 17% to 95 cents. Revenues fell 1.1% to $34.7 billion. Analysts expected earnings of 89 cents per share on revenues of $17.93 billion. The company raised its 2009 earnings per share from continuing operations expectations to a range of $3.18-$3.30 from its previous guidance of $3.08-$3.25, while analysts estimate earnings of $3.19 per share.

AutoNation (AN) reported first quarter net income from continuing operations of 27 cents per share, lower than 31 cents per share last year. On an adjusted basis, the company reported earnings of 23 cents per share. Revenues fell to $2.5 billion from $3.8 billion last year. The consensus estimates called for earnings of 16 cents per share on revenues of $2.74 billion.

Philip Morris’ (PMI) first quarter adjusted earnings per share fell to 74 cents from 80 cents per share. Net revenues fell 7.4% to $13.29 billion. Analysts, on average, estimated earnings of 69 cents per share on revenues of $5.50 billion. The company reaffirmed its 2009 full year guidance of $2.85-$3 per share.

Danaher (DHR) said its first quarter net earnings declined 13% to 72 cents per share last year. Sales fell to $2.63 billion from $3.03 billion last year. The consensus estimates had called for earnings of 73 cents per share on revenues of $2.67 billion.

Bunge (BG) reported that its first quarter net sales fell 26% to $9.2 billion. The company reported a loss of $1.76 per share compared to a profit of $2.10 per share last year. The company lowered its 2009 full year earnings per share guidance to $4.90-$5.40 per share from its earlier estimate of $6.90-$7.60. Meanwhile, Potash Corp. of Saskatchewan (POT) reported net income of $1.02 per share, lower than $1.74 per share last year. The company’s adjusted earnings were 55 cents per share, below the 85 cents per share consensus estimate. Sales declined to $922.5 million from $1.89 billion in the year-ago period.

JetBlue (JBLU) reported first quarter earnings of 5 cents per share compared to a loss of 5 cents per share in the year-ago period. Revenues declined 3% to $793 million. Analysts, on average, estimated earnings of 3 cents per share on revenues of $810.3 million.

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The stock markets across the Asia-Pacific region closed notably higher on Thursday, as traders went bargain hunting amid hopes that growth would return sooner in many non-developed economies. However, a cautious undertone prevailed about the health of the U.S. financial industry. The global economy will probably shrink by 1.3% in 2009, the deepest slump since 1945, the International Monetary Fund predicted.

The Japanese market rallied on bargain hunting after Goldman Sachs upgraded its ratings on key automakers to "attractive" from "cautious." Construction and consumer finance stocks also closed with significant gains, but stocks in the oil and coal, insurance and sea transport sectors ended in the red.

The Nikkei 225 index closed at 8,847, up 120 points or 1.37% and the broader Topix index of all First Section issues on the Tokyo Stock Exchange rose 10 points or 1.15% to 839.

The Australian market also closed sharply higher for the day, led by miners and financials. The benchmark S&P/ASX200 closed at 3,743, up 2% or 75 points and the broader All Ordinaries index rose nearly 69 points or 2% to 3,696.

Miners ended stronger on potential gains expected from a recovery in the Chinese economy. BHP Billiton gained 3.14%, its rival Rio Tinto surged up 6.06% and Iluka Resources added 1.57%.

Banking stocks rallied due to the expiry of option contracts on Thursday. Gold miners also ended stronger as gold traded steady at $891.04 an ounce.

The South Korean market rose modestly for the fourth day in a row as an improved earnings outlook and hopes that government measures will spur demand buoyed sentiment. The benchmark KOSPI rose 13 points or 0.94% to 1,369, rising for the fourth day in a row. Volume was at 736.48 million shares worth 8.74 trillion won (US$6.5 billion) and advancers outnumbered decliners by 420 to 394.

Hyundai Motor posted a smaller-than-expected 43% decline in its first-quarter net profit. Hyundai Motor closed up 3.18%, Kia Motors advanced 5.42% and Ssangyong Motor rallied 5.56%.

Shipbuilders closed mixed. Daewoo Shipbuilding rose 2.53% and Hyundai Heavy gained 3.29%, but Samsung Heavy Industries closed down 0.16%.

Among other notable stocks, market heavyweight Samsung Electronics added 2.96%, Korean Air Lines advanced 1.45%, LG Display LCD moved up 1.79% and LG Electronics closed up 0.91%, while oil stock SK and telecom stock SK Energy Telecom ended flat.

Hynix Semiconductor tumbled 4.80% after leading shareholders of the company agreed to inject 1.3 trillion won in new funding through the issuance of fresh shares and loans for the loss-making chipmaker.

Hong Kong’s Hang Seng Index opened higher and saw some uncertainty in the morning before the index began to climb steadily higher to close up 336.01 points or 2.26% at 15,215. The market witnessed broad based buying interest, with forty of the forty-two index components ending in positive territory.

After trading choppily in early trading, the Indian market saw a sharp comeback on buying across the board in index heavyweights. The benchmark Sensex ended the day at 11,135, up 317.45 points or 2.93% over the previous close.

Among the other markets in the region, China's Shanghai Composite index rose 0.11%, Hong Kong's Hang Seng index gained 2.26% and Singapore's STI Straits Times index closed up 0.90%, but Taiwan's TWII Weighed index moved down 0.18%.

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Crude oil futures are rising $0.78 to $49.63 a barrel after advancing $0.30 to $48.85 a barrel in Wednesday’s session. The price increase on Wednesday came despite the release of the weekly oil inventory report for the week ended April 17th, which showed that crude oil inventories rose by 3.9 million barrels to 370.9 million barrels. Crude oil stockpiles were now above the upper bound of the average range for this time of the year.

Gasoline stockpiles rose by 0.8 million barrels and were above the upper bound of the average range. Distillate inventories also rose, increasing by 2.7 million barrels, and were above the upper bound of the average range. Refinery capacity utilization averaged 81.8% over the four weeks ended April 17th compared to 81.5% in the previous week.

Gold futures are currently rising $0.80 to $893.30 an ounce. In the previous session, the commodity gained $9.80 to $892.50 an ounce.

Among the currencies, the U.S. dollar is trading at 98.354 yen, down from 98.025 yen at the close of New York trading on Wednesday. The greenback is currently valued at $1.3028 versus the euro.

Based on the assumption that the U.S. economy will exhibit signs of recovery before most other economies, Wachovia expects the greenback to trend higher over the next few quarters before flattening out or even depreciating somewhat if the U.S. economic recovery proves to be quite sluggish.

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