US & World Daily Markets Financial Briefing 23-09-2010

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Stocks Climb Well Off Worst Levels Of The Day

After showing a notable move to the downside at the start of trading on Thursday, stocks have regained some ground following the release of the latest batch of economic data. The major averages have climbed well off their worst levels, with the Nasdaq jumping into positive territory.

The major averages are currently turning in a mixed performance, as the Nasdaq is posting a notable gain. The Nasdaq is up 9.75 points or 0.4 percent at 2,344.30, while the Dow is down 1.59 points or less than 0.1 percent at 10,737.72 and the S&P 500 is down 0.87 points or 0.1 percent at 1,133.41.

A short time ago, the National Association of Realtors released a report showing that existing home sales in the month of August rebounded roughly in line with economist estimates after showing a steep drop in July.

NAR said existing home sales rose by 7.6 percent to an annual rate of 4.13 million in August from an upwardly revised 3.84 million in July. Existing home sales had been expected to increase to 4.10 million from the 3.83 million originally reported for the previous month.

The Conference Board released a separate report showing that its leading indicators index increased by 0.3 percent in August following a 0.1 percent increase in July. Economists had been expecting the leading index to show a more modest increase of about 0.1 percent.

Earlier, the Labor Department reported that jobless claims in the week ended September 18th edged up to 465,000 from the previous week's revised figured of 453,000. Jobless claims had been expected to come in unchanged compared to the 450,000 originally reported for the previous week.

In earnings news, drugstore chain Rite Aid Corp. (RAD) reported a second quarter net loss that was wider than expected on revenues that fell short of estimates. Rite Aid also projected a sharper loss for fiscal 2011 than initially expected on revenues that also were lower than forecast.

Red Hat Inc. (RHT), the world's largest seller of Linux software, said that its second quarter profit fell 18 percent from last year, when the company recorded a one-time tax benefit. However, the company's adjusted earnings came in above analysts' expectations.

Home goods retailer Bed Bath & Beyond Inc. (BBBY) said that its second-quarter profit increased by 34 percent over last year, boosted by strong sales and higher margins. Quarterly earnings came in well ahead of the analysts' expectations, as did net sales.

Looking ahead, Bed Bath & Beyond provided third quarter guidance in-line with the Street consensus and raised its earnings outlook for fiscal year 2010.

Sector News

Despite the recovery attempt by the broader markets, weakness remains visible among railroad stocks, with the Dow Jones Railroads Index down by 0.8 percent. The decline is pulling the index down further off of a two-year closing high set earlier this week.

While brokerage, real estate, and oil stocks also continue to see some weakness, considerable strength has emerged among semiconductor stocks. The Philadelphia Semiconductor Index has surged up by 1.6 percent, partly offsetting the drop seen earlier this week.

Internet and biotechnology stocks have also moved to the upside over the course of the morning, contributing to the rebound by the broader markets.

Stocks Driven By Analyst Comments

Nvidia (NVDA) is trading notably higher after being upgraded at BMO Capital Markets from Market Perform to Outperform. The stock is currently up by 4.5 percent after setting a three month intraday high.

Meanwhile, Tiffany (TIF) is under pressure after a downgrade by Goldman Sachs from Neutral to Sell based on valuation. The stock is currently down by 2.5 percent, pulling back further off of a three and a half month closing high set on Monday.

Other Markets

Overseas, most of the major stock markets in the Asia-Pacific region were closed on the day, although Australia's All Ordinaries Index edged up by 0.1 percent.

Meanwhile, the major European markets are seeing steep losses. The French CAC 40 Index and U.K.'s FTSE 100 Index are down by 1.2 percent and 0.8 percent, respectively, while the German DAX Index is down by 0.6 percent.

In the bond markets, treasuries are modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.515 percent, posting a loss of 3.3 basis points.

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TSX May Open Lower Amid Weak Global Cues

Bay Street stocks may open lower Thursday amid discouraging economic data from the U.S. and Europe. Also, falling energy prices may weigh on energy stocks, putting pressure on the main index.

While first-time claims for unemployment benefits in the U.S. unexpectedly showed a modest increase last week, the Markit euro-zone composite output index fell more than expected.

On Wednesday, the S&P/TSX Composite Index lost 23.31 points or 0.19% to 12,147.26

The price of crude oil slipped below $74 amid worries over demand growth, after Wednesday's data from the EIA revealed pile up of crude oil and gasoline inventories in the U.S., the largest energy consumer. Crude for November was down $0.87 to $73.84 a barrel.

Meanwhile, the price of gold was steady near its record high amid safe haven buying. Gold for December was almost flat at $1,292.20 an ounce.

In corporate news form Canada, oil and gas industry services provider Calfrac Well Services said it would revise up its 2010 capital spending by $56 million to $236 million.

Multimedia and data communications products company Gennum Corp. swung to profit in third quarter, reporting net income of $5.3 million or $0.15 per share, compared to a net loss of $4.3 million or $0.12 per share a year-ago.

Mineral properties company Nevsun Resources said it expects its Bisha gold project to commission in the fourth quarter and start commercial production in the first quarter 2011.

Coal mining company Western Coal Corp. said Julian Treger has resigned from the company's Board of Directors, effective September 30, 2010.

Mining services company Orbit Garant Drilling reported improved fourth-quarter net earnings of C$4.0 million or C$0.12 per share, compared to C$3.6 million or C$0.10 per share a year ago.

Chinese construction company Boyuan Construction Group reported nearly a 100% jump in its fourth quarter net income at $4.59 million or $0.17 per share compared to $2.32 million or $0.09 per share a year ago.

Oil and natural gas explorer Ripper Oil and Gas said it has completed the sale of its conventional and coal bed methane assets at Alberta for $13.2 million.

In economic news from south of the border, the U.S. Labor Department said initial jobless claims edged up to 465,000 from the previous week's revised figured of 453,000. Economists were expecting claims to come in unchanged at 450,000 that was originally reported for the previous week

Elsewhere, the Markit euro-zone composite output index, which combines manufacturing and services, fell to 53.8 in September from 56.2 in August.

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Asian Markets End In Negative Territory

Most of the Asian markets, including the markets in China, Hong Kong, Japan, South Korea and Taiwan, were closed for a national holiday. Mixed trading was witnessed in the markets open for trading amid thin volumes and lackluster trading. While the Australian market managed to end in positive territory led by late buying in resource stocks, the markets in India, Indonesia and Singapore ended in negative territory on profit taking. Weak closing on Wall Street in the previous session also impacted market sentiment.

In Australia, the benchmark S&P/ASX200 Index added 8.40 points, or 0.18%, and closed at 4,634 points, while the All-Ordinaries Index ended at 4,680, representing a gain of 5.30 points, or 0.11%.

Mining and metal stocks led the gains on higher commodity prices in the international market. BHP Billiton added 0.82%, Rio Tinto climbed 1.52%, Fortescue Metals advanced 1.01%, Gindalbie Metals was up 0.56%, and Murchison Metals surged up 3.06%. Minara Resources, Mincor Resources and Oz Minerals remained unchanged from previous close, while Iluka Resources bucked the trend and ended in negative territory with a loss of 0.17%.

Mixed trading was witnessed among oil-related stocks. Woodside Petroleum gained 1.02%, ROC Oil Co rose 1.20% and Oil Search Ltd advanced 0.65%. However, Origin Energy slipped 0.31% and Santos Ltd declined 0.62%.

Gold stocks ended in positive territory on higher bullion prices in the international market. Newcrest Mining advanced 0.99% and Kingsgate Consolidated climbed 2.03%.

Mixed trading was witnessed among bank stocks as well. ANZ Bank added 0.25%, National Australia advanced 0.35%, and Westpac Banking gained 0.75%. Investment banking companay Macquarie Group edged up 0.22%. However, Commonwealth Bank of Australia bucked the trend and ended in negative territory with a loss of 0.13%

The Indian market extended its previous session's losses on Thursday on the back of sell-off in realty, banking, oil/gas and telecom shares. A spike in food inflation, another round of profit taking amid lackluster global cues as well as concerns about stretched valuations weighed on sentiment. FMCG stocks like ITC, Hindustan Unilever and Colgate Palmolive rose by 1%-2% on defensive buying, helping limit the downside.

ONGC advanced 1.49% after the state-run oil explorer said it has discovered two oil and gas wells in the Krishna Godavari and Cambay basin. Larsen & Toubro edged up 0.17% after it signed a JV pact with South Africa-based Befula Investments to explore opportunities in the power sector in the African nation. Mahindra & Mahindra (up 1.11%), Jaiprakash Associates (up 1.04%), Tata Steel (up 0.75%), Wipro (up 0.58%) and Tata Motors (up 0.14%) were the other prominent gainers.

The 30-share Sensex ended down 80 points or 0.40% at 19,861. with 17 of its components edging lower, while the broader Nifty Index ended at 5,960, down 31.45 points, or 0.52%. The markets in China, Japan, Hong Kong, South Korea and Taiwan were closed for public holidays.

Among the other markets in the region, Jakarta Composite Index in Indonesia ended in the negative territory with a loss of 6.15 points, or 0.18%, at 3,337, and the Strait Times Index in Singapore declined 12.97 points, or 0.42%, to close at 3,083.

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After opening higher, the major European markets declined steadily, dropping sharply in late morning trading. The averages are currently languishing in the red, with the French CAC 40 Index and the German DAX Index declining 1.09% and 0.86%, respectively, while the U.K.’s FTSE 100 Index is receding 0.88%. The markets in the region declined in each of the past two sessions.

In economic news, French manufacturing confidence improved slightly in September, a key monthly survey showed, with industry leaders turning positive about future growth. Meanwhile, a separate report showed that France's private sector growth remained strong in September, despite slowing to a six-month low.

Statistical office INSEE’s sentiment indicator rose to 98 from July's 97 in August, matching analysts' expectations. While, manufacturers' personal production outlook indicator climbed to 0 from –11, the general production indicator, which is a gauge of general industrial activity in France, rose to 3 from -1.

The results of a separate survey released by Markit showed that French private sector growth remained strong in September. The composite purchasing managers' index fell 1 point in August, although remaining elevated at 58.5, in August.

At the same time, eurozone private sector activity growth slowed more than expected in September, pointing towards a slowdown in economic growth in the third quarter. The Markit Flash eurozone composite output index fell to a seven-month low of 53.8 from 56.2 in August. This marks the biggest drop since November 2008. Economists had forecast a score of 55.7.

U.S. Economic Reports

Following some recent positive signs of the employment front, first-time claims for unemployment benefits unexpectedly showed a modest increase in the week ended September 18th, according to a report released by the Labor Department.

The report showed that initial jobless claims edged up to 465,000 from the previous week's revised figured of 453,000. Economists had expected jobless claims to come in unchanged compared to the 450,000 originally reported for the previous week.
The National Association of Realtors is scheduled to release its report on existing home sales for August at 10 AM ET. Economists estimate existing home sales of 4.10 million for the month.

Existing home sales slumped 27.2% month-over-month to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million unit-rate in June. Economists expected a less severe decline to 4.72 million units. Inventories measured in months of supply rose to 12.5 months from 8.9 months in June. The median price of an existing home fell 0.2% month-over-month.

The Conference Board is also scheduled to release a report on its U.S. leading index for August at 10 AM ET. The consensus estimate calls for a 0.1% increase in the leading indicators index for the month.

In July, the leading indicators index rose 0.1% month-over-month, with the increase coming about due to the steep yield curve, a lengthier workweek and a decline in claims. The coincident index and the lagging index also increased, rising by 0.2% and 0.4%, respectively.

Chicago Federal Reserve Bank President Charles Evans is scheduled to open a two-day International Banking Conference in Chicago at 10:40 AM ET. Additionally, Paul Volcker, the Chair of the President's Economic Recovery Advisory Board, is due to speak to the two-day International Banking Conference sponsored by the Chicago Federal Reserve Bank and the IMF at 1 PM ET.

Stocks in Focus

Baldor Electric (BEZ) may gain ground after Standard & Poor’s announced that the company will replace Valeant Pharma (VRX) in the S&P MidCap 400 Index. Meanwhile, Universal Health Realty (UHT) will replace Baldor Electric in the S&P SmallCap 600 Index.

Copart (CPRT) could be in focus after it announced that its fourth quarter income from continuing operations rose to 43 cents per share from 41 cents per share last year. Revenues rose 3.3% to %190.5 million. Analysts estimated earnings of 48 cents per share on revenues of $202.7 million.

Red Hat (RHT) is likely to see some activity after it reported that its second quarter non-GAAP net income fell to 19 cents per share from 20 cents per share in the year-ago period. Revenues rose 20% year-over-year to $219.8 million. The consensus estimates called for earnings of 18 cents per share on revenues of $212 million.

Bed Bath & Beyond (BBBY) may also be in focus after it reported that its second quarter earnings rose to 70 cents per share from the year-ago’s 52 cents per share. Net sales climbed 11.6% to $2.14 billion. Analysts estimated earnings of 63 cents per share on revenues of $2.1 billion. For the third quarter, the company expects earnings of 61-65 cents per share, while analysts estimate earnings of 63 cents per share.

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Dollar Uncertain Ahead Of Housing, Jobless Claims Data

The dollar was on the defensive Thursday morning in New York ahead of the latest reading on the beleaguered US housing sector and the weekly jobless claims report.

The National Association of Realtors will table its report on existing home sales for August. Economists expect that existing home sales increased to a seasonally adjusted annual rate of 4.04 million units, after plummeting 27.2% in July.

The government's jobless claims report for the week ended September 18 at 8.30 a.m. ET. Economists project that jobless claims remain unchanged at 450,000, having shown some improvement over the past few weeks.

The buck has been battered this week on speculation the Federal Reserve is about to launch a second round of quantitative easing measure.

In addition to pledging to keep rates near zero for an extended period on Tuesday, the Fed said it stands ready to support the sluggish economy in other ways, and is concerned about disinflation.

The buck was steady against the euro ahead of today's data releases, holding around 1.3330. Yesterday, the buck hit 1.3439 -- its lowest since early May.

Eurozone private sector activity growth slowed more than expected in September, suggesting a slowdown in economic growth in the third quarter.

The Markit Flash eurozone composite output index fell to a seven-month low of 53.8 from 56.2 in August, data from Markit Economics showed Thursday. It was the largest fall since November 2008.

The buck was stuck in place versus the yen this morning, unable to fight back from yesterday's losses. The dollar held near Y84.35, staying close to a recent 15-year low of Y82.86.

Japanese officials intervened in the currency markets to devalue the surging yen last week, but the action had little lasting impact. Analysts speculate that a second intervention is on the way.

The dollar remained near Monday's 2-year low of 0.9837 versus the swiss franc, and was steady at 1.5670 versus the sterling.

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