US & World Daily Markets Financial Briefing 24-06-2009

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Stocks Moving Notably Higher On Mixed Data

Stocks are posting strong gains in mid-morning trading on Wednesday, as traders remain largely optimistic despite a mixed batch of economic data. The major averages are all in positive territory by notable margins, looking to snap a streak of uninspiring performances.

Early optimism was generated by a report from the Commerce Department showing that durable goods for May rose by 1.8 percent, matching a revised increase in April. The increase surprised economists, who had expected a decline of 0.9 percent.

However, a separate report from the Commerce Department showed that new home sales slipped by 0.6 percent to an annual rate of 342,000 in May from a revised April rate of 344,000. Economists had expected sales to jump 2.3 percent to 360,000 from the 352,000 originally reported for the previous month.

This afternoon, the results of the Federal Reserve's 2-day meeting are likely to drive the markets, as traders will digest near-term monetary policy and comments regarding the current economic climate.

On the corporate front, troubled banking giant Citigroup (C) intends to raise workers' base salaries by as much as 50 percent this year to offset smaller annual bonuses, the New York Times reported, citing parties with direct knowledge of the plan.

Meanwhile, General Motors is reportedly planning to cut another 4,000 U.S. white-collar jobs by October 1, 600 more than it earlier announced, as part of an accelerated plan to shrink its work force.

In earnings news, Oracle (ORCL) said Tuesday after the markets closed that its fourth quarter profit fell about 7 percent from last year, as a stronger U.S. dollar ate into its sales. Nonetheless, the results beat analyst estimates, and shares of Oracle are up 7.4 percent on the news.

Contract electronics manufacturer Jabil Circuit (JBL) reported a third quarter net loss due to restructuring and impairment charges and lower revenues. The company's fourth quarter revenue forecast was also lower than analyst estimates. Nonetheless, the stock is currently up 7.2 percent.

In recent trading, the major averages have pulled back off their highs for the session, although they remain firmly positive. The Dow is currently up 84.64 at 8,407.55, the Nasdaq is up 35.33 at 1,800.25 and the S&P 500 is up 12.70 at 907.80.

Sector News

Most of the major sectors have shown strong upward moves, helping the major averages to post solid gains on the day.

Transportation stocks are seeing some of the day’s strongest performances, with the Dow Jones Transportation Average currently up 3.4 percent. With the advance, the average is moving further off the nearly one-month closing low set on Monday.

Continental Airlines (CAL) is helping to lead the transportation sector higher, with the airline currently up 5.5 percent. The gain has lifted shares of Continental well off the three-month closing low set in the previous session.

Despite the drop in new home sales, housing stocks are also posting particularly strong gains, driving the Philadelphia Housing Index up 3.5 percent. Radian Group (RDN) is leading the sector to the upside, rising 20.3 percent.

Significant strength is also visible in a variety of other sectors, with steel, healthcare provider, semiconductor and real estate stocks posting notable gains.

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Toronto Stocks Look To Add To Rebound Session

Canadian stocks will look to add to yesterday's modest gains on Wednesday morning as all eyes will be looking toward the Federal Reserve's interest rate decision this afternoon.

The Federal Open Market Committee's interest rate decision at 2:15 p.m. ET at the end of a two-day meeting. Rates are expected to remain unchanged.

Also on Wednesday, the Organization for Economic Cooperation and Development said the Bank of Canada leave its interest rates at 0.25% through 2010. The OECD also raised its outlook for its 30 member nations for the first time in two years.

Energy stocks could pause after a strong session yesterday as crude oil is down 34 cents to $68.90 per barrel ahead of the Energy Information Administration's inventory report later in the morning.

In corporate news, Addax Petroleum agreed to be bought by Sinopec for C$8.3 billion or C$52.80 per common share in cash.

Starfield Resources said that it has agreed to acquire all of the outstanding securities of Nevoro Inc. Saputo said Tuesday that it has agreed to buy the activities of F&A Dairy of California.

Bell Canada announced the public offering of C$1 billion of medium term debentures, or MTN Debentures. Clairvest Group reported net income for the fourth quarter of C$3.82 million or C$0.23 per share, compared to C$5.22 million or C$0.32 per share in the year-ago quarter.

AGF Management reported second-quarter net income of C$17.2 million or C$0.19 per share, compared to C$44 million or C$0.49 per share last year.

In economic news across the border, a Commerce Department report said durable goods orders rose 1.8 percent in May, matching the revised increase seen in April. The continued increase came as a surprise to economists, who expected orders to fall 0.9 percent compared to the 1.9 percent increase originally reported for the previous month.

On Tuesday, the S&P/TSX Composite Index added 62.54 points or 0.63% to settle at 9,896.72. With the gains, the index erased some of the 4.4% plunge from Monday.

Crude oil futures are declining $0.69 to $68.55 a barrel after advancing $1.74 to $69.24 a barrel on Tuesday. After rising $3.30 to $924.30 an ounce in the previous session, gold futures are moving up $3.70 to $928 an ounce.

On the currency front, the U.S. dollar is trading at 95.395 yen after it weakened to 95.225 yen at the close of New York trading on Tuesday. The dollar is trading at $1.4061 versus the euro.

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The major Asian markets ended in the positive territory on Wednesday ahead of announcement of the Fed rate decision. Japan’s Nikkei 225 Average opened sharply higher at 9,597 compared to its previous close of 9,550, led by electronics makers. However, weakness in retail stocks and concerns about global recovery prospects limited the upside as investors preferred to stay on the sidelines ahead of the FOMC announcement. The index finally closed at 9,590, representing a gain of 40.71 points or 0.43%. The broader Topix Index of all first section issues ended at 902, up 0.77 points or 0.09%.

On the economic front, a report released by the Ministry of Finance revealed that Japan's trade surplus plunged to 299.83 billion yen in May from JPY 341.1 billion recorded during the same period of the previous year. Exports tumbled 40.9% on a yearly basis to 4.02 trillion yen in May, while imports declined 42.4% to 3.72 trillion yen.

Softbank Corp. gained more than 6% following the news that the company is planning to raise its dividend payment from the year beginning 2011. Oil refiner Showa Shell Sekiyu KK gained more than 6% after it said it will build solar power plants in Saudi Arabia. Among other oil stocks, Impex gained 0.98% and Nippon Oil Corp. advanced 2.61%. Among retailers, Seven & I Holdings Co., lost 2.2% after the company stated that it would bear part of the cost to throw away expired foods. However, financials ended in the negative territory

In Australia, the All Ordinaries Index opened unchanged from its previous close at 3,793 and slipped below the unchanged line in early trading. The firming up of commodity prices and a rally in resource stocks helped recover the losses amid low volume as investors preferred to stay away from the markets. The index finally ended with a gain of 9.20 points, or 0.20%, at 3,802. The benchmark S&P/ASX 200 Index followed a similar trend and ended lower at 3,807, representing a gain of 10.2 points, or 0.27%.

Mixed trend was witnessed among the resource stocks following a modest rise in commodity prices in the international market. On the other hand, financials ended weak on growth concerns. ANZ Bank slipped 0.19%, Commonwealth Bank Australia lost 0.51%, National Australia Bank fell 1.11% and Westpac Banking edged down 0.05%.

In Hong Kong, the Hang Seng Index opened higher at 17,583 compared to its previous close at 17,538 and continued to trade in positive territory on optimism about global recovery. The index ended with a gain of 353.78 points, or 2.02%, to close at 17,892.

Resource, property and financial stocks advanced following sharp losses in recent sessions. Property stocks advanced on bargain hunting at lower prices, while financial stocks also rose.

In South Korea, the benchmark KOSPI Index ended in positive territory, led by technology stocks and bargain hunting amid recovery hopes. The index ended at 1,364, representing a gain of 3.25 points, or 0.25%.

Market-leader Samsung Electronics advanced 0.87% after reporting an alliance with U.S. chip-maker Numonyx B.V. to develop a shared standard for a next-generation memory chip. LG Display gained 2.72% following favorable comments from local brokerage house.

Bargain hunting at lower levels helped shipbuilders end in positive territory. Hyundai Heavy Industries climbed 1.08% and Samsung Heavy Industries gained 2.14%

In India, the stock market ended in the positive territory amid short covering ahead of the expiry of derivative contracts for June on Thursday. The BSE Sensex gained 98.72 points or 0.69% to close at 14,324, and the broader Nifty index ended higher with a gain of 45.95 points, or 1.08% at 4,293.

Among the other major markets in the region, China's Shanghai Composite Index advanced 29.60 points or 1.02% to close at 2,922, Taiwan's Weighted Index gained 182.61 points or 2.95% to close at 6,380, the Strait Times Index in Singapore added 52.86 points or 2.37% to close at 2,279 and Indonesia's Jakarta Composite Index rose 81.29 points, or 4.25% to close at 1,996.

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The major European averages are advancing solidly on Wednesday after showing weakness in the previous two sessions. The French CAC 40 Index and the German DAX Index are gaining 1.32% and 1.39%, respectively, while the U.K.’s FTSE 100 Index is moving up 0.63%. Banking stocks received support from the European Central Bank’s move to lent 442.241 billion euros in a 371-day operation at a fixed rate of 1%.

U.S. Economic Reports

A report released by the Commerce Department showed that new orders for manufactured durable goods rose 1.8% month-over-month in May to $163.9 billion following an upwardly revised 1.8% increase in April. Economists had looked forward to a 0.9% decline in durable goods orders for May from the originally reported 1.7% increase for April.

Machinery orders, which rose in three of the past four months, showed the biggest increase of 7.7%. However, shipments fell 2.1% and unfilled orders declined by 2%. Inventories at the end of the month were down 0.8%. Orders for non-defense capital goods orders, excluding aircrafts,- a key measure for capital spending climbed 4.8% following a 2.9% increase in the previous month. Shipments of this category of goods edged up 0.3%.

The Commerce Department is due to release its new home sales report for May at 10 AM. The consensus estimate calls for an increase in new homes sales to an annual rate of 360,000.

New home sales rose 0.3% month-over-month in April to 352,000. However, annually new home sales were down 34%. The median price of a new home was $209,700, up from $202,000 in the previous month, but it was down from $246,400 in the year-ago period. The months-supply of new homes was 10.1 months compared to 10.6 months in March and 10.4 months in April last year.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report at 10:30 AM ET.

Crude oil stockpiles declined 3.9 million barrels to 357.7 million barrels in the week ended June 12th. Despite the decline, crude oil inventories remained above the upper limit of the average range.

Gasoline inventories increased by 3.4 million barrels, but stockpiles were still below the lower limit of the average range. Distillate inventories rose by 0.8 million barrels and were above the upper limit of the average range. Refinery capacity utilization averaged 85.8% over the four weeks ended June 12th compared to 84.8% in the previous week.

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Oracle is likely to see some strength after its quarter adjusted net income came in at 46 cents per share, ahead of the 44 cents per share estimate of analysts. Sales declined to $6.86 billion. New software license sales, an indicator of future revenue streams, fell 13% to $2.74 billion. The company expects first quarter adjusted earnings of 29-31 cents per share on a 1%-4% revenue decline. Analysts, on average, estimate earnings of 30 cents per share on an estimated 5% drop in revenue.

Apogee could be in focus after it reported that its first quarter revenues declined 24% to $180.9 million. The company reported net earnings of $7.52 million or 27 cents per share compared to $10.20 million or 36 cents per share last year. The consensus estimates called for earnings of 27 cents per share on revenues of $195.01 million.

Jabil Circuit receded in Tuesday’s after hours session despite reporting third quarter adjusted earnings of 4 cents per share, exceeding the 3 cents per share consensus estimate. Revenues declined to $2.62 billion from $3.09 billion but came in-line with the consensus estimate. For the fourth quarter, the company expects an adjusted profit of 2-12 cents on revenues of $2.5 billion to $2.7 billion. Analysts expect earnings of 9 cents per share on revenues of $2.72 billion.

H.B. Fuller is likely to move in reaction to its announcement that it reported second quarter earnings of 36 cents per share compared to 41 cents per share last year, as revenues fell over 16% to $299.2 million. Analysts estimated earnings of 25 cents per share on revenues of $304.4 million. Citing challenging economic conditions, the company said it is reiterating its guidance for a 10%-12% decline in revenues for the full year.

Darden Restaurants may also be in the spotlight after it said its fourth quarter sales from continuing operations were $1.98 billion, higher than $1.83 billion last year. The company said its adjusted earnings from continuing operations were 72 cents per share compared to 78 cents per share last year. The Street estimates earnings of 86 cents per share on revenues of $1.98 billion. For the full year 2009, the company expects adjusted earnings per share of $2.75 per share compared to the consensus estimate of $2.71 per share.

Earnings

American Greetings said its first quarter revenues were $412.92 million, lower than $428.30 million last year. Net income declined to $9.96 million or 25 cents per share compared to $13.33 million or 27 cents per share in the year-ago period.

Monsanto’s third quarter net sales fell to $3.16 billion from $3.54 billion last year. The company’s ongoing earnings per share also declined to $1.25 from $1.46 in the year-ago period. Analysts estimated earnings of $1.17 per share on revenues of $3.45 billion. The company said it continues to expect 2009 ongoing earnings per share of $4.40-$4.50 compared to the $4.40 per share consensus estimate.

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