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Stocks May Retain Buoyancy on Firming Recovery Hopes
The major U.S. index futures are pointing to a higher opening on Tuesday, reflecting the cautious optimism that things may turn around. Global cues were mixed, with the Asian markets showing weakness, while the European markets have turned higher after a weak start.
Commodities are adding to their recent gains and moving to the upside. Traders are also likely to closely watch the results of the Treasury’s auction of 2-year notes and the results of the Confidence Board’s consumer confidence survey.
Optimism over an economic recovery kept market sentiment upbeat in morning trading on Monday. However, skepticism replaced the optimism thereafter, leading to a sell-off in the afternoon. Consequently, the major averages closed the session nearly unchanged.
After rising about 82 points, the Dow Industrials squandered most of its gains by the close to end up merely 3.32 points or 0.03% at 9,509. However, the S&P 500 Index receded 0.56 points or 0.05% to close at 1,026 and the Nasdaq Composite Index fell 2.92 points or 0.14% to 2,018.
Seventeen of the thirty Dow components ended the session lower, with Alcoa (AA) (down 1.11%), DuPont (DD) (down 1.16%), Home Depot (HD) (up 1.71%), JP Morgan Chase (JPM) (down 1.49%), Kraft Foods (KFT) (down 1.42%) and Coca Cola (KO) (down 1.70%) showing weakness.
On the other hand, Boeing (BA) rallied 2.75%, Chevron (CVX) gained 1.48%, United Technologies (UTX) rose 1% and Exxon Mobil (XOM) surged up 1.97%.
Among the sector indexes, the Philadelphia Oil Service Index gained close to a percentage point. However, the S&P Retail Index fell 1.55% and KBW Bank Index receded 1.59%.
The NYSE Arca Networking Index, the Philadelphia Semiconductor Index, the NYSE Arca Securities Broker/Dealer Index and the Philadelphia Housing Sector Index all closed down 1%. |
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Bay Street Stocks May See Early Strength
Toronto stocks could see early gains on Tuesday as markets are seeing green in Europe and the U.S. Financials will be in focus after Bank of Montreal revealed better-than-expected third quarter earnings.
BMO Financial reported third-quarter net income of C$524 million, compared to C$502 million last year. Earnings per share were C$0.97, compared to C$0.98 in the same quarter last year.
In other corporate news, Absolute Software Corp. reported its fourth-quarter net income was C$16.49 million or C$0.35 per share, compared to net loss of C$2.33 million or C$0.05 per share last year.
General Motors Co., now known as Motors Liquidation Co. is reportedly considering plans to raise funds to keep Opel, as an alternative to selling the unit to Canadian car-parts maker Magna International along with German-backed bailout funds.
On the commodity front, crude oil fell 5 cents to $74.32 per barrel and copper lost 3 cents to $2.9005, while gold rose $9 to $952.70.
There is no major economic news on tap from Canada on Tuesday. Across the border, the Conference Board will reveal its consumer confidence data at 10 a.m. ET. A reading of 48.0 is expected for August, compared to 46.6 in July.
Meanwhile, Ben Bernanke has been chosen for the post of Federal Reserve Chairman for the second term by President Barack Obama.
On Monday, the S&P/TSX Composite Index fell 41.21 points or 0.38% to settle at 10,789.97. Earlier the index had reached above 10,900 for the first time in 2 1/2 weeks.
Crude oil futures are receding $0.06 to $74.31 a barrel after moving up $0.48 to $ 74.37 a barrel on Monday. Gold futures, which fell $11 to $943.70 an ounce in the previous session, are currently moving up $7.40 to $951.10 an ounce.
On the currency front, the U.S. dollar is trading at 94.24 yen compared to the 94.5625 yen it was worth at the close of trading on Monday. Against the euro, the dollar is trading at $1.4338. |
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Asian Markets End Weaker On Profit Taking, Concerns About Recovery
The Asian markets ended in the negative territory on Tuesday, following flat closing on Wall Street in the previous session amid concerns about economic fundamentals. Profit taking following recent rally, softness in commodity prices and lack of direction also contributed to negative closing across the major markets. The markets in India, Indonesia and Singapore, however, managed to end in positive territory with minor gains.
In Japan, the benchmark Nikkei 225 Index ended at 10,497, representing a loss of 83.69 points, or 0.79%, while the broader Topix index of all first section stocks fell 5.16 points, or 0.5%, to 965.
Technology stocks and automakers declined following the strengthening of the local currency against the greenback.
Honda Motor declined 1.97%, Toyota Motor edged down 0.47%, Nissan Motor Corp. lost 1.60% and Mitsubishi Motor slipped 0.59%.
Exporters declined following the strengthening of the local currency against the US dollar. Canon Inc., declined 1.08%.
Oil related companies also ended in negative territory. Nippon Oil Corp declined 0.74%, Showa Shell edged down 0.20% and Nippon Mining slipped 0.61%.
Mixed trading was witnessed among trading companies. Toyota Tsusho Corp. edged down 0.07% and Marubeni Corp. slipped 0.62%. However, Mitsubishi Corp. gained 0.57%, Itochu Corp. advanced 0.74% and Sumitomo Corp. edged up 0.10%.
Banks ended in the negative territory on profit taking. Mitsubishi UFJ Financial declined 1%, Mizuho Financial fell 1.75%, Resona Holdings lost 1.09%, and Sumitomo Mitsui Financial shed 1.22%.
In Australia, the benchmark S&P/ASX200 Index lost 0.46% or 20.30 points to close at 4,406, while the All-Ordinaries Index ended at 4,418, representing a loss of 16.70 points, or 0.38%.
Woolworths, the biggest retailer in the country, has agreed to buy Danks Holdings, the second largest hardware distributor in the country, in an effort to expand into the hardware market. Also the company will team up with home-improvement chain in the U.S., Lowe's Co., to effectively challenge Wesfarmers Ltd, the leading retailer in the country.
Following the news, the share price of Woolworths gained 2.21%. However, Wesfarmers Ltd, which operates the Bunnings Stores in the country, slumped 5.74%.
Among other major retailers in the country, David Jones declined 2.51% and Harvey Norman lost 2.78%.
Metals and mining stocks ended weaker following drop in commodity prices in the international market. BHP Billiton declined 1%, Rio Tinto slipped 0.98%, Fortescue Metals fell 2.83%, Gindalbie Metals lost 1.83% and Oz Minerals shed 1.32%.
In energy space, Woodside Petroleum declined 1.73%, Santos lost 1.47% and Origin Energy fell 1.78%. However, Oil Search bucked the trend and surged up 4.31%.
Mixed trading was witnessed among bank stocks. ANZ Bank edged down 0.05%, Commonwealth Bank of Australia slipped 0.67% and Westpac Banking declined 1.35%. However, National Australia Bank bucked the trend and ended in positive territory with a gain of 1.12%.
Gold stocks also ended mixed. While Newcrest Mining fell 1.81%, Lihir Gold gained 2.81% and Sino Gold Mining advanced 0.84%.
In Hong Kong, the Hang Seng Index ended in negative territory with a loss of 100.70 points, or 0.49% at 20,435, following weakness in mainland China and other markets across the region, on concerns about the pace of economic recovery. Profit taking at higher levels following recent gains and valuation concerns also impacted trading. As many as 32 of the 42 components in the index ended in the red, with property stocks leading the decline.
In South Korea, the benchmark KOSPI Index ended at 1,601, down 10.84 points, or 0.76% amid volatile trading on concerns about the pace of economic recovery. Profit taking at higher levels also impacted trading as traders moved to sidelines looking for direction.
Bucking the weak sentiment across the region, the Indian market recovered sharply to finish modestly higher, helped by higher U.S. stock futures and short covering ahead of the settlement of current month derivative contracts on Thursday. The benchmark BSE Sensex finished at 15,688, up 60 points or 0.38% from its previous close, and the S&P CNX Nifty rose 17 points or 0.36% to 4,659.
Among the other major markets in the region, China's Shanghai Composite Index slipped 2.59% or 77.63 points, to 2,916 and Taiwan's Weighted Index declined 28.84 points, or 0.42% to close at 6,809. However, Indonesia's Jakarta Composite Index edged up 0.20% or 4.65 points to close at 2,380 and Singapore's Strait Times Index added 6.43 points, or 0.25% to close at 2,619. |
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After opening sharply lower on Tuesday, the major European averages have snapped back their losses and are trading higher. The French CAC 40 Index and the German DAX Index are rising 0.16% and 0.15%, respectively, while the U.K.’s FTSE 100 Index is up 0.08%.
In corporate news, Cairn Energy reported a loss for its first half. The company also said it may not meet target for the next stages due to challenges in development. Homebuilder Persimmon said its first half pre-tax profits fell to 9.8 million pounds from 36.9 million pounds, with the decline almost all in line with expectations.
On the economic front, the German Federal Statistical Office confirmed that the German economy has recovered from the worst recession since the Second World War on strong government and household spending. The economy grew slightly for the first time, following four quarterly GDP declines in a row. The economy expanded 0.3% sequentially in the second quarter after contracting 3.5% in the first quarter.
U.S. Economic Reports
The S&P/Case-Shiller home price index, which tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S., is scheduled to be released at 9 AM. Economists expect a 16.40% year-over-year decline in the 20-city composite house price index for June.
The 20 city composite home price index declined 17.06% year-over-year in May compared to expectations for a 17.9% drop. However, on a monthly basis, the index rose for the first time since July 2006.
The Conference Board is scheduled to release its consumer confidence report for August at about 10 am ET. The report, which is based on a survey of 5,000 U.S. households, is expected to show that the consumer confidence index rose to 47.9 in August.
The consumer confidence index for July declined to 46.6 from 49.3 in June. Economists had expected a more modest decline to 49. The present situation as well as the expectations index declined. Much of the negativity was due to the difficult job market situation. |
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Big Lots said its second quarter income from continuing operations fell to 35 cents per share compared to 32 cents per share in the year-ago period. Net sales rose 1.7% to $1.09 billion. Analysts estimated earnings of 30 cents per share on revenues of $1.08 billion. The company raised its full year 2009 earnings from continuing operations guidance to $1.92-$2.02 per share compared to the $1.93 per share consensus estimate.
Burger King’s fourth quarter earnings rose to 43 cents per share from 37 cents per share last year. Revenues were down 2.4% to $629.9 million. The consensus estimates had called for earnings of 33 cents per share on revenues of $632.40 million.
Staples reported second quarter earnings of 13 cents per share, lower than 21 cents per share last year. On an adjusted basis, the company reported earnings of 16 cents per share. Sales rose 9% to $5.5 billion. Analysts estimated earnings of 16 cents per share on revenues of $5.55 billion.
Stocks in Focus
CareFusion is likely to see buying interest on news that it will replace Manitowoc (MTW) in the S&P 500 Index after the close of trading on August 31st, 2009. CareFusion is to be spun off from Cardinal Health (CAH) in a transaction to be completed on or about that date.
FMC Technologies is likely to see some buying interest after it said it received a contract from StatoilHydro ASA to manufacture subsea equipment for the Marlim filed located in the Compos Basin, offshore Brazil. The contract will result in revenues of about $90 million for the company.
AAR Corp. could see weakness after it said its first quarter earnings are likely to come in between 23 and 27 cents per share. The company expects sales of $330 million to $345 million. The consensus estimates call for earnings of 41 cents per share on revenues of $354 million. The company attributed the lower than expected earnings guidance to a cut back on inventory and maintenance visit levels by commercial airlines.
Marathon could move to the upside after Fitch announced that it reaffirmed its BBB+ rating on the debt of the company. The agency upgraded its rating outlook on the company to “Stable” from “Negative”, citing an improved outlook due to the progress the company has made on asset sales.
Pride International could be in focus after it said it has completed the spin-off of Seahawk Drilling (HAWK), its former subsidiary that owns 20 mat-supported jackup rigs operating in the Gulf of Mexico. The company said the spin-off was concluded by way of a pro-rata stock dividend.
Winn-Dixie Stores may also react to its announcement that its fourth quarter earnings rose to 17 cents per share from 10 cents per share last year. Revenues were up about 1% to $1.72 billion. Analysts estimated earnings of 16 cents per share on revenues of $1.71 billion. The company said it expects its same store sales to rise 1%-2% in 2010, while it estimates the year’s EBITDA to be $170 million to $180 million. |