US & World Daily Markets Financial Briefing 26-03-2010

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Stocks Posting Moderate Gains After Upbeat Consumer Sentiment Report

Stocks are up by moderate margins in mid-morning trading on Friday, as the markets digest an upbeat reading on consumer sentiment and the strongest final reading on gross domestic product in roughly six years. The major averages are all in positive territory and are looking to build on this week's solid gains.

Reuters and the University of Michigan said that consumer sentiment in the month of March was slightly better than previously estimated, with the revised reading on sentiment coming in well above economists' expectations.

The consumer sentiment index for March was upwardly revised to 73.6 from the previously reported 72.5 and is now flat compared to the February reading. Economists had expected a more modest upward revision to a reading of 73.0.

While the index of current economic conditions rose to 82.4 in March from 81.7 in February, the index of consumer expectations fell to 67.9 from 68.4 in the previous month.

Before the opening bell on Wall Street, the Commerce Department released a report showing that gross domestic product increased at an annual rate of 5.6 percent in the fourth quarter compared to the 5.9 percent growth that was reported last month.

Despite the downward revision, the pace of GDP growth in the fourth quarter still marks a notable acceleration from the 2.2 percent growth in the third quarter and is still the fastest pace of growth since the third quarter of 2003.

The markets are also looking for any additional news out of the second day of a European Union summit after France and Germany agreed yesterday to dispatch a joint loan to debt embattled Greece with additional financial support sourced from the International Monetary Fund.

In corporate news, Oracle Corp. (ORCL) said that its third quarter profit fell 10 percent from last year, as higher restructuring and other operating costs offset a 17 percent increase in revenue.

The company's quarterly earnings per share, excluding items, came in line with analysts' estimates, while quarterly revenue topped analysts' forecast. The company also said its new software license sales rose for the second straight quarter.

Technology outsourcing and consulting firm Accenture Plc (ACN) said that its profit for the second quarter declined 3 percent from last year, hurt by lower revenues on weak performance from almost all its operating units.

Quarterly earnings as well as revenues failed to meet analysts' expectations. Looking ahead, the company lowered its earnings outlook for fiscal year 2010, citing the impact of a stronger U.S. dollar.

The major averages have all seen choppy movement in recent dealing, hovering near their highs of the session. The Dow is up 47.01 points or 0.4 percent at 10,888.22, the Nasdaq is up 12.74 points or 0.5 percent at 2,410.15 and the S&P 500 is up 6.23 points or 0.5 percent at 1,171.96.

Sector News

Airline stocks are showing notable strength in mid-morning trading, helping the NYSE Arca Airline Index to a 2.1 percent gain. The index continues to move in a range, hovering near a more than two-year high.

Housing stocks are also seeing buying interest, as reflected by the 1.5 percent advance by the Philadelphia Housing Sector Index. Homebuilder Lennar (LEN) is helping to lead the sector higher, posting a 2.6 percent gain. Although the stock has not taken out its recent intraday highs it is on target for its best closing level in nearly two years.

Steel, oil service and gold stocks are also moving markedly higher, indicative of the day's strength in the resource sector. Notably, the Philadelphia Oil Service Sector Index is up by 1.7 percent, bouncing off of yesterday's six-week closing low.

Meanwhile, moderate weakness is visible among electronic storage stocks, driving by NYSE Arca Disk Drive Index down by 0.9 percent. The index is moving lower for the third straight session, puling further away from a recent two-month closing high.

Bay Street Likely Poised For A Mixed Open Amid Data

Canadian stocks may struggle to find direction Friday morning amid mixed global cues. While a marginal recovery in the prices of commodities will likely to help lift sentiment, the just released GDP numbers from the U.S., the country's largest trading partner, might cap any big upside.

However, traders may put worries over the Greece debt situation on the back burner, at least for some time now, as the EU leaders agreed to a plan to backup Greece debt. According to the accord announced yesterday, Greece would get coordinated bilateral loans from the euro zone and IMF if situation turns worse.

On Thursday, the S&P/TSX Composite Index ended almost flat easing 4.85 points or 0.04% to 11,958.11, after having hit an intra-day high of 12,048.67.

The price of oil was up $0.64 to $81.17 a barrel and bullion edged up $5.0 to $1,097.90 an ounce.

In corporate news, hydrogen generation and fuel cell products company Hydrogenics Corp (HYG.TO) turned to profit in fourth-quarter, reporting net profit of $1.64 per share versus a loss of $0.53 per share last year, largely due to recording a gain of $10.4 million in connection with the transaction with Algonquin Power Income Fund completed on October 27, 2009.

Oil and natural gas explorer Niko Resources closed the acquisition of Voyager Energy Ltd. by issuing an aggregate of 397,379 common shares to the former shareholders of Voyager in exchange for all of the issued and outstanding shares of Voyager.

Oil and gas firm Winstar Resources swung to profit in fourth quarter reporting a net income of C$0.04 per share, compared to a net loss of C$0.11 per share for the year-ago quarter.

Petroleum and gas explorer Midway Energy reported fourth quarter net loss of C$0.04 per share, compared to a loss of C$0.10 per share in the prior year quarter.

Royalty properties company Franco-Nevada reported improved net income for the fourth quarter at $0.36 per share, compared to $0.15 per share in the year-ago quarter.

Pharmaceutical company Biovail Corp. said its subsidiary, Biovail Laboratories International SRL, has acquired certain AMPAKINE compounds, including associated intellectual property, from Cortex Pharmaceuticals, Inc.

Bio pharmaceutical company MethylGene Inc. slipped into the red, reporting fourth quarter loss of C$0.12 per share, compared to a net profit of C$0.19 per share last year.
Mineral explorer MAG Silver reported wider net loss for 2009 at $0.27 per share, compared to a loss of $0.12 per share in the prior year.

Investment management company Sceptre Investment Counsel reported net earnings of C$0.08 per share for the first quarter, compared to C$0.07 per share in the prior year quarter.

Telecommunications software services provider Intrinsyc Software International reported a narrower loss of $0.02 for 2009, compared to $0.26 in 2008.

Home products retailer Brick Group Income Fund turned to profit reporting fourth quarter consolidated net income of C$12.24 million, compared to a loss of C$224.13 million in the year-ago quarter.

In economic news from the U.S. the Commerce Department said the nation's gross domestic product grew at an annual rate of 5.6% in the fourth quarter compared to the 5.9% growth that was reported last month. Economists had expected the pace of fourth quarter GDP growth to be unrevised.

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The major Asian averages moved higher on Friday, deriving support from the resilience shown by the U.S. markets overnight despite being in overbought territory.

Japan’s Nikkei 225 average opened higher and moved sideways in the morning before legging up further in the afternoon. The index closed up 167.52 points or 1.55% at 10,996.37. During the session, the index breached the 11,000 level for the first time since October 3rd, 2008 before pulling back slightly. The yen’s weakness and economic optimism helped sentiment during the day.

A majority of stocks advanced in the session, with only 10 of the 225 index components closing the session lower. Alps Electric, Chiyoda, Fukuoka Financial, Kajima, Kirin Holdings, Kuraray, Mitsui Sumitomo, Nitto Boseki, Obayashi and Pioneer were among the notable advancers. On the other hand, Heiwa Real Estate slumped 6.23%.

On the economic front, Japan’s Ministry of Internal Affairs and Communication released its report on Japanese consumer price inflation, which showed that core consumer prices declined 1.2% year-over-year in January compared to the 1.3% decline in the previous month. Going by the core consumer price inflation rate for the Tokyo region, which is considered the leading indicator for the trend in the whole of Japan, BNP Paribas commented that the national inflation rate will not exclusively continue to moderate, but will fluctuate in the months ahead.

Despite trading below the unchanged line for the bulk of the session, Australia’s All Ordinaries staged a late hour recovery. The index closed up 8.90 points or 0.18% at 4,905, its highest level since January 18th, 2010. Healthcare stocks led the day’s advances, with material, industrial and financial stocks offering some support. However, consumer staple, energy, IT and telecommunication stocks moved to the downside.

A report released by the Conference Board showed that Australia’s leading economic indicators index fell for the first time in eight months in January, with the index edging down 0.2% to 113.7. The coincident indicators index rose 0.4% to 115.1.

Hong Kong’s Hang Seng Index opened lower, but it recovered in early trading and thereafter began moving sideways until late trading. Subsequently, the index climbed higher to close up 274.56 points or 1.32% at 21,053. Thirty-five of the forty-two index components closed higher, with retailer Esprit Holdings leading the advance with a 4.77% gain. Property stocks also showed notable buying interest.

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After the solid advance in the previous session, the major European markets are showing weakness on Friday. The French CAC 40 Index is declining 0.19% compared to a 0.22% drop by the German DAX Index, while the U.K.’s FTSE 100 Index is receding 0.26%.

In corporate news, U.K. home insurance company Homeserve said it expects the underlying annual profit at its core membership businesses to come in at the top end of market expectations due to the healthy sales trend seen in recent months.

On the economic front, an indicator of French consumer confidence fell to –34 in March from –33 in February, the results of a survey by French statistical office INSEE showed. Economists had expected an improvement in the index to –32.

U.S. Economic Reports

The revised fourth quarter GDP report released by the Bureau of Economic Analysis showed a downward revision to the preliminary estimate, with GDP now being estimated to have increased by 5.6% quarter-over-quarter compared to the 5.9% growth estimated originally. Economists had been expecting an unchanged reading.

The revision stemmed from downward revisions to non-residential fixed investment, private investment and to personal consumption expenditure. Meanwhile, the acceleration in GDP growth in the fourth quarter relative to the third quarter was due to an acceleration in private inventory investment, an upturn in nonresidential fixed investment, an acceleration in exports, and a deceleration in imports that were partly offset by decelerations in personal consumption expenditure and in federal government spending.

The Reuters/University of Michigan's final report on the consumer sentiment index for March is scheduled to be released at 9:55 AM ET. The consumer sentiment index is expected to be revised up to 73 from the mid-month of reading of 72.5.

Federal Reserve Governor Kevin Warsh is due to speak to a Shadow Open Market Committee symposium on maintaining central bank independence in New York at 11:30 AM ET.

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Oracle (ORCL) moved lower in Thursday’s after hours session after it reported that its third quarter GAAP total revenues rose 17% year-over-year to $6.4 billion and said its non-GAAP revenues climbed 18% to $6.5 billion. The company’s non-GAAP earnings rose 9% to 38 cents. The company noted that its new software license revenues were up 13% and applications new license revenues were up a steeper 21%. Analysts estimated earnings of 32 cents per share on revenues of $6.35 billion.

Accenture (ACN) may recede after it reported second quarter net revenues of $5.54 billion, down from $5.66 billion in the year-ago period, but higher than the consensus estimate of $5.21 billion. The company reported earnings of 60 cents per share, missing the consensus estimate of 61 cents per share. The company lowered its revenue guidance for the full year, saying it now expects revenues at the low end of its previous guidance range of a negative 3% to positive 1% in local currency. The company also lowered its earnings per share guidance by 6 cents per share to $2.61-$2.69. Analysts estimate earnings of $2.70 per share on revenues of $21.77 billion.

Cost Plus (CPWM) rallied strongly in Thursday’s after hours session after it reported that its fourth quarter sales fell 4.6% to $335.4 million. The company reported a profit of 95 cents per share compared to a loss of 83 cents per share last year. For the first quarter, the company expects net sales in the range of $185 million to $188 million.

Finish Line (FINL) could move in reaction to its announcement that its fourth quarter net sales rose 8.9% to $374.5 million. The company reported income from continuing operations that rose to 56 cents per share from 36 cents per share in the year-ago period. Analysts estimated earnings of 48 cents per share on revenues of $349.96 million. For March, the company reported comparable store sales growth of 15.5% compared to a 1.2% decline in the year-ago period.

Tibco Software (TIBX) may also move in reaction to its announcement that its first quarter revenues rose to $155 million from $132.9 million last year. The company reported earnings of 6 cents per share compared to 3 cents per share last year. On a non-GAAP basis, earnings rose to 12 cents per share from 9 cents per share. The consensus estimates called for earnings of 10 cents per share on revenues of $148.43 million.

CONSOL Energy (CNX) showed weakness in Thursday’s after hours session after it announced that it has priced its previously announced public offering of 38.5 million shares of its common stock at $42.50 per share.

Scientific Learning (SCIL) may see some activity after it announced that it has received approval from the NASDAQ Stock Market Listing Qualifications staff to transfer the listing of its common stock from the NASDAQ Capital Market to the NASDAQ Global Market. The company noted that the transfer would occur on March 29th, 2010.

Lexington Realty Trust (LXP) is likely to see weakness after it announced that it would issue and sell 7 million common shares. The company said it intends to use the net proceeds of the offering for general corporate purposes, including the repayment of debt.

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