US & World Daily Markets Financial Briefing 26-10-2009

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Stocks May Attempt to Rebound Even as Apprehensions Remain

The major U.S. index futures are pointing to a modestly higher opening on Monday, with the major averages poised to rebounding from the previous session's slide. In the absence of economic data to digest, the markets may focus on earnings, which have so far been bordering on the positive. Commodity prices are pulling back slightly, reflecting apprehension among traders against the backdrop of their recent run up.

U.S. stocks snapped a 2-session winning streak in the week ended October 23rd despite earnings largely coming in better than expected. Financial, biotechnology, transportation and airline stocks came under significant selling pressure.

Last Monday, the major averages advanced sharply, aided by strong earnings, with the Dow ending the session at a new closing high for the year. However, the markets largely ignored upbeat earnings on Tuesday and instead focused on a mixed housing market report and consequently, ended moderately lower.

Profit taking continued to weigh on the markets on Wednesday, as the major averages extended their declines. The equity market decline came amid a sharp rise in oil prices and the release of the Beige Book, which showed conditions are either stabilizing or modestly improving. Despite the release of a job market report that showed a bigger than expected increase in weekly jobless claims on Thursday, the markets advanced steadily throughout the session, ending notably higher. Turning a blind eye to strong earnings from some major companies and a fairly positive housing report, the major averages ended lower on Friday.

For the week, the Dow Industrials ended down 0.24% and the S&P 500 Index fell 0.74%, while the Nasdaq Composite Index lost 0.11%.

Among the sector indexes, the NYSE Arca Airline Index fell 7.03%, the NYSE Arca Biotechnology Index receded 5.79%, the Dow Jones Transportation Average declined 5.42% and the NYSE Arca Securities Broker/Dealer Index slipped 4.01%.

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Bay Street Stocks Poised For Lackluster Open

Toronto stocks could remain near the unchanged mark early on Monday as traders await the latest earnings news. The market fell to its lowest level in more than two weeks in the previous session.

On the commodity front, crude oil has declined 37 cents to $80.13 a barrel and gold dropped $2.60 to $1,053.80 an ounce, while copper has added 2.25 cents to $3.057 per pound.

Iamgold Corp. announced it now projects 2009 production of about 940,000 - 950,000 ounces of gold, an increase of 30,000 ounces over its prior guidance issued in June 2009.

DDi Corp. said it has offered to acquire all the outstanding shares of Coretec for C$0.20 per share, or approximately C$3.6 million.

Canfor Pulp Income Fund reported its third quarter net income of C$18.3 million or C$0.26 per share, compared to C$11.1 million or C$0.15 per share in the same period last year.

Later in the week, Canadian Pacific Railway and Nexen are among the companies reporting quarterly earnings results.

On Friday, the S&P/TSX Composite Index dropped 151.24 points or 1.31% to close at 11,382.13.

Currency, Commodity Futures

Crude oil futures are receding $0.26 to $80.24 a barrel after advancing for the fourth straight week in the week ended October 23rd, when oil rose over 1% to $80.50 a barrel. The November futures, which expired on Wednesday, rallied last Monday, rising over $1-a-barrel, only to recede on Tuesday, although moderately, as profit taking led to weakness following 8 straight sessions of gains.

The December futures, which began trading as the front-month contract on Wednesday, jumped by over $2-a-barrel, helped by a weakening dollar and the EIA's oil report, which showed a draw down in distillate and gasoline inventories.

Oil saw slight weakness on Thursday and fell further on Friday, as a rebounding dollar exerted downward pressure on the commodity.

Gold futures are currently trading down $2.20 at $1,054.20 an ounce. In the previous week, the precious metal gained $4.90 or 0.47% to $1,056.40 an ounce.

On the currency front, the U.S. dollar had a mixed week in the week ended October 23rd, ending stronger against the yen but weaker against the euro. The greenback rose 1.29% against the yen to 92.06 yen, while it fell 0.7% against the euro to $1.5008 per euro. The strength of the euro in the previous week reflected optimism that the global economy will rebound shortly.

Currently, the U.S. dollar is trading at 91.934 yen and is valued at $1.5019 versus the euro.

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Most Asian markets ended Monday's session higher, with the exception of the Australian and Indonesian markets, while the New Zealand and Hong Kong markets remained closed.

Japan's Nikkei 225 average opened lower and showed modest weakness in early trading. Thereafter, the index rebounded and advanced strongly, hitting a high of 10,398 by early afternoon trading, although it gave back some of its gains and closed up 79.63 points or 0.77% at 10,363.

Exporters rallied along with the rally in the dollar, while financial and construction stocks also gained ground in the session. On the other hand, Chiyoda slumped 12.59%. Some resource, real estate ands paper stocks also came under selling pressure.

Meanwhile, Australia's All Ordinaries languished in negative territory throughout the session before closing down 27.10 points or 0.56% at 4,833. A majority of stocks declined in the session. Mining stocks ended lower across the board, while among the four major banks, Westpac rose, but the rest declined. Insurance and oil stocks also came under selling pressure.

South Korea's Kospi ignored a weak start and advanced in early trading before moving sideways thereafter. The index closed up 16.94 points or 1.03% at 1,657. The market received support from a report, showing that the South Korean economy expanded at its fastest rate in seven years. The domestic economy grew 2.9% quarter-over-quarter in the September quarter following 2.6% growth in the previous quarter. Annually, GDP rose 0.6% following a 2.2% decline in the June quarter.

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After opening higher and showing volatility on Monday, the major European markets are currently showing notable strength. The French CAC 40 Index and the German DAX Index are rising 0.29% and 0.46%, respectively, while the U.K.'s FTSE 100 Index is moving up 0.22%. Utility, telecom, financial, pharma and chemical stocks are advancing strongly.

On the economic front, the GfK reported that its forward-looking consumer confidence index for November, indicating conditions for German consumers, fell to 4 in November from 4.2 in October. Economists had expected an increase by the index to 4.5. Among the three component indices, income expectations and the propensity to buy declined in October, while economic expectations improved again.

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Allergan may be in focus after it announced that the U.S. District Court of Delaware has ruled in favor of the company in its patent infringement lawsuit against Exela PharmSci and Apotex, which were seeking to market purported generic versions of Allergan's drug ALPHAGAN.

Yahoo is also expected to be in focus after it announced that activist investor Carl Icahn has given up his seat on Yahoo's board. Icahn said in a letter to the board that he no longer believes that Yahoo needed an activist investor like him at this point in time. His resignation takes effect immediately.

Ethan Allen may see some activity after the company said it has amended its existing 3-year senior secured revolving credit facility, increasing the line to $60 million by adding a $20 million loan commitment from Wells Fargo Retail Finance. The company also said its net sales for the September quarter totaled $136.2 million compared to $205.8 million last year. Analysts estimate sales of $150.42 million.

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