US & World Daily Markets Financial Briefing 02-09-2010

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Stocks Moving Mostly Higher As Traders Digest Data

While buying interest has remained somewhat subdued, stocks have moved mostly higher in morning trading on Thursday. Traders are digesting another batch of economic data, including a report showing an unexpected increase in pending home sales.

The Nasdaq and the S&P 500 are posting moderate gains, while the Dow is only just above the unchanged line. While the Dow is up 3.63 points or less than 0.1 percent at 10,273.10, the Nasdaq is up 10.32 points or 0.5 percent at 2,187.16 and the S&P 500 is up 3.78 points or 0.4 percent at 1,084.07.

The National Association of Realtors said its pending home sales index rose by 5.2 percent in July following a revised 2.8 percent decrease in June. Economists had been expecting the index to come in unchanged compared to the 2.6 percent drop originally reported for the previous month.

Separately, the Commerce Department reported that orders for manufactured goods edged up by 0.1 percent in July following a revised 0.6 percent decrease in June, although factory orders had been expected to increase by 0.3 percent.

Before the start of trading, the Labor Department said that initial jobless claims edged down to 472,000 from the previous week's revised figure of 478,000. Economists had expected jobless claims to inch up to 475,000 from the 473,000 originally reported for the previous week.

August retail sales from some major U.S retailers are also in focus, as Target reported a 1.8 percent increase, Saks posted a pickup of 1 percent, Kohl's registered 4.5 percent growth and wholesaler Costco saw a 7 percent jump.

In corporate news, Hewlett-Packard Co. boosted its bid for electronic storage firm 3Par (PAR) to $33 per share after Dell Inc raised its offer to $32. Dell has since backed out of the bidding process.

Burger King has surged higher after the firm entered an agreement to be purchased by private capital firm 3G for $24 per share or nearly $4 billion, including debt.

Homebuilder Hovnanian Enterprises, Inc. said that its third quarter loss narrowed from last year but was still far sharper than expected, while its revenues also missed analyst projections.

Sector News

Housing stocks are among the day's best performers, with the Philadelphia Housing Sector Index up by 1.7 percent. The upward move has lifted the index to a three-week intraday high.

Healthcare provider stocks are also seeing a strong upward move, resulting in a 1.1 percent gain by the Morgan Stanley Healthcare Provider Index. The advance is lifting the index further off of the one-year closing low set earlier this week.

Semiconductor, gold and airline stocks are also on the upside, while some weakness in the utility sector has resulted in a 0.7 percent decline by the Philadelphia Utility Sector Index.

Stocks Driven By Analyst Comments

Zumiez is trading higher after analysts at Caris & Company boosted their rating on the stock from Above Average to Buy. The stock has gained 6.1 percent, reaching a one-month intraday high.

MCG Capital is also on the upside after FBR Capital Markets raised its rating on the stock from Perform to Outperform. The broker also boosted its price target on shares from $5 to $7. The stock is up by 5 percent, also rising to its best intraday price in a month's time.

On the other hand, Companhia Vale do Rio is posting a modest loss after RBC Capital Markets dropped its rating on the stock from Outperform to Sector Perform. Shares are down by 0.5 percent.

Other Markets

Overseas, stock markets in the Asia-Pacific region saw strong gains on Thursday. Japan's benchmark Nikkei 225 Index gained 1.5 percent, while Hong Kong's Hang Seng Index moved up by 1.2 percent.

Meanwhile, the major European markets are seeing modest upside. The French CAC 40 Index is up by 0.5 percent, while the German DAX Index and the U.K.'s FTSE 100 Index are both up by 0.1 percent.

In the bond markets, treasuries are showing moderate weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.614 percent, posting a gain of 3.2 basis points.

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TSX May Struggle To Sustain Gains Thursday

Toronto stocks may struggle to sustain gains Thursday morning after advancing for the past six sessions. While commodities prices were almost flat, cues from the global equity markets were mixed. Most Asian markets ended higher and stocks in Europe were little changed after the ECB left its rates at record low amid a gloomy economic outlook.

Traders are likely to turn cautious ahead of the all important non-farm payroll report for August from south of the border Friday.

On Wednesday, the S&P/TSX Composite Index advanced for a sixth session, adding 89.93 points or 0.76% to 12,003.78, following better-than-expected factory data from the U.S. and China.

The price of crude oil was trading almost flat after rebounding nearly 3% in the previous session, even after the official data revealed a 3.4 million barrels pile up in U.S. crude inventories last week. Crude for October was down $0.24 to $73.67 a barrel.

The price of gold was holding onto its recent gains, with gold for December adding $2.30 to $1,250.40 an ounce.

Reportedly, China's Sinochem has hired HSBC to advise it on various options regarding Potash Corp. In mid-August, Australian mining giant BHP Billiton had made a hostile $130 per share bid for the Canadian fertilizer maker, but later indicated it would not hike its bid price.

In corporate news from Canada, TD Bank reported improved third quarter net income of C$1.13 billion or C$1.29 per share versus C$863 million or C$1.01 per share last year. On an adjusted basis, net income for the quarter remained almost flat at C$1.30 billion. Adjusted earnings per share were C$1.43 compared with C$1.47 in the prior year period. Analysts were expecting the bank to report net earnings of C$1.44 per share this quarter.

CIBC said it has completed its acquisition of an about $2-billion credit card portfolio from Citigroup Inc.'s (C) Canadian MasterCard business, making it the largest dual issuer of Visa and MasterCard credit cards in Canada.

Canadian Western Bank reported improved third quarter net income of C$42.79 million or C$0.59 per share, compared to C$24.93 million or C$0.38 per share in the year-ago quarter.

Swiss mining company Xstrata plc said today its wholly owned subsidiary Xstrata Zinc does not intend to proceed with the acquisition of remaining stake in Canada-based open-ended trust Noranda Income Fund
Diamond mining and retail company Harry Winston Diamond swung to profit in second quarter, reporting net income of $16.5 million or $0.22 per share, compared to net loss of $24.5 million or $0.32 per share in the prior year quarter.

In economic news from south of the border, the U.S. Labor Department said that initial jobless claims edged down to 472,000 from the previous week's revised figure of 478,000. Economists were expecting the claims to inch up to 475,000 from the 473,000 originally reported for the previous week.

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Asian Markets Extend Gains On Wall Street Cues

Asian markets ended Thursday's trading session in positive territory lifted by smart rally in the US after manufacturing survey came in better than expected, soothing the nerves of traders about the health of the US economy. Buoyant economic data from across the world lifted market sentiment boosting hopes of sustaining global economic recovery and avoiding double dip recession. Almost all the stocks ended with modest gains amid caution ahead of key economic data related to jobs report in the US.

In Japan, the benchmark Nikkei 225 Index rose 135.82 points, or 1.5%, to 9063 while the broader Topix index of all First Section issues gained 8.02 points, or 1.0%, to 819.

On the economic front, a statement released by the Bank of Japan revealed that the monetary base in the country rose 5.4% year-over-year in August, standing at 98.399 trillion yen, following a 6.1% annual increase in July. The report further noted that on seasonally adjusted basis, the monetary base shed 4.2% on year to 99.474 trillion yen in August.

As many as 31 of the 33 sectors in the market ended in positive territory on optimism that global economic recovery will be sustained and the chances of either stalling recovery or double-dip recession look bleak.

Machinery stocks and exporters led the gains on optimism about global economic recovery. Kyocera Corp. climbed 3.30%, Fanuc Ltd advanced 1.20%, TDK Corp. rose 2.48%, Denso Corp. was up 3.04%, Sony Corp. added 2.19%, Canon Inc. gained 1.15%, Advantest Corp. increased 1.51% and Panasonic Corp. edged up 0.37%.

Mixed trading was witnessed among automotive stocks. Honda Motor gained 1.85%, Mitsubishi Motors rose 1.89%, Suzuki Motor Corp. advanced 1.48%, Nissan Motor climbed 2.95% and Isuzu Motors was up 1.05%. However, Toyota Motor Corp. bucked the trend and ended in negative territory with a loss of 0.25%, and Mazda Motor declined 0.54%.

Shipping transport stocks ended in positive territory. Nippon Yusen added 0.91%, Mitsui OSK Lines climbed 2.81% and Kawasaki Kisen Kaisha advanced 0.95%.

In Australia, the benchmark S&P/ASX200 Index gained 37.00 points, or 0.82%, and closed at 4,533 points, while the All-Ordinaries Index ended at 4,563, representing a gain of 36.20 points, or 0.80%.

On the economic front, a report released by the Australian Bureau of Statistics revealed that the country's trade surplus for July unexpected compared to the previous month, largely due to lower exports of commodities such as coal, iron ore and non-monetary gold. The trade balance showed a surplus of A$1.9 billion in July compared to the A$3.4 billion surplus in the previous month. Economists were looking for a surplus of about A$3.1 billion. Exports of goods and services fell 4% in July compared to A$25.4 billion. The decrease was largely due to a 6% fall in exports of non-rural goods. Imports, on the other hand, were up 2% from the previous month to A$23.5 billion. Imports of intermediate goods climbed 9%, and those of consumption goods rose 1%.

Light sweet crude oil futures for October delivery ended at $73.82 a barrel in electronic trading, down $0.09 per barrel from previous close at $73.91 a barrel in New York on Wednesday.

Banking stocks ended in positive territory on optimism about global economic recovery. ANZ Bank gained 1.25%, Commonwealth Bank of Australia rose 1.19%, National Australia Bank advanced 1.09% and Westpac Banking climbed 1.39%. However, investment banking company Macquarie Group bucked the trend and ended in negative territory with a loss of 1.06%.

Mining and metal stocks also ended higher. BHP Billiton added 1.08%, Rio Tinto advanced 1.25%, Gindalbie Metals gained 1.65%, Iluka Resources rose 1.06%, Macarthur Coal increased by 1.47%, Mincor Resources edged up 0.56%, Murchison Metals soared 8.19% and Oz Minerals climbed 2.45%.

Mixed trading was witnessed among energy-related stocks. Woodside Petroleum advanced 0.77% and Oil Search added 0.17%. However, Santos Ltd ended in negative territory with a loss of 1.61% and Origin Energy slipped 0.13%.

The Indian market failed to hold its initial gains on Thursday despite a rally on Wall Street overnight and notable gains across Asia. The benchmark indexes pared gains after the European markets opened in the red ahead of interest rate decision from the European Central Bank and data on U.S. pending home sales. Wall Street also looked poised for a tepid start ahead of Friday' s non-farm payrolls report. The 30-share Sensex finished the range-bound session 32 points or 0.18% higher at 18,238, while the 50-share Nifty rose by 14 points or 0.26% to 5,486.

Among the other major markets open for trading, China's Shanghai Composite Index gained 32.89 points, or 1.25%, to 2,656, Singapore's Strait Times Index added 3.83 points, or 0.13%, to 2,987, and Taiwan's Weighted Index advanced 52.57 points, or 0.69%, to close at 7,721. However, Jakarta Composite Index in Indonesia bucked the trend and ended in negative territory with a loss of 13.17 points, or 0.42%, at 3,122.

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After trading below the unchanged line amid some volatility for much of Thursday’s morning session, the major European averages are now showing divergence. The French CAC 40 Index and the U.K.’s FTSE 100 Index are rising 0.19% and 0.07%, respectively, while the German DAX Index is showing a modest lost.

In a key central bank decision, the European Central Bank left its key interest rate unchanged at a record low of 1% for the 16th month.The last change in the key interest rate was in May 2009, when the bank cut the rate by 25 basis points to the current level of 1%. The bank has lowered the key interest rate by a total of three and a quarter percentage points since early October 2008. The central bank also retained its interest rate on the marginal lending facility at 1.75% and that on the deposit facility at 0.25%.

A below-target inflation gives room for the central bank to hold the key rate. Consumer price inflation in the 16-nation bloc had eased to 1.6% in August from a 20-month high, reflecting lack of underlying inflationary pressure.

U.S. Economic Reports

First-time claims for unemployment benefits showed a modest decrease in the week ended August 28th, according to a report released by the Labor Department, with the decrease offsetting an upward revision to the previous week's data.

The Labor Department said that initial jobless claims edged down to 472,000 from the previous week's revised figure of 478,000. Economists had expected jobless claims to inch up to 475,000 from the 473,000 originally reported for the previous week
A separate report released by the Labor Department showed that labor productivity in the second quarter fell by much more than had originally been estimated.

The report showed that labor productivity in the second quarter fell by a revised 1.8% compared to the previously reported 0.9% drop. The drop in productivity during the quarter had been expected to be revised to 1.7%.

Additionally, the Labor Department said that the increase in unit labor costs was upwardly revised to show 1.1% growth compared to the more modest 0.2% increase that had been reported previously. The upward revision to the pace of labor cost growth was in line with economist estimates.

The Commerce Department is due to release its report on factory goods orders for July at 10 AM ET. Orders for manufactured goods are likely to have increased 0.3% in the month. In June, factory goods orders fell 1.2% following a 1.8% decline in the previous month.

Data on Pending Home Sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 AM ET. A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. The index is expected to remain unchanged in July.

In June, pending home sales fell by 2.6% month-over-month following a steeper 29.9% drop in May. Economists had expected the index to decrease by 5%.

Stocks in Focus

Hovnanian Enterprises (HOV) could be in focus after it reported third quarter revenues of $380.6 million, lower than $387 million in the year-ago period. The company reported a loss of 92 cents per share, narrower than the loss of $2.16 per share in the year-ago period. Analysts had estimated a loss of 52 cents per share on revenues of $385.96 million.

Cigna (CI) could see some activity after it announced the resignation of its Annmarie Hagan from the post of CFO, effective September 1, 2010. The company also announced the appointment of its VP and treasurer Thomas McCarthy to the post of CFO on an interim basis.

Collective Brands (PSS) is likely to move in reaction to its announcement that its second quarter earnings per share rose to 32 cents per share from 29 cents per share last year. Net sales rose 0.6% to $841.3 million. Analysts estimated earnings of 46 cents per share on revenues of $863.27 billion.

Among retailers, Hot Topic (HOTT) reported a 3.7% decline in its same store sales for August. Fred’s (FRED) said its same store sales rose 3.6%, reversing the 1.4% decline in the year-ago period. Costco’s (COST) same store sales for August rose 7%. Excluding the effect of gasoline and the strengthening of foreign currencies, same store sales rose 5%.

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Dollar Sputters Ahead Of Jobless Claims

The dollar held its ground versus other major currencies Thursday morning ahead of another prelude to tomorrow's closely-watched monthly jobs report.

Its been a rough week for the dollar, which has hovered near a recent 15-year low against the yen and turned lower against the euro on rising stocks.

The Department of Labor's weekly jobless claims report is due out today at 8:30 am ET.

Economists expect weekly jobless claims to rise to 475,000 from 473,000 reported for the previous week. Weakness in the jobs market has bled into the greater economy, fueling talk of a double-dip recession.

At the same time, the Labor Department will release its revised report on second quarter non-farm productivity and unit labor costs. Economists project the productivity growth be revised down by 1.6%.

At 10.00 a.m. ET, the Commerce Department will release its report on factory goods orders for July. Economists project that factory goods orders rose by a modest 0.3% during the month following a 1.2% decline in the previous month.

The dollar was little-changed versus the yen, within a whisker of August's 15-year low of Y83.63. The markets have ignored comments from Japanese officials intended to talk down the yen, which has been boosted by the unwinding of carry trades.

The dollar also paused versus the euro after falling sharply in the previous session. The buck hit a 2-week low of 1.2855 yesterday, and was edging back toward that mark this morning.

Eurozone logged its biggest growth in four years as estimated in the second quarter, lifted by investment and exports.

Economic growth in the second quarter was 1% on a sequential basis, preliminary data released by the European Union statistical office Eurostat showed Thursday. The agency confirmed the flash estimate issued on August 13.

Against the sterling, the dollar was slightly improved at 1.5400.

UK house prices fell 0.9% compared to July, faster than the 0.5% decrease in the previous month. Economists had forecast a 0.3% drop.

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