US & World Daily Markets Financial Briefing 13-08-2010

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Stocks Mixed In Mid-Morning Trading

Stocks are showing a lack of concrete direction in mid-morning trading on Friday following a continued influx of economic reports painting a murky economic picture. While the tech-heavy Nasdaq index is posting a moderate loss, the Dow and the S&P are little changed.

The Nasdaq is down 6.62 points or 0.3 percent at 2,183.65 and the S&P 500 is down 1.23 points or 0.1 percent at 1,082.38, while the Dow is up 1.89 points or less than 0.1 percent at 10,321.84.

On the economic front, Reuters and the University of Michigan reported that their consumer sentiment index rose to a reading of 69.6 in August from the final July reading of 67.8. Economists had been expecting the index to increase to a reading of 70.0.

The Commerce Department said that business inventories increased by 0.3 percent in June following an upwardly revised 0.2 percent increase in May. Economists had expected inventories to increase by 0.2 percent compared to the 0.1 percent increase originally reported for the previous month.

In a separate report released before the start of trading, the Commerce Department reported that retail sales increased by 0.4 percent in July following a revised 0.3 percent decrease in June. Sales had been expected to increase by 0.5 percent compared to the 0.5 percent drop originally reported for the previous month.

Excluding a 1.6 percent increase in sales by motor vehicle and parts dealers, retail sales increased by a more modest 0.2 percent in July compared to a 0.1 percent drop in June. The increase in ex-auto sales came in line with economist estimates.

Also this morning, the Labor Department said its consumer price index rose by 0.3 percent in July after edging down by 0.1 percent in June. Economists had been expecting the index to increase by 0.2 percent.

Core prices, which exclude food and energy prices, inched up by 0.1 percent in July following a 0.2 percent increase in the previous month. The modest increase in core prices met economist estimates.

In economic news overseas, Germany, the largest economy in the Eurozone, revealed that its GDP rose 2.2 percent sequentially in the second quarter following a 0.5 percent increase in the first quarter, well above estimates for growth of 1.3 percent.

On the earnings front, J.C. Penney Co. Inc. (JCP) reported second-quarter net income of $0.06 per share, edging out forecasts for $0.05 per share. Adjusted net income for the quarter was $0.20 per share.

Net sales for the quarter were $3.938 billion, short of estimates for $4.01 billion for the period. The firm also projected third quarter and full-year earnings below analyst expectations.

After the markets closed for trading in the previous session, fashion specialty retailer Nordstrom Inc. (JWN) said that its second quarter profit rose nearly 39 percent, as consumer spending continued to improve, resulting in a just over 8 percent increase in same-store sales.

Design software maker Autodesk, Inc. said that its second quarter profit jumped more than five-fold over last year, driven mainly by higher revenue and fewer restructuring charges. The company's quarterly earnings, excluding items, easily beat analyst estimates.

Sector News

Gold stocks are among the morning's worst performers, with the NYSE Arca Gold Bugs Index posting a loss of 0.8 percent, bouncing around in a recent range. The weakness in the sector comes amid a modest decrease by the price of gold.

Healthcare provider stocks are also under pressure, with the Morgan Stanley Healthcare Provider Index slipping by 0.5 percent. The index is extending recent weakness and is on pace for its lowest closing level in eight and a half months.

Meanwhile, moderate strength is visible among computer hardware stocks. The NYSE Arca Disk Drive Index is up by 0.8 percent, bouncing off of the nearly one-year closing low set on Thursday.

Utility stocks are also on the upside, further contributing to the mixed outing in the markets.

Stocks Driven By Analyst Comments

Strayer Education is trading lower after being downgraded by analysts at Morgan Stanley from Equal weight to Underweight based on valuation. The stock has fallen by 4.4 percent, setting a six-month intraday low.

On the other hand, Post Properties is up after RBC Capital Markets raised its rating on the stock from Underperform to Outperform. The broker also boosted its price target on the stock from $25 to $30. Shares are up by 1.6 percent, bouncing off of yesterday's three-week closing low.

Calgon Carbon is also trading higher after Wedbush boosted its rating on the stock from Neutral to Outperform. The stock has gained 3.1 percent, rebounding from the more than one-year closing low set in the previous session.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher to close out the week. Japan's benchmark Nikkei 225 ended the day up by 0.4 percent, while China's Shanghai Composite Index surged up by 1.2 percent.

Meanwhile, the major European markets are mixed. the U.K.'s FTSE 100 Index and the French CAC 40 Index are up by 0.3 percent and 0.1 percent, respectively, while the German DAX Index is down by 0.1 percent.

In the bond markets, treasuries are seeing moderate gains. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.709 percent, posting a loss of 2.6 basis points.

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TSX Poised For A Mixed Open After 3 Day Fall

Toronto stocks are poised for a mixed open Friday amid varied cues from the commodities markets. Also, data showing a modest rise in U.S. retail sales may help lift sentiment in the already beaten market, while traders will react to mixed earnings reports from some key Canadian companies.

On Thursday, the S&P/TSX Composite Index shed 58.61 points or 0.51% to 11,523.60, recording losses for a third session.

The price of crude oil edged up Friday morning, recovering from a three-day slump. OPEC today revised upwards its 2010 world oil demand growth estimate to 1.2% or 1.05 million barrels per day, or bpd. Total demand for 2010 was now expected to reach 85.5 million bpd, up from 84.46 million bpd in 2009. However, the cartel warned about supply overhang and slow demand in the second half of 2010 and did not revise its 2011 forecast. Crude for September was up $0.29 to $$76.03 a barrel.

The price of gold was little changed, holding on to its previous session's gain. Gold for December delivery edged down $1.20 to $1,215.50 an ounce.

In corporate news from Canada, oil and gas explorer Petrobank Energy and Resources reported an 18% increase in second quarter profit to C$41.05 million from C$34.67 million a year ago. However, on a per share basis, earnings were down to C$0.35 from C$0.40 in the year ago period.

Oil and gas industry services provider Savanna Energy Services posted a narrower second quarter loss of $0.10 per share, compared to $0.14 per share in the same quarter last year.

Oil and gas firm Bankers Petroleum turned to profit, reporting second quarter net income of $0.011 per share, compared to a loss of $0.009 per share last year.

Copper mining company Equinox Minerals swung to profit in second quarter, reporting net earnings of $73.44 million or $0.10 per share compared to a loss of $38.74 million or break even per share in the same quarter last year. Copper production for the quarter increased to $43.84 million tonnes from 24.41 tonnes in the year-ago quarter.

Palladium and gold miner North American Palladium reported a net loss for the second quarter of C$11.56 million or C$0.08 per share, compared to a net loss of C$9.81 million or C$0.11 per share in the year-ago quarter.

Precious metals miner Greystar Resources reported a second quarter loss of C$8.9 million compared to C$6.0 million in the year-ago period. Loss per share was flat at C$0.11 compared the prior year.

Investment company C.A. Bancorp Inc. said it would be selling its interest in Bermingham, comprised of preferred shares and common shares to Bermingham Foundation Solutions for C$11.5 million.

Insurance services provider Kingsway Financial Services reported a narrower second quarter net loss of $0.36 per share, compared to $0.70 per share in the year ago quarter.

Lumber manufacturing company Western Forest Products said it sold certain non-core properties to the Capital Regional District of Victoria, British Columbia for C$18.8 million.

Power systems solutions provider Turbo Power Systems said net loss for the second quarter widened to GBP 3.10 million or 0.6 pence per share from GBP 234 thousand or 0.1 pence per share in the previous year.

Nuclear energy company Cameco Corp. reported lower second-quarter net earnings of C$0.17 per share, compared to C$0.63 per share in the year ago quarter. For fiscal 2010, the company revised down its uranium sales guidance to 30 million pounds, from its previous outlook range of 31 million - 33 million pounds.

Bio pharmaceutical company Adherex Technologies said its second-quarter net loss narrowed to $ 0.4 million or a breakeven per share from $ 0.9 million or $ 0.01 per share in the prior-year quarter. The company added that it had completed a first closing of a non-brokered private placement of 240.07 million units at a price of $ 0.03 per unit for gross proceeds of $ 7.19 million.

In economic news, Statistics Canada said the number of new motor vehicle sold rose 2.5% to 130,135 units in June, largely helped by higher truck sales. Sales of trucks increased 3.2% to 72,709 units in June. For the past seven months, truck sales have surpassed passenger car sales, the agency noted.

In news from south of the border, the U.S. Labor Department said said its consumer price index rose by 0.3% in July after edging down by 0.1% in June. Economists were expecting the index to increase by 0.2%. Meanwhile, core prices, which exclude food and energy prices, inched up by 0.1% in July following a 0.2% increase in the previous month and inline with consensus estimates.

In another report, the U.S. Commerce Department said that retail sales increased by 0.4% in July following a revised 0.3% decrease in June. Economists had expected retail sales to increase by 0.5%. Excluding a 1.6 percent increase in sales by motor vehicle and parts dealers, retail sales increased by a more modest 0.2% in July compared to a 0.1% drop in June.

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Asian Markets Rebound On Bargain Hunting

Asian markets ended the trading session Friday, the last day of the trading week, in positive territory as traders resorted to bargain hunting at lower levels, taking cues from Wall Street where the major averages recovered from the day's lows and ended with modest losses in the previous session. Trading volumes were relatively less as most of the traders preferred to stay on the sidelines awaiting direction from the US.

In Japan, the benchmark Nikkei 225 Index rose 40.87 points, or 0.4%, to 9253, while the broader Topix index of all First Section issues rose 3.46 points, or 0.4%, to 831. As many as 26 of the 33 sectors in the markets witnessed gains in the market.

On the economic front, minutes of the Bank of Japan's policy board meeting held between July 14-15 revealed that the board members felt that both upside and downside risks to the Japanese economy are increasing, and opined that the pace of Japanese economic growth may slow. The minutes further added that there remains a serious degree of instability among the global financial markets. The board members added that they would closely monitor developments in the U.S. economy.

Trading companies ended in positive territory. Sumitomo Corp. gained 2.02%, Toyota Tsusho Corp. advanced 1.17%, Marubeni Corp. added 1.09%, Mitsui & Co. Ltd edged up 0.34% and Sojitz Corp. was up by 0.73%.

Exporters also advanced following pause in the strengthening of the yen against the US dollar. Canon Inc. edged up 0.14%, Panasonic Corp. climbed 1.97%, Sharp Corp added 0.35% and Sony Corp. rose 1.91%.

Shipping stocks also ended in positive territory on bargain hunting. Kawasaki Kisen Kaisha gained 1.17%, Nippon Yusen advanced 0.87% and Mitsui OSK Lines increased by 0.88%.

All Nippon Airways ended in positive territory with a gain of 0.38%.

In Australia, the benchmark S&P/ASX200 Index advanced 58.70 points, or 1.33%, and closed at 4,460 points, while the All-Ordinaries Index ended at 4,481, representing a gain of 58.50 points, or 1.32%.

Mining and metals stocks advanced on bargain hunting at lower levels. BHP Billiton gained 1.92%, Rio Tinto rose 2.32%, Fortescue Metals climbed 2.78%, Gindalbie Metals advanced 1.55%, Iluka Resources added 1.32%, Macarthur Coal was up 2.01%, Mincor Resources surged up 4.17%, Murchison Metals soared 4.69% and Oz Minerals increased by 4.29%.

Energy stocks also ended in positive territory. Woodside Petroleum gained 2.12%, Santos Ltd rose 2.49%, ROC Oil surged up 5.41%, Oil Search Ltd added 1.21% and Origin Energy increased by 2.08%.

Gold related stocks also advanced following rise in gold prices in the bullion market. Lihir Gold rose 2.38% and Newcrest Mining gained 2.51%.

Banks also advanced on bargain hunting. ANZ Bank added 0.36%, Commonwealth Bank rose 1.54%, National Australia Bank advanced 0.55% and Westpac Bank gained 1.40%.

Retailers also ended in positive territory. David Jones gained 2.77%, Harvey Norman advanced 1.74%, JB Hi-Fi Ltd added 1.50%, Reject Shop increased by 1.58%, Wesfarmers rose 1.94% and Woolworths was up by 0.41%.

Impressive earnings from SBI and Tata Steel, news-driven buying in several other bluechip stocks, and upbeat economic data from Germany and France lifted Indian equities higher on Friday. However, weekend profit taking and a lack of clear direction from the global markets limited the upside. Realty, consumer durable, banking, FMCG and oil/gas stocks led the gainers. The 30-share BSE Sensex ended up 93 points or 0.52% at 18,167, with 20 of its components ending in the green. The 50-share S&P Nifty rose by 36 points or 0.66% to 5,452,

Among the other major markets open for trading, China's Shanghai Composite Index ended in positive territory with a gain of 31.23 points, or 1.21% at 2,607, Taiwan's Weighted Index advanced 61.79 points, or 0.79%, to close at 7,892, Indonesia's Jakarta Composite Index rose 27.37 points, or 0.90%, to close at 3,053, and Singapore's Strait Times Index gained 12.93 points, or 0.44%, to 2,940.

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The major European markets have surrendered their early gains and are trading below the unchanged line. The French CAC 40 Index and the German DAX Index are currently receding 0.63% and 0.38%, respectively, while the U.K.’s FTSE 100 Index is moving down 0.17%. The declines are despite the economies in the region reporting better than expected GDP growth for the second quarter.

U.S. Economic News

With energy prices showing a significant increase in the month of July, the Labor Department released a report showing that consumer prices for the month increased by a little more than economists had been anticipating.

The Labor Department said its consumer price index rose by 0.3 percent in July after edging down by 0.1 percent in June. Economists had been expecting the index to increase by 0.2 percent.

Core prices, which exclude food and energy prices, inched up by 0.1 percent in July following a 0.2 percent increase in the previous month. The modest increase in core prices met economist estimates.

A report released by the Commerce Department showed that retail sales rose 0.4% month-over-month in July, slightly lesser than the 0.5% increase expected by economists. June’s data was revised to show a more modest decline of 0.3%. Excluding auto sales, retail rose 0.2%, in line with expectations. On a year-over-year basis, retail sales and retail sales, excluding autos, were up 5.5% and 4.9%, respectively.

The increase in the headline number was helped by a 1.6% rebound in auto sales, which reversed the 1.3% decline in the previous month. Gasoline sales climbed 2.3%, reversing the 2% drop in the previous month. However, most other categories showed sales declines.

Gasoline sales declined 2%, while sales decline at building material & garden equipment store sales slowed to 1.1% from the 9% drop in the previous month. On the other hand, sales at electronics & appliance stores, general merchandise stores and miscellaneous retail stores increased.

The preliminary report of the Reuters/University of Michigan's consumer sentiment survey for August is scheduled to be released at 9.55 AM ET. The consumer sentiment index is expected to increase to 70 from July's 67.80.

The Commerce Department is scheduled to release its business inventories report for June at 10 AM ET. The report summarizes the results from the monthly retail trade, wholesale trade and factory goods orders surveys. The report is expected to show a 0.2% increase in business inventories for the month.

Business inventories rose 0.1% month-over-month in May, slightly softer than the 0.2% increase expected by economists. However, business sales declined by 0.9%, resulting in an increase in the inventories to sales ratio to 1.24 from 1.23 in April.

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Nvidia (NVDA) reported a GAAP loss of 25 cents per share for its second quarter compared to a loss of 19 cents per share last year. The company’s revenues rose to $811.2 million from $776.5 million last year. Excluding a charge, the company’s earnings would have been 3 cents per share. Analysts estimated earnings of 11 cents per share on revenues of $831.88 million. For the third quarter, the company expects revenues to show 3%-5% sequential growth, translating to revenues of $835.54 million to $851.76 million, while analysts estimate revenues of $884.08 million.

Nordstrom (JWN) said its second quarter earnings rose to 66 cents per share from 48 cents per share last year. Net sales rose to $2.52 billion from the year-ago’s $2.23 billion. Analysts estimated earnings of 66 cents per share on revenues of $2.40 billion. The company maintained its 2010 earnings per share outlook of $2.50-$2.65, while analysts estimate earnings of $2.62 per share.

Autodesk (ADSK) reported that its second quarter non-GAAP revenues increased to 36 cents from 24 cents per share last year. Revenues rose 14% to $473 million. The results were ahead of the consensus estimates. The company expects third quarter non-GAAP earnings of 28-33 cents per share and revenues of $450 million to $475 million. The Street estimates earnings of 30 cents per share on revenues of $463.78 million. The company also said it expects non-GAAP operating margin to increase by 400-450 basis points in 2011.

DeVry (DV) reported that its fourth quarter earnings nearly double to 99 cents per share and revenues rose 28% to $506.7 million. The consensus estimates called for earnings of 82 cents per share on revenues of $487.18 million.

Other Corporate News

Oracle (ORCL) could be in focus after it said it has filed a complaint against Google (GOOG) for patent and copyright infringement. Oracle claimed that Google infringed on Java-related intellectual property while developing Android system to mobile phones.

Another stock that could move in reaction to a lawsuit is Eli Lilly (LLY), which said a U.S. district court has ruled against the company’s patent litigation for Strattera. The company said it would appeal this decision. With the ruling paving way for the entry of generic versions of the drug into the market, the company lowered its revenue guidance for 2010 and now expects revenue growth in the low-to-mid-single digits compared to its earlier guidance of mid-single digits. However, the company said earnings are unlikely to be impacted.

Barnes & Noble (BKS) could see some activity after Yucaipa, the firm run by billionaire Ron Burkle, expressed disappointment with a Delaware court ruling that the poison pill invoked by the bookseller is legal. Yucaipa said it has decided to take the message directly to the company’s shareholders at the upcoming 2010 Annual Meeting.

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