US & World Daily Markets Financial Briefing 16-09-2010

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Stocks Mostly Lower Following Disappointing Philly Fed Report

Stocks are mostly on the downside in mid-morning trading on Thursday, as traders are digesting a worse than expected reading on Philadelphia-area manufacturing activity. Traders are also weighing an unexpected drop in jobless claims and a slightly bigger than expected pickup in producer prices.

The major averages have seen choppy trading following the news and are currently posting modest losses. The Dow is down 11.99 points or 0.1 percent at 10,560.74, the Nasdaq is down 4.13 points or 0.2 percent at 2,297.19 and the S&P 500 is down 2.92 points or 0.3 percent at 1,122.15.

While a report released by the Federal Reserve Bank of Philadelphia showed that its reading on regional manufacturing activity in the month of September increased compared to the previous month, the index unexpectedly remained negative.

The Philly Fed said its diffusion index of current activity rose to a negative 0.7 in September from a negative 7.7 in August, with a negative reading indicating a contraction in activity. Economists had been expecting the index to rise to a positive reading of 2.0.

Earlier, the Labor Department reported that first-time claims for unemployment benefits unexpectedly showed a modest decrease in the week ended September 11th, falling to a key psychological level.

Initial jobless claims fell to 450,000 from the previous week's revised figure of 453,000. Economists had expected jobless claims to rise to 460,000 from the 451,000 originally reported for the previous week.

Commenting on the data, Peter Boockvar, equity strategist at Miller Tabak, said, "The 450kish level of claims is definitely an improvement from the high levels of late July and thru August but is still elevated historically speaking."

In a separate report, the Labor Department said that its producer prices index rose by 0.4 percent in August following a 0.2 percent increase in July. The increase in producer prices came in slightly above economist expectations for 0.3 percent growth.

Core producer prices, which exclude food and energy prices, edged up by a more modest 0.1 percent in August compared to a 0.3 percent increase in July. The modest increase came in line with estimates.

In earnings news, FedEx Corp. (FDX) reported that its first-quarter net income came in at $1.20 per share, which was nearly in-line with estimates for earnings of $1.21 per share. Revenues for the quarter totaled $9.46 billion, topping expectations for $9.41 billion for the quarter.

FedEx now projects fiscal 2011 earnings of $4.80 to $5.25 per share, up from the company's previous estimate of $4.60 to $5.20 per share. Analysts expect the company to report earnings of $5.19 per share for fiscal 2011.

Software firm Oracle Corp. (ORCL) and Blackberry-maker Research in Motion (RIMM) are scheduled to report their quarterly results after the closing bell.

Sector News

Housing stocks are among the steepest percentage decliners thus far in the session, with the Philadelphia Housing Sector Index falling by 1.6 percent. The decline is taking the index further off of the one-month closing high it set on Monday.

Healthcare provider stocks are also under pressure, seeing some selling after yesterday's upside. The Morgan Stanley Healthcare Provider Index is down by 1.3 percent after ending the previous session at its best closing level in over a month.

Brokerage, banking and electronic storage stocks are also retreating, while substantial upside is visible among gold stock. The NYSE Arca Gold Bugs Index is up by 1.3 percent and is on target for a fresh nine and a half month closing high.

The upward move among gold stocks comes amid a continued increase by the price of gold, with gold futures up by $5.60 to $1,274.30 an ounce on the day.

Stocks Driven By Analyst Comments

Biotech firm Medicis (MRX) is trading higher after analysts at Jefferies boosted their rating on the stock from Hold to Buy. The broker also raised its target on the stock from $29 to $41. The stock is up by 1.3 percent after setting a three-year intraday high in earlier trading.

Electrical equipment manufacturer Regal-Beloit (RBC) is also on the upside after Robert W. Baird upgraded the stock from Neutral to Outperform. Shares are currently up by 2.3 percent, setting a one-month intraday high.

Meanwhile, industrial machinery maker Actuant (ATU) is under pressure after KeyBanc Capital Markets downgraded the stock from Buy to Hold. The stock is down by 1.4 percent, slipping from the four-month closing low set in the previous session.

Other Markets

Overseas, stock markets in the Asia-Pacific region saw modest losses on Thursday. Japan's benchmark Nikkei 225 Index inched down by 0.1 percent, while Hong Kong's Hang Seng Index edged down by 0.2 percent.

The major European markets are also seeing modest selling. The U.K.'s FTSE 100 Index is and the French CAC 40 Index are both down by 0.2 percent, while the German DAX Index is down by 0.4 percent.

In the bond markets, treasuries are showing modest weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.752 percent, posting a gain of 2.9 basis points.

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TSX May Edge Up At Open Thursday

Toronto stocks are poised for a marginally higher open Thursday after data showed an unexpected drop in U.S. weekly jobless claims, easing worries over the job market in the world's biggest economy.

Gold stocks may be in play with bullion prices advancing to a fresh record high in morning deals. On Wednesday, the S&P/TSX Composite Index shed 48.14 points or 0.40% to 12,144.84, snapping its three day winning streak.

The price of crude oil continued to move down for a third session, amid worries over demand growth. Crude for October was down $0.84 to $75.18 a barrel.

The price of gold surged to a fresh all-time high amid a weak dollar. Gold for December gained $5.70 to $1,274.40 an ounce.

Fertilizer maker Potash Corp. is planning to assemble a China led buy-out group to avert a $130 per share bid from the Australian miner BHP Billiton, the Globe and Mail said.

In corporate news from Canada, blackberry maker Research In Motion will release its second quarter earnings report today after the markets close. Analysts expect the company to report earnings per share of $1.36.

Oil transportation services provider Enbridge Inc said its U.S. subsidiary, Enbridge Energy Partners L.P. has completed repairs to 670,000 per day crude oil pipeline and will restore services from September 17 morning.

Wireless services provider WebTech Wireless said Andrew Morden, has been appointed as CFO of the company, effective October 4.

Oil and gas firm Georox Resources Inc. announced a non-brokered equity private placement of up to 6 million units at a price of C$0.22 per unit.

Base metals miners Ivanhoe Mines said it had inducted Michael Gordon, former Executive Vice President of Anglo American Plc, and Dan Westbrook, former President, BP China Gas, Power & Upstream, into it Board of Directors.

In economic news from the U.S., the Labor Department said that initial jobless claims fell to 450,000 from the previous week's revised figure of 453,000. Economists were expecting the claims to rise to 460,000 from the 451,000 originally reported for the previous week.

Separately, the department said said that its producer prices index rose by 0.4% in August following a 0.2% increase in July. The increase in producer prices came in slightly above economist expectations for 0.3% growth. Core producer prices, which exclude food and energy prices, edged up by a more modest 0.1% in August compared to a 0.3% increase in July and in in line with estimates.

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Profit Taking Drags Asian Markets Lower

Asian markets open for trading on Thursday ended in negative territory as traders paused to lock in gains from the recent rally and await further cues related to jobless claims, producer price index and manufacturing survey from the US. Lack of positive cues, other than the US market ending in positive territory at close led by dollar strengthening, provided the adequate excuse for the traders to lock in gains following recent gains.

In Japan, the benchmark Nikkei 225 Index shed 7.06 points, or 0.07% to 9,510, while the broader Topix index of all First Section issues was down 3.93 points, or 0.46%, to 845.

On the economic front, a report released by the Ministry of Economy, Trade and Industry revealed that an index measuring tertiary industrial activity in Japan climbed 1.6% in July compared to the previous month, coming in at a seasonally adjusted 98.9. That was sharply higher than analyst expectations for a 0.7% increase following the 0.1% monthly decline in June.

Light sweet crude oil futures for October delivery ended at $75.05 a barrel in electronic trading, down $0.97 per barrel from previous close at $76.02 a barrel in New York on Wednesday.

Inpex Corp., engaged mining and oil exploration, was the major loser in the market having shed 3.77%. and dragged the market indices lower.

Insurance related stocks also ended in negative territory. MS&AD Insurance holdings fell 2.84%, Tokio Marine Holdings lost 1.65%, T&D Holdings slipped 0.71% and NKSJ Holdings was down 1.50%.

Gas related stocks also ended weaker. Osaka Gas Co declined 1.55% and Tokyo Gas Co fell 1.75%.

Electric power companies also declined during the day. The Kansai Electric Power Co. shed 1.71%, Chubu Electric Power Co. lost 1.92% and the Tokyo Electric Power Co. fell 1.99%.

In Australia, the benchmark S&P/ASX200 Index declined 56.20 points, or 1.21%, and closed at 4,605 points, while the All-Ordinaries Index ended at 4,650, representing a loss of 52.70 points, or 1.12%.

On the economic front, official figures released by the Australian Bureau of Statistics revealed that the value of merchandise imports decreased sharply in August compared to the previous month. The Bureau revealed that the value of merchandise imported into the country last month totaled A$17.4 billion, a decrease of A$1.3 billion or 7% on the July total of A$18.7 billion. On a balance of payments basis, goods imports slumped A$1.2 billion in seasonally adjusted terms to A$17.6 billion in August. Intermediate & other merchandise goods imports fell 12%. Capital goods and non-monetary gold fell 3% and 22% respectively, while consumption goods edged up 1%.

A report released by the Melbourne Institute revealed that Australia's median consumer inflationary expectations rose to 3.1% in September from 2.8% in August. As per the report, the proportion of consumers expecting inflation to be within the RBA's 2-3% target range rose slightly in September, reaching 19% from 18.9%. Commenting on the report, Michael Chua, a research fellow at the Melbourne Institute, said the rise in the expectations index probably reflected the better labor market numbers in August and the strong 1.2% GDP expansion recorded for the April to June period.

Light sweet crude oil futures for October delivery ended at $75.05 a barrel in electronic trading, down $0.97 per barrel from previous close at $76.02 a barrel in New York on Wednesday.

Banks ended in negative territory on profit taking. ANZ Bank declined 2.07%, Commonwealth Bank of Australia lost 2.16%, National Australia Bank slipped 0.62% and Westpac Banking fell 1.48%. Investment banking company Macquarie Group was down 1.99%.

Mining and metal stocks also declined following softer commodity prices in the international commodities market. BHP Billiton declined 1.75%, Rio Tinto shed 2.01%, Fortescue Metals fell 3.38%, Gindalbie Metals were down 1.58%, Macarthur Coal lost 3.27%, Minara Resources slipped 1.80%, Murchison Metals declined 2.72% and Oz Minerals plunged 4.07%.

Oil-related stocks also ended in negative territory on lower crude oil prices. Woodside Petroleum edged down 0.16%, Santos Ltd slipped 0.55%, ROC Oil Ltd shed 1.25%, Origin Energy declined 0.18% and Oil Search Ltd lost 1.15%.

The Indian market closed an extremely volatile session modestly lower on Thursday, as weak global markets weighed on sentiment. The Reserve Bank of India's monetary policy announcement was in line with expectations, though a 50-basis points hike in reverse repo rate surprised analysts. By hiking the short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points and 50 basis points, respectively, the central bank signaled banks to raise their deposit rates to compensate savers for the risk of rising inflation. Data on food inflation released Thursday showed that food prices rose by 15.10% during the week ended September 4 versus 11.47% in the previous week, as prices of essentials like vegetables and milk became costlier owing to supply disruptions following heavy rains. The 30-share Sensex ended down about 85 points or 0.43% at 19,417, with 19 of its components edging lower. The broader Nifty fell by 32 points or 0.55% to 5,829.

Among the other major markets open for trading, China's Shanghai Composite Index ended in negative territory with a loss of 50.04 points or 1.89%, at 2,602, Indonesia's Jakarta Composite Index slipped 15.40 points or 0.46% to 3,342, Taiwan's Weighted Index lost 64.07 points, or 0.78%, to close at 8,100, and Singapore's Strait Times Index shed 3.92 points, or 0.13% to 3,067.

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French Market Moderately Down

The French market is moderately down in afternoon trading Thursday as a dip in August retail sales volume in the U.K. hurt investor sentiment, along with weak cues from Asia where markets closed lower on fears of the Japanese government stepping in again to control the yen.

Crude for October delivery is sliding $0.85 at $75.17 per barrel and gold is adding $7.3 at $1276 an ounce.

In economic news, U.K.'s retail sales volume including automotive fuel dipped 0.5% in August from July, the Office for National Statistics said. Economists were expecting a 0.3% rise after a 0.8% increase in July.

Switzerland's industrial production increased year over year in the second quarter, but came in slightly lower than economists' expectations. The Swiss Federal Statistical Office said industrial output increased 7.8% on an annual basis in the second quarter, while economists were looking for a rise of 8%. In the first quarter, output was up 5.1%.

Sweden's unemployment rate declined more than expected during August. The non-seasonally adjusted jobless rate was 7.4% in August, Statistics Sweden said, down from 8% in July. Economists were looking for an unemployment rate of 7.8%.

Meanwhile, the Eurozone's trade balance with the rest of the world rose to a bigger-than-expected surplus in July, due to the fall in imports outpacing that of exports. The unadjusted surplus came in at EUR 6.7 billion, compared with the EUR 2.2 billion surplus in June. Economists had predicted the surplus to fall to EUR 1.3 billion.

The CAC 40 started trading slightly higher from the previous close at 3,758. Despite seeing some strength in early trade, the index has been languishing in negative territory for most of the session and is currently down 0.55%.

Most banking stocks are witnessing a decline. Credit Agricole is losing 2.5%, BNP Paribas is down 1.4% and Societe Generale is slipping 0.4%. However, Dexia is adding 0.3%.

Car manufacturers Renault and Peugeot are sliding 2% and 1.5%, respectively. Heavy construction firm Bouygues is sliding 2.1% and peer Vinci is down 0.5%. EADS, the maker of Airbus, building materials maker Saint-Gobain and Air France-KLM are each down 1.7%.

Chipmaker STMicroelectronics, dairy products maker Danone and cement giant Lafarge are making notable losses.Schneider Electric, drugmaker Sanofi-Aventis and grocery retailer Carrefour are on the winning side.

Elsewhere in Europe, the UK's FTSE 100 is losing 0.30% and the German DAX is sliding 0.55%.

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FedEx (FDX) is likely to be in the spotlight after it reported that its first quarter earnings rose to $1.20 per share from 58 cents per share in the year-ago period. Revenues rose 18% to $8.01 billion. Analysts estimated earnings of $1.20 per share on revenues of $9.41 billion. The company alsoraised its full year earnings estimate to $4.80 to $5.25 per share from its earlier estimate of $4.60 to $5.20 per share, while it expects second quarter earnings of $1.15-$1.35 per share. The consensus estimates call for earnings of $5.19 per share for the year and $1.36 per share for the second quarter.

Dress Barn (DBRN) saw moderate weakness in Wednesday’s after hours session after it reported fourth quarter non-GAAP earnings of 47 cents per share compared to 38 cents per share last year. Net sales climbed 78% to $710.9 million, with the bulk of the increase due to the inclusion of Justice sales of $245.6 million. Analysts estimated revenues of $679.23 million.

LifePoint Hospitals (LPNT) is likely to see some buying interest after it announced that its board has authorized a new stock purchase program thar authorizes repurchase of up to $150 million worth of its common stock over the next 18 months.

Apogee Enterprises (APOG) receded in Wednesday’s after hours trading after it reported loss from continuing operations of 18 cents per share for its second quarter compared to earnings of 46 cents per share for last year. Revenues fell 23% to $144.7 million, softer than the consensus estimate of $145.38 million. The company also said it expects company wide revenues to be down 15% year-over-year in 2010 and a loss for the second half of the year, although expecting positive cash flow from operations for the second half of the year. Analysts estimate a 15.7% decline in revenues for 2011.

Enbridge Energy Partners (EEP) could be in focus after it announced that it is preparing to safely return the Line 6A pipeline to service on Friday, September 17th. The pipeline transports heavy and medium crude oil from Superior, Wisconsin, to Griffith, Indiana. The pipeline was shut earlier after a leak was identified in Romeoville, Illinois.

Abbott Labs (ABT) is expected to see some activity after it said a FDA Committee to review the results of its SCOUT trial and its weight loss medication Meridia were divided over whether the product needs to be withdrawn due to concerns about higher risks of heart problems and strokes.

ClARCOR (CLC) rose in Wednesday’s after hours session after it reported that its third quarter earnings rose to 55 cents per share from 42 cents per share last year. Net sales rose 14% year-over-year to $262.8 million, exceeding the consensus estimate of $261.29 million. Citing its strong third quarter performance, the company raised the low-end of its full year earnings guidance to $1.80 from $1.70 per share. The company now expects earnings of $1.80-$1.85 per share on 10.5%-11% sales growth, while analysts are looking for 10.20% sales growth.

GameStop (GME) also rallied strongly in Wednesday’s after hours session after it announced board approval for setting aside $500 million in repurchase funds. The company clarified that $300 million will be used to buy back shares and $200 million for retiring senior notes.

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