US & World Daily Markets Financial Briefing 24-01-2011

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Stocks Modestly Higher In Mid-Morning

Stocks are up slightly in mid-morning trading on Monday, seeing modest gains as traders are digesting a mixed batch of corporate earnings reports.

The major averages have all seen upside in recent dealing and are near their best levels. The Dow is up by 48.55 points or 0.4 percent at 11,920.39, the Nasdaq is up by 9.20 points or 0.3 percent to 2,698.74 and the S&P 500 has risen by 2.70 points or 0.2 percent to 1,286.05.

Fast food giant McDonald's (MCD) announced fourth-quarter net income of $1.15 per share, in-line with forecasts for $1.15 per share. Total revenues rose to $6.21 billion from $5.97 billion in the prior-year quarter, coming in slightly above the $6.21 billion projected by analysts. The stock is down by 0.6 percent.

Halliburton Co. (HAL) posted fourth-quarter net income of $0.66 per share, topping expectations for $0.63 per share. Total revenues came in at $5.16 billion, above expectations for $4.87 billion. Shares are up by 1.1 percent.

Steel Dynamics Inc. (STLD) reported income of $0.04 per share and $0.07 per share on an adjusted basis. Analysts expected the company to earn $0.09 per share for the quarter. Net sales increased to $1.53 billion from $1.18 billion last year, while four analysts projected revenue of $1.60 billion. The stock is down by 0.7 percent.

In other corporate news, Sanofi-Aventis (SNY) said it has extended its tender offer for shares of Genzyme Corp. (GENZ) at $69.00 per share. The offer was to expire on Friday, but is now scheduled to run out at 11:59 p.m. ET on February 15th. Sanofi Aventis is up by 0.5 percent, while Genzyme is down by 0.2 percent.

Sector News

Semiconductor, steel and housing stocks are seeing a strong outing in the early going, helping the major averages to their modest gains.

The respective sector indices are up by roughly 1 percent each as they are seeing a partial recovery from last week's losses.

Biotech, gold and telecomm stocks are seeing more modest gains, while some downside is present among banking and health insurance stocks.

Stocks Driven By Analyst Comments

Tyson Foods (TSN) is down after BB&T Capital Markets lowered their rating on shares from Buy to Hold. The stock is down by 2.4 percent, continuing its zig-zag movement.

Atwood Oceanics (ATW) is also under pressure after Dahlman Rose downgraded the stock from Buy to Hold. Shares are posting a loss of 1.1 percent, on pace for a two-week closing low.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw a mixed close on Monday. Japan's benchmark Nikkei 225 Index gained 0.7 percent, while Hong Kong's Hang Seng Index slid by 0.3 percent.

The major European markets are also seeing uneven trade. The U.K.'s FTSE 100 Index is up 0.5 percent, while the German DAX Index and the French CAC 40 Index are seeing losses of 0.8 percent and 0.1 percent, respectively.

In the bond markets, treasuries are modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 3.402 percent, posting a loss of 1.4 basis points.

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TSX Poised For A Mixed Open

Bay Street stocks are poised for a flat open Monday amid mixed cues from the commodities markets. Traders might also turn cautious ahead of Canada's inflation data due out Tuesday and a slew of earnings reports this week.

Canada's fourth-quarter earnings season kicks off this week, with Canadian National Railways and Canadian Pacific Railway reporting on Wednesday and Potash Corp on Thursday.

U.S. stock futures were pointing to a marginally higher open.

On Friday, the S&P/TSX Composite Index lost 72.75 points or 0.55 percent to 13,258.57, taking its cumulative losses in the past week to just over 200 points or 1.50 percent.

The main index recorded its lone gain last week on Tuesday after the BoC held steady its key rates at 1 percent and said the economy would grow by 2.4 percent in 2011 and 2.8 percent in 2012. However, the index ended as loser in the subsequent three days.

Oil stocks may be in play after Halliburton Co. said its fourth-quarter income more than doubled on increase in drilling activity around the globe. The oil services company reported net income of $605 million, or $0.66 per share, for the quarter ended December 31, compared to $243 million, or $0.27 per share a year ago. Revenue increased 40 percent to $5.2 billion.

Meanwhile,the price of crude oil resumed its southward journey after Saudi Arabia's oil minister said that the OPEC producers' group may hike output to meet rising demand for crude oil in 2011. Crude for March edged down $0.20 to $88.91 a barrel.

The price of gold moved up after falling 1.5 percent last week. Gold for February was up $5.60 to $1,346.60 an ounce.

In corporate news from Canada, geothermal heat pumps maker WaterFurnace Renewable Energy said it acquired the fixed assets and technology of Hyper Engineering Pty for $2.78 million.

Air pollution control systems maker BIOREM Inc. said it appointed Robert Wood as CFO of the company, effective February 7, 2011.

Mineral properties developer Buchans Minerals said it raised $3.0 million through a private placement with Northern Securities Inc. with a bought deal commitment. The offering will consist of $1.5 million in units and $1.5 million in flow-through units, at a price of $0.11 per unit and $0.13 per flow-through unit. On Friday the stock rose nearly 8 percent to C$0.140.

Electronic gaming company Amaya Gaming Group said it received a government permit to operate a public lottery in Kenya.

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French Market Slightly Up

The French market reversed early losses and is slightly up in afternoon trading Monday. Sentiment was influenced by mixed cues from Asia/Pacific amid a slew of economic reports from the region. Banks and carmakers are lower, while construction-related stocks are seeing upside.

In economic news, the French private sector expansion accelerated slightly in January with the headline composite output index rising to a four-month high of 56.9 from 56.3 in December, flash estimates from Markit Economics showed Monday. Meanwhile, French industrial demand increased significantly during the fourth quarter last year, but the outlook for this quarter remains dull, survey results released by the French statistical office INSEE showed.

German private sector growth in January was the strongest since June 2006, data from Markit Economics showed. The seasonally adjusted Markit Flash Germany Composite Output Index rose to 61 in January from 60.3 in December. Also, the Conference Board Leading Economic Index rose 0.9 percent from October to 106.0, compared to a revised 0.7 percent increase in the previous month.

In the U.K., the household finance index dropped to a 20-moth low of 36.1 in January from 39.9 in December. Around 34 percent of households reported a deterioration in their current finances, compared to just 6 percent that saw an improvement. The deterioration is at the fastest pace since April 2009, reflecting high inflation and unfavorable labor market conditions.

After opening slightly higher at 4,028, compared to the previous close of 4,017, the CAC 40 index has been seeing volatile trading that took it to either side of the unchanged line. The index is currently gaining 0.10 percent.

Building materials maker Saint-Gobain is advancing 2 percent. Builders Vinci and Bouygues are seeing gains. However, cement giant Lafarge is down about 1 percent.

Those making notable gains include beverages firm Pernod-Ricard, media company Vivendi and oil giant Total.

Schneider Electric is losing 2.9 percent and engineering group Alstom is falling 2.7 percent. Oil and gas services firm Technip, metal fabrication company Vallourec and Air Liquide are seeing notable losses.

Among banks, Credit Agricole, Societe Generale and BNP Paribas are falling, while Natixis is moderately rising.

Among carmakers, Peugeot is down 2 percent and Renault is dropping 0.7 percent.

Elsewhere in Europe, the UK's FTSE 100 is sliding 0.31 percent and the German DAX is losing 0.55 percent.

Across Asia/Pacific, major markets closed on opposite sides of the unchanged line. Australia's All Ordinaries gained 0.6 percent and Japan's Nikkei 225 added 0.7 percent. However, China's Shanghai Composite Index and Hong Kong's Hang Seng retreated 0.7 percent and 0.3 percent, respectively.

 In the U.S., futures point to a mixed open on Wall Street. In the previous session, the Nasdaq fell 0.6 percent, while the Dow rose 0.4 percent and the S&P 500 climbed 0.2 percent.

In commodities, crude for March delivery is sliding $0.31 to $88.80 per barrel and February gold is gaining $7.8 to $1348.8 a troy ounce.

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Indian Market Ends Higher; SBI Top Gainer

Shrugging off negative global cues and rate hike worries ahead of the central bank meeting tomorrow, the Indian market ended Monday's session notably higher, with banking, consumer durable, capital goods, realty and auto stocks leading the gainers.

After a flat opening, the benchmark BSE Sensex rose to a high of 19,195 by mid-session before paring some gains and ending up 144 points or 0.76% at 19,151. Likewise, the 50-share Nifty has given up some of its early gains to finish 47 points or 0.82% higher at 5,743.

Second-line stocks also followed suit and in the broader market, the breadth was fairly positive, with 1650 gainers versus 1137 decliners on the BSE.

Banking stocks led the gainers owing to upbeat results and short covering ahead of RBI's quarterly policy meet tomorrow. Economists expect the central bank to increase repo and reverse repo rates by at least 25 basis points each.

SBI (up 3.66%) led the gainers in the 30-share Sensex pack after the state-run lender beat market expectations with a 14% rise in quarterly net profit. Private sector lender ICICI Bank rose 1.69% on posting a healthy 31% rise in its quarterly net profit on the back of a fall in provisions to Rs.464 crore from Rs1,002 crore in the corresponding period last year.

HDFC Bank advanced 2.36%, Axis Bank rallied 3% and mortgage lender HDFC added 2.53%. Union Bank of India (up 3.33%) and Indian Bank (up 6.02%) jumped on the back of strong Q3 results.

Heavyweight Reliance Industries fell 1.57% after its third-quarter net profit fell slightly below expectations and concerns continued to weigh over the delay in ramp-up of gas production from its KG-D6 fields. Rival ONGC gained a little over 3%.

IT stocks such as Infosys (up 0.90%), TCS (down 0.56%) and Wipro (down 2.57%) closed on a mixed note. In the telecom sector, Bharti Airtel shed 0.82% after the country's largest mobile phone operator launched its 3G services in the southern state of Karnataka. Rival Reliance Communication slipped a percent, while Idea Cellular rose a percent.

Tata Steel, which raised $770 million via a follow-on public offering, closed 3% higher. SAIL eased 1.19% on FPO-related reports. GAIL (India) rose 1.46% and Oil India edged up 0.67% amid reports that they would jointly bid for shale gas assets in the U.S. and Australia.

In the auto sector, commercial vehicle manufacturer Ashok Leyland gained 2.70% despite reporting disappointing results. Hero Honda Motors slipped 0.33% after it executed a final binding licensing agreement with Japan's Honda Motor, in line with a pact approved by their respective boards on December 16.

Himalya International soared 9% after it signed a pact with U.K.-based New World Paradigm to set up hydroponic vegetable/fruits production systems in India. Mcnally Bharat Engineering climbed nearly 4% on bagging a Rs.33.45-crore order from BHEL.

Bharat Forge (up 2.41%) and Jyoti (up 4.73%) rallied on strong quarterly earnings. Four Soft jumped 7% on securing an overseas order. Mukta Arts added 1.16% after it acquired the distribution rights of English film Sanctum. Asian Paints fell 1.45% even as it posted a 16% rise in its third-quarter standalone net profit.

Elsewhere, the other Asian markets closed on a mixed note Monday, as the improving economic outlook in the U.S. failed to outweigh Chinese interest rate hike worries.

European stocks slipped in early trading as investors looked ahead to the second reading for U.K. fourth-quarter GDP data due on Tuesday.

Crude oil futures dropped further after a 2% drop last week, as the dollar was broadly higher against its major counterparts on Monday ahead of some key events this week that include Tuesday's release of consumer confidence numbers, Wednesday's interest rate decision by the Federal Reserve and GDP data on Friday. The Dow futures were largely unchanged.

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Dollar Pauses Ahead Of Fed Meeting

The dollar steadied Monday morning after significant losses in the previous week against the euro, as traders shrugged off another round of encouraging euro zone economic data.

The Federal Reserve meets this week, and is expected to maintain its record low interest rates and quantitative easing program despite evidence the economy is getting back on solid ground.

Powered by Germany, euro zone private sector growth picked up in January, raising the likelihood that the European Central Bank will hike interest rates sooner than forecast in order to combat inflation.

The dollar edged slightly higher to $1.3560 against the euro, having touched a 2-month low of $1.3640 Sunday evening. Earlier in January, the dollar hit a 4-month peak near $1.2875, but has since come under daily pressure.

Driven by both manufacturing and services, euro zone private sector activity rose to a six-month high. The Markit Flash Eurozone composite output index came in at 56.3 in January, up from 55.5 in December.

Eurozone industrial new order growth quickened in November, led by Portugal, Finland and Germany, official figures showed Monday.

Industrial orders rose 2.1% month-on-month in November, after rising 1.4% in October, the European Union Statistical office Eurostat said.

Meanwhile, the dollar was stable near $1.5940 versus the sterling, compared to $1.6010 overnight.

There was little movement against the yen, with the buck hovering near Y83. The buck was just below parity against its Canadian counterpart.

With no major economic data on tap for the day, traders might react to earnings from major corporates including Haliburton (HAL), McDonalds (MCD), American Express (AXP), Crane (CR) and Texas Instruments (TXN) among others slated to release their quarterly report cards.

The S&P Case-Shiller house price index for October, the Federal House Finance Agency's house price index also for October, and the Commerce Department's new home sales report for December will be released this week.

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