US & World Daily Markets Financial Briefing 24-09-2010

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Stocks Sharply Higher In Mid-Morning Trading

Stocks are posting strong gains in mid-morning trading on Friday, as new home sales data indicated that the housing market may have hit bottom while durable goods orders came in better than expected.

The major averages have seen additional gains since shooting higher at the open and have recently set fresh session highs. The Dow is currently up 179.14 points or 1.7 percent at 10,841.56, the Nasdaq is up 37.70 points or 1.6 percent at 2,364.78 and the S&P 500 is up 20.09 points or 1.8 percent at 1,144.92.

While existing home sales showed a notable rebound in the month of August, the Commerce Department released a report showing that new home sales for the month remained unchanged at a level indicating continued weakness in the market.

New home sales in the month of August came in at an annual rate of 288,000, unchanged from the revised rate for July. Economists had expected new home sales to rise to an annual rate of 291,000 from the 276,000 originally reported for the previous month.

Before the start of trading, the Commerce Department said durable goods orders fell by 1.3 percent in August following a revised 0.7 percent increase in July. Economists had expected orders to drop by 1.4 percent compared to the 0.4 percent growth that had been reported for the previous month.

Excluding a 10.3 percent drop in orders for transportation equipment, however, durable goods orders actually increased by 2.0 percent in August compared to a revised 2.8 percent decrease in July. The increase far exceeded economist estimates for 0.6 percent growth.

In earnings news, KB Home (KBH) reported a third-quarter net loss of $0.02 per share, while analysts expected a loss of $0.15 per share for the quarter. Total revenues increased 9 percent to $501.0 million, topping forecasts that called for $483.53 million.

After the markets closed for trading in the previous session, Nike Inc. (NKE), the world's largest maker of athletic shoes and apparel, said that its first quarter profit rose 9 percent from last year due to higher revenue and improved gross margin. The company's quarterly earnings also came in above analysts' expectations.

Meanwhile, chipmaker Advanced Micro Devices Inc. (AMD) lowered its revenue outlook for the third quarter due to weaker than expected demand, particularly in the consumer notebook market in Western Europe and North America.

For the third quarter, AMD now expects revenue to decline in a range of 1 percent to 4 percent from the $1.65 billion reported for the second quarter. The outlook implies a revenue range of $1.58 billion to $1.63 billion for the third quarter.

Sector News

Networking stocks are among the morning's best performers, with the NYSE Arca Networking Index posting a 3.1 percent gain. With the advance, the index has jumped to its best intraday level in four and a half months.

Electronic storage stocks are also seeing substantial gains, driving the NYSE Arca Disk Drive Index up by 2.8 percent. The upward move is lifting the index back towards a recent six-week closing high.

Semiconductor, steel, housing and defense stocks are also seeing notable upside on the day amid a broad-based market rally.

Stock Driven By Analyst Comments

CNO Financial (CNO) is trading higher after being reiterated at Outperform by analysts at Wells Fargo. Shares are currently up by 5.4 percent, bouncing off of a two-week closing low.

American States Water (AWR) is also on the upside after seeing its Buy rating reiterated at Baird. The stock is up by 2.3 percent and is on pace for a seven-week closing high.

Other Markets

Overseas, the major stock markets in the Asia-Pacific region ended on a mixed note. Japan's benchmark Nikkei 225 Index slid by 1 percent, while Hong Kong's Hang Seng index gained 0.3 percent.

Meanwhile, the major European markets are all notably higher. The French CAC 40 Index and the German DAX Index are up by 1.7 percent and 1.4 percent, respectively, while the U.K.'s FTSE 100 Index is up by 0.9 percent.

In the bond markets, treasuries are moderately lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.594 percent, posting a gain of 3.9 basis points.

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TSX May Edge Up At Open As Gold Glitters

Bay Street stocks may open higher Friday amid strong bullion prices and recovery in energy prices. However, cues from the global equity markets were mixed.

While Asian markets closed on a mixed note, European equities were moving higher after business sentiment rose in Germany, the biggest economy in the euro zone.

On Thursday, the S&P/TSX Composite Index lost 45.46 points or 0.37% to 12,101.79, extending losses for a third session.

The price of crude oil edged up for a second session after German business sentiment rose unexpectedly to 106.8 in September from 106.7 in August. Crude for November added $0.78 to $75.96 a barrel.

The price of gold soared to a psychological $1,300-mark amid a weak U.S. dollar. Gold for December rose $3.20 to $1,299.50 an ounce, after hitting an intraday high of $1,301.30.

Australian miner BHP Billiton said it has been granted early termination by U.S. regulators of the mandatory waiting period under the HSR Act. The termination is effective immediately, thereby ending the HSR waiting period for the proposed acquisition of Canadian fertilizer company Potash Corp. for $ 39 billion.

In corporate news from Canada, bio pharmaceutical company YM BioSciences reported a wider fourth quarter net loss of C$8.6 million or C$0.11 per share compared to a loss of C$3.3 million or C$0.06 per share in the year ago period.

Gold mining company Minera IRL said it would not exercise its pending options to acquire the La Falda Project in Chile and the Killincho Project in Peru.

GPS technology services provider WebTech Wireless said it would be getting a $1.65 million order for its its patented technology form Los Angeles County Metropolitan Transportation Authority.

Engineering technology services provider Reko International Group reported a wider fourth quarter net loss of C$2.2 million or C$0.33 per share compared with a loss of $1.4 million or $0.20 per share a year ago.

Precious metals explorer Terrane Metals said its shareholders approved the previously announced acquisition by Thompson Creek Metals.

Infrastructure technology services company Pure Technologies said its subsidiary, the Pressure Pipe Inspection received $1.3 million orders from Hong Kong Water Supplies Department.

In economic news from south of the border, the U.S. Commerce Department said that durable goods orders fell by 1.3% in August following a revised 0.7% increase in July. Economists were expecting orders to drop by 1.4% compared to the 0.4% growth that had been reported for the previous month.

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Asian Markets End Mixed

Asian markets open for trading, except the Chinese market, ended mixed on Friday, the last trading day of the week. The Chinese market is closed for a holiday. The markets in Australia, Japan and Taiwan ended in negative territory, while the markets in Hong Kong, India, Indonesia, Singapore and South Korea ended in positive territory with modest gains, on optimism about sustaining global economic recovery, notwithstanding weak closing on Wall Street in the previous session amid mixed economic data.

In Australia, the benchmark S&P/ASX200 Index declined 31.70 points, or 0.68%, and closed at 4,602 points, while the All-Ordinaries Index ended at 4,651, representing a loss of 28.50 points, or 0.61%.

On economic front, Wayne Swan, Treasury Secretary revealed that Australia's Final Budget Outcome for 2009-10 showed a small fiscal improvement from the estimate of the May Budget, due to lower spending. The final budget outcome revealed an underlying cash deficit of A$54.8 billion or 4.2% of gross domestic product for 2009-10. This was around A$2.3 billion lower than estimated at the 2010-11 budget. The fiscal balance was in deficit by $52.9 billion.

Light sweet crude oil futures for November delivery ended at $74.94 a barrel in electronic trading, down $0.24 per barrel from previous close at $75.18 a barrel in New York on Thursday.

Banks ended in negative territory amid concerns about global economic recovery. ANZ Bank slipped 1.13%, Commonwealth Bank of Australia shed 1.16%, National Australia Bank fell 1.54% and Westpac Banking Corp. was down 0.97%. Investment banking company Macquarie Group declined 1.06%.

Gold related stocks also ended in negative territory. Newcrest Mining plunged 2.49% and Kingsgate Consolidated edged down 0.17%.

Mixed trading was witnessed among oil related stocks. Woodside Petroleum edged up 0.09% and Santos Ltd advanced 0.86%. However, ROC Oil Ltd plunged 4.76%, Origin Energy slipped 0.50% and Oil Search Ltd declined 0.97%.

Resource stocks also witnessed mixed trading. Mining giant BHP Billiton slipped 0.46%, Rio Tinto shed 0.56%. Among others, Gindalbie Metals fell 0.56%, Mincor Resources lost 1.51%, Murchison Metals plunged 2.16% and Oz Minerals drifted down 4.06%. However, Fortescue Metals gained 1.00%, Iluka Resources climbed 1.67% and Macarthur Coal gained 1.37%.

In Japan, the benchmark Nikkei 225 Index ended the day at 9,472, down 94.65 points, or 0.99%, while the broader Topix index of all First Section issues lost 8.11 points, or 0.96%, to 838.

Mixed economic data and weakening of the US dollar against the major currencies impacted market sentiment in early trading. However, intervention of the Japanese authorities in the foreign exchange market to arrest the strengthening of the local currency against the dollar limited the losses.

Exporters ended in negative territory following strengthening of the local currency against the US dollar.

The Indian market bounced back sharply on Friday after two days of consolidation, with strong foreign fund inflows and a move by the government to hike FII limit in the debt market underpinning sentiment. The 30-share Sensex saw a lackluster start and struggled thereafter for direction till the mid-session before resuming its positive momentum to end higher by 184 points or 0.92% at 20,045, with 25 of its components edging higher. Jindal Steel (down 1.19%), Sterlite Industries (down 0.23%), Tata Motors (down 0.17%), TCS (down 0.11%) and Mahindra & Mahindra (down 0.05%) were the laggards. The broader market also followed suit. The BSE mid-cap and small-cap indexes closed up a little over a percent each. On the BSE, gaining shares outpaced declining ones by 1899 to 727 shares.

The market in China was closed for a public holiday.

Among the other markets in the region, Jakarta Composite Index in Indonesia ended in positive territory with a gain of 60.43 points, or 1.81%, at 3,398, and the Strait Times Index in Singapore advanced 9.55 points, or 0.31%, to close at 3,093. However, the Taiwan Weighted Index bucked the trend and ended in negative territory with a loss of 35.92 points, or 0.44%, at 8,167.

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French Stocks Erase Early Losses

The French market erased early losses and is trading in positive territory in afternoon trading Friday, as less than expected fall in durable goods orders in the U.S. gave investors confidence in the growth of economy.

The November Nymex crude oil futures contract is higher by $0.73 at $75.91 and December gold was at $1299.7 per troy ounce, up $3.4 from its New York close.

In economic news, the French economy grew at a faster pace between April and June than previously estimated, official figures showed. Statistical office Insee said gross domestic product rose 0.7% between April and June compared to three months earlier. This is slightly better than the 0.6% expansion estimated earlier and the 0.2% rise in the first quarter.

Germany's annual import price inflation rose 8.6% year-over-year in August, slower than the 9.9% rise in the previous month, a report by the Federal Statistical Office revealed. Meanwhile, German business confidence improved unexpectedly in September. The corresponding index rose to 106.8 from 106.7 in the previous month, the Munich-based Ifo institute reportedly said.

In the U.S., orders for manufactured durable goods showed a notable decrease in August, according to a report released by the Commerce Department. Durable goods orders fell 1.3% in August following a revised 0.7% increase in July. Economists had expected orders to drop 1.4%.

The CAC 40 opened lower at 3,688 and had been in negative territory for most of the session. The index is currently gaining 1.09%.

Telecom equipment maker Alcatel Lucent is gaining 5.3%, thus leading the gainers. Airbus maker EADS is rising 2.5%.

Lenders Credit Agricole, Natixis and Societe Generale are adding between 3.3% and 1.6%. BNP Paribas is rising 1%.

Those making notable gains include Schneider Electric, cosmetics giant Loreal, rela estate company Unibail-Rodamco, chemical firm Air Liquide, tyre company Michelin and luxury conglomerate LVMH.

Power transmission company Alstom, water utilities Veolia Environnement as well as Suez Environment, and heavy construction firm Bouygues are losing moderately.

Elsewhere in Europe, the FTSE 100 is adding 0.55% and the German DAX is gaining 0.91%.

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KB Home (KBH) is rallying in Friday’s after hours session after it reported a loss of 2 cents per share, narrower than the net loss of 87 cents per share last year. Revenues rose 9% to $501 million. Analysts estimated a loss of 15 cents per share on revenues of $483.53 million.

AmerisourceBergen (ABC) could be in focus after it authorized a new share repurchase program to buy $500 million worth of shares, effective after completion of the current repurchase program.

Zale (ZLC) may also see some activity after its board named its interim CEO Theo Killion to the post of CEO on a permanent basis.

Anixter International (AXE) could gain ground after it announced that its board declared the payment of a special dividend of $3.25 per share for a total cash outlay of $110 million.

Comtech Telecommunications (CMTL) rallied sharply in Thursday’s after hours session after it reported fourth quarter non-GAAP earnings of 73 cents per share. Net sales rose to $256.95 million from the year-ago’s $122.03 million. Analysts estimated earnings of 58 cents per share on revenues of $237.53 million.

However, Finish Line (FINL) slipped in Thursday’s after hours session after it reported second quarter income from continuing operations of 31 cents per share compared to 21 cents per share last year. Sales edged up 0.8% to $301.1 million. The consensus estimates had called for earnings of 36 cents per share on revenues of $316 million. The company also said its same store sales for the period from August 29th through September 19th rose 6.2% on top of a 7% increase in the year-ago period.

Advanced Micro Devices (AMD) rose moderately in Thursday’s after hours session despite reducing its third quarter revenue outlook. The company now a expects 1%-4% sequential revenue decline, translating to revenues of $1.64 billion to $1.58 billion. The company attributed the toned down outlook to weak demand, particularly in the consumer notebook market in Western Europe and North America.

Nike (NKE) rose sharply in Thursday’s after hours session after it reported first quarter earnings of $1.14 per share, up 10% year-over-year. The company’s revenues rose 8% to $5.2 billion. Analysts estimated earnings of $1.01 per share on revenues of $5.22 billion. The company also noted that future orders, scheduled for delivery from September 2010 through January 2011, totaled $7.1 billion, up 10% year-over-year.

Tibco Software (TIBX) may also be in focus after it reported that its third quarter non-GAAP net income rose to 17 cents per share from 13 cents per share last year. Revenues climbed to $184.5 million from the year-ago’s $150.3 million, exceeding the $175.46 million consensus estimate. Separately, the company announced a deal to buy OpenSpirit Corp., an application software provider for the global oil and gas market. The company did not divulge the terms of the deal.