US & World Daily Markets Financial Briefing 28-07-2010

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Stocks Move Mostly Lower In Mid-Morning Trading

Stocks are mostly on the downside in mid-morning trading on Wednesday, as traders are digesting the latest batch of earnings news and a drop in durable goods orders. The movement has been relatively subdued however, as the markets are still awaiting the latest Beige Book report from the Federal Reserve.

In earnings news, Boeing Co. (BA) reported second-quarter earnings of $1.06 per share, topping forecasts for $1.01 per share, while its revenues for the quarter came in $15.57 billion, short of projections of $16.13 billion for the period.

Sprint Nextel Corp. (S) reported a wider second-quarter net loss compared to last year, showing a loss of $0.25 per share compared a loss of $0.13 per share last year. On average, analysts expected a loss of $0.20 per share for the quarter.

The company also posted second-quarter revenues of $8.02 billion, which were just short of the $8.03 billion estimated on Wall Street.

Meanwhile, ConocoPhillips (COP) reported a surge in its second-quarter earnings to $2.77 per share, while its adjusted quarterly earnings came in at $1.67 per share. Analysts had forecast the firm to earn $1.56 per share for the quarter.

ConocoPhillips also announced that it will sell 40 percent of its stake in Lukoil back to the firm for approximately $3.4 billion. The firm said its remaining 60 percent stake in Lukoil are depositary receipts and are expected to be sold in open market transactions or to Lukoil by the end of 2011.

On the economic front, the Commerce Department said that orders for durable goods fell by 1.0 percent in June following a revised 0.8 percent decrease in May. The drop in orders came in line with economist estimates, while the decrease in orders in the previous month was revised from the 0.6 percent decline that had been reported.

Excluding a 2.4 percent decrease in orders for transportation equipment, durable goods orders fell by a more modest 0.6 percent in June compared to a 1.2 percent increase in the previous month. The decrease came as a surprise to economists, who had expected ex-transportation orders to increase by 0.6 percent.

In the afternoon, the Federal Reserve will release its Beige Book report, an assessment of economic conditions in each of the 12 Federal Reserve districts. The markets are eagerly anticipating the commentary after Fed Chairman Ben Bernanke said that the economic outlook is "unusually uncertain" earlier this month.

The major averages have all seen choppy movement in recent dealing, lingering near their session lows. The Dow is down 34.74 points or 0.3 percent at 10,502.95, the Nasdaq is down 13.97 points or 0.6 percent at 2,274.28 and the S&P 500 is down 6.39 points or 0.6 percent at 1,107.45.

Sector News

Health insurance stocks are among the markets worst performers, with the Morgan Stanley Healthcare Payor Index posting a loss of 2.7 percent. Despite the decline, the index remains in a recent trading range.

Within the sector, Aetna (AET) is seeing a loss of 4.6 percent, backing further away from Monday's one-month closing high. The loss by Aetna comes even though the company reported better than expected second quarter earnings and raised its full year guidance.

Housing, electronic storage, railroad and banking stocks are also moving notably lower, adding to the pullback in the major averages.

The weakness in the banking sector comes as Moody's is reviewing a slew of regional banks for a possible downgrade following the passage of financial regulatory reform.

Meanwhile, upside is visible among trucking and gold stocks, helping to soften the drop by the broader markets.

Stocks Driven By Analyst Comments

Radiation equipment specialist Tomotherapy (TOMO) is trading higher after an upgrade at Robert W. Baird from Neutral to Outperform. The broker also lifted its target on the stock from $4 to $5. The stock has gained 4.2 percent, reaching its best intraday price in over two months.

On the other hand, PNM Resources (PNM) is moving lower after analysts at Jefferies downgraded shares of the diversified utilities firm from Hold to Underperform. The broker also dropped its target on the stock from $12 to $10. The stock is down by 3 percent, pulling back off of the nearly two and a half month closing high set in the previous session.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region ended mostly higher on Wednesday. Japan's benchmark Nikkei 225 surged up by 2.7 percent, while Hong Kong's Hang Seng Index advanced by 0.6 percent.

Meanwhile, the major European markets are moderately lower. The U.K.'s FTSE 100 Index and the German DAX Index are both down by 0.7 percent, while the French CAC 40 Index is down by 0.1 percent.

In the bond markets, treasuries are little changed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 3.039 percent, posting a loss of less than one basis point.

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TSX May Open Lower Amid Mixed Earnings

Bay Street stocks may open lower Wednesday amid easing commodities prices and mixed earnings from some key Canadian companies. Cues from global equity markets were also mixed. While most Asian markets ended higher, European stocks were consolidating following their recent gains.

On Tuesday, the S&P/TSX Composite Index eased 29.38 points or 0.25% to 11,716.69, after discouraging consumer confidence data from both sides of the border.

The price of crude oil edged down ahead of weekly U.S. crude oil inventories data from the EIA, due out later today. Crude for September delivery was down $0.62 to $76.88 a barrel.

The price of gold edged up after plummeting $25 in the previous session. Gold for August delivery was up $2.60 to $1,160.60 an ounce.

In corporate news from Canada, natural resources explorer Teck Resources reported lower second quarter net income of $0.44 per share, compared to $1.17 per share in the same period last year. The company plans 2010 capital expenditures of approximately $1.05 billion, including $375 million of sustaining capital expenditures and $675 million on development projects.

Oil and natural gas transporter Enbridge Inc. has claimed to have plugged a major oil leak in the Talmadge Creek in Michigan, the latest of three major oil spills that have occurred this year, where. More than three million liters of oil from a pipeline has been spilling into the Kalamazoo River since Monday morning. The company reported a drop in second quarter net income at $0.37 per share, compared to $1.08 per share a year ago.

Integrated energy company Husky Energy reported lower second quarter net income of $0.31 per share compared to $0.51 per share in the year ago period. The company said it intends to focus on growing production this year with the acquisition of natural gas properties.

Canadian stock market operator TMX Group reported improved second-quarter net income of C$0.64 per common share, compared to C$0.63 per common share last year. The company declared a dividend of $0.38 on each common share outstanding.

Railways operator Canadian Pacific Railway announced second-quarter net income of C$0.98, compared to C$0.80 in the second-quarter 2009.

Financial services provider Cash Store Financial Services reported improved fourth-quarter net income of C$0.31 per share compared to C$0.07 per share for the same period last year. The company has partnered with Ria Financial Services, a division of Euronet Worldwide to supply money transfer services across Cash Store Financial's Canadian network.

Oil and gas explorer New Sage Energy said it privately placed 2.1 million units at a price of C$0.05 per unit for gross proceeds of C$105,000.

Gallic Energy announced a private placement of up to 44 million units at a price of C$0.05 per unit for gross proceeds of up to C$2.2 million, to be used for general working capital requirements.

In economic news from south of the border, the Commerce Department said durable goods orders dropped 1% in June. Economists were expecting that durable goods orders rose 1% during the month after declining 0.6% in the previous month.

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Indian Market Ends Lower: Reliance Leads Sell-off

The Indian market fell notably on Wednesday, as heavyweights such as Reliance Industries and ICICI Bank came under selling selling pressure.

After flip-flopping till the mid-session, the 30-share Sensex fell sharply in the afternoon before ending down 120 points or 0.67% below the crucial 18,000 mark, while the 50-share Nifty fell by 33 points or 0.61% to 5,398.

Reliance Industries tumbled a little over 3% on brokerage downgrades amid concerns that its gas production would stagnate at 60 million standard cubic metres a day in the next 9-12 months. Private sector lender ICICI Bank ended down 1.63%, a day after RBI unveiled its somewhat hawkish policy.

Among the other major decliners, Reliance Communication, Jaiprakash Associates, ACC, NTPC, Jindal Steel, HDFC, Larsen & Toubro, DLF and Hindustan Unilever fell between 1% and 3%.

On the flip side, SBI, Cipla and HDFC Bank rose over a percent each. ITC, Tata Motors, Tata Power, Mahindra & Mahindra, Tata Steel, TCS, Hindalco Industries, Infosys, BHEL and Sterlite Industries also closed in positive territory with modest gains.

Most Asian markets, barring the Indian markets, advanced on Wednesday, with earnings providing a boost to sentiment. The Japanese market led the gainers in the region, with its key average advancing 2.70%.

Japan’s Nikkei 225 average opened higher and moved steadily higher to close up 256.42 points or 2.70% at 9,753. The yen’s weakness and some positive earnings from the region helped sentiment. A majority of stocks advanced in the session, with Shinsei Bank leading the gainers with an over 12% climb. Canon rose about 5.70% after it reported June quarter profits that rose more than five times from the year-ago period.

Australia’s All Ordinaries, which traded with a modest gain in the morning, experienced some weakness in early afternoon trading. However, the index recovered shortly thereafter and advanced steadily to close up 28.20 points or 0.62% at 4,542. A report showing that the domestic inflationary environment is relatively benign offered come comfort to traders.

Most sectors moved to the upside, while IT and telecommunications stocks saw some weakness. Consumer prices in Australia rose at a weaker than expected pace during the June quarter, which may allow the central bank to keep interest rates unchanged for another month. Australia's consumer price index rose 3.1% year-on-year in the June quarter, the Australian Bureau of Statistics said on Wednesday. This was lower than analyst forecasts for a 3.4% rise and follows a 2.9% increase in prices in the March quarter.

Hong Kong’s Hang Seng Index ignored a weak start and moved into positive territory in early trading. Thereafter, the index moved sideways in the morning before legging up further in the afternoon. The index closed up 117.79 points or 0.56% at 21,091. Financial and China-related stocks advanced, while utility and property stocks ended lower.

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The major European markets are receding on Wednesday after advancing for five straight sessions. The major averages in the region opened higher, but they have surrendered their gains by late morning trading and are currently lower.

The French CAC 40 Index is receding 0.56%, while the German DAX Index and the U.K.’s FTSE 100 Index are moving down 0.73% and 0.59%, respectively.

Steel giant Arcelor Mittal reported a profit of $1.7 billion for its June quarter compared to a loss of $792 million last year. The company’s earnings before interest, taxes, depreciation and amortization rose to $3 billion from $1.22 billion last year.

Infineon (IFX) reported a profit of 136 million euros for its third quarter compared to a net loss of 23 million euros for the year-ago period. Revenues rose 59% to 1.21 billion euros. The company also raised its sales guidance for the year, expecting sales growth of 40% compared to the 30% increase it predicted earlier.

Economic News

The Commerce Department’s durable goods orders report for June showed a 1% month-over-month decline in orders for goods designed to last for more than 3 years. Economists had estimated a 1%increase in orders.

Transportation orders fell 2.4%, with the decline reflecting a $1.8 billion drop in non-defense aircraft and parts. Excluding transportation orders, durable goods orders edged down 0.6%. However, on a positive note, non-defense capital good orders, excluding aircraft, edged up 0.6%, adding to the 4.6% increase in the previous month.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended July 23rd at 10:30 AM ET.

EIA's oil inventory report, for the week ended July 16th showed a 0.4 million-barrel increase in crude oil stockpiles to 353.5 million barrels. Inventories of crude oil remained above the upper limit of the average range.

Gasoline stockpiles rose by 1.1 million barrels, remaining above the upper limit of the average range. Distillate inventories also increased, rising by 3.9 million barrels and remaining above the upper boundary of the average range. Refinery capacity utilization averaged 91.5% over the four weeks ended July 16th compared to 90.5% in the previous week.

The Federal Reserve is due to release its Beige Book, a compilation of anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts, at 2 PM ET. The report is normally released about two weeks before the monetary policy meeting is held.

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Aetna (AET) reported second quarter adjusted operating earnings of 75 cents per share, while revenues excluding net realized gains fell 2% to $8.50 billion. Analysts estimated earnings of 74 cents per share on revenues of $8.49 billion. The company raised its guidance and is currently expecting operating per share of $3.05-$3.15 per share for the full year, which is ahead of the consensus estimate of $2.99 per share.

Boston Properties (BXP) reported that its second quarter funds from operations fell to $1.12 per share from $1.32 per share last year. Total revenues rose to $385.96 million from last year’s $389.49 million. Analysts estimated earnings of $1 per share on revenues of $367.20 million. The company guided third quarter funds from operations to $1.01-$1.03 per share and full year funds from operations to $4.24-$4.29 per share.

CB Richard Ellis (CBG) said its non-GAAP net income rose to 18 cents per share from 4 cents per share last year. Revenues rose 23% to $1.2 billion. Analysts estimated earnings of 9 cents per share on revenues of $1.10 billion.

Insurer ACE (ACE) reported second quarter income, excluding net realized gains/losses, of $2.01 per share, lower than $2.09 per share last year. The consensus estimates had called for earnings of $1.84 per share.

Norfolk Southern’s (NSC) second quarter earnings per share rose 58% to $1.04 and its revenues increased to $2.43 billion from the year-ago’s $1.86 billion. The results were ahead of expectations. The company also announced a 50 million share-increase in its stock buyback program and a 6% increase in its dividend to 36 cents per share.

Manitowoc (MTW) reported second quarter adjusted earnings from continuing operations of 12 cents per share compared to 23 cents per share last year. Net sales fell to $876.5 million from $1.03 billion in the year-ago period. Analysts estimated earnings of 6 cents per share on revenues of $869.78 million.

Broadcom (BRCM) reported second quarter GAAP net income of 52 cents per share compared to 3 cents per share last year. Net revenues climbed 54.3% to $1.6 billion, exceeding the consensus estimate of $1.59 billion.

DreamWorks (DWA) said its second quarter net income fell to 28 cents per share from 30 cents per share last year. Revenues climbed to $158.10 million from $131.99 million last year. The consensus estimates had called for earnings of 22 cents per share on revenues of $138.72 million. The company also said its board approved a new $150 million share repurchase program.

JDA Software (JDAS) reported second quarter adjusted earnings of 48 cents per share, which is up from 47 cents per share last year. Revenues rose 59% to $158.4 million. Analysts estimated earnings of 52 cents per share on revenues of $153.45 million.

Boeing (BA) said its second quarter earnings fell 25% to $1.06 per share, as revenues declined 9% to $15.57 billion. Analysts estimated earnings of $1.01 per share on revenues of $16.13 billion. The company reaffirmed its 2010 revenue guidance at $64 billion to $66 billion and earnings per share guidance at $3.50-$3.80. The consensus estimates call for earnings of $3.87 per share on revenues of $16.13 billion.

Sprint Nextel (S) reported a second quarter loss of 15 cents per share on a pro forma basis, while net operating revenues slid 1% to $8.03 billion. Analysts estimated a loss of 20 cents per share on revenues of $8.03 billion.

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