US & World Daily Markets Financial Briefing 28-09-2010

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Weak Consumer Confidence Data Drags Stocks Lower

Stocks have come under pressure over the course of morning trading on Tuesday, pulling back further off their recent highs following the release of disappointing economic data. The major averages have all fallen firmly into negative territory, with the tech-heavy Nasdaq underperforming its counterparts.

In recent trading, the major averages have edged up off their worst levels, but they continue to post notable losses. The Dow is down 49.87 points or 0.5 percent at 10,762.17, the Nasdaq is down 23.01 points or 1 percent at 2,346.76 and the S&P 500 is down 7.39 points or 0.7 percent at 1,134.77.

After seeing some early weakness, stocks accelerated to the downside following the release of a report from the Conference Board showing a substantial decrease in consumer confidence in September due in large part to a notable deterioration in consumer expectations.

The Conference Board said its consumer confidence index fell to 48.5 in September from a downwardly revised 53.2 in August. Economists had expected the index to edge down to 53.0 from the 53.5 originally reported for the previous month.

Before the start of trading, Standard & Poor's released a separate report showing that its S&P/Case-Shiller 20-City Composite Home Price Index increased at an annual rate of 3.2 percent in July compared to a 4.2 percent increase in June. The index had been expected to increase at an annual rate of about 3.3 percent.

Meanwhile, S&P said that the 20-City Composite Home Price Index rose 0.6 percent on a monthly basis in July, reflecting month-over-month increases in twelve out of the twenty metropolitan areas.

Among individual stocks, shares of Jabil Circuit (JBL) are seeing notable weakness, as the company reported fourth quarter earnings that beat analyst estimates but missed expectations on the top line. The company also forecast first quarter revenues below analyst estimates.

Walgreen (WAG), on the other hand, is posting a strong gain after reporting fourth quarter earnings of $0.49 per share on revenues of $16.9 billion. Analysts had expected the company to earn $0.44 per share on revenues of $16.84 billion.

Shares of Endo Pharmaceuticals (ENDP) are also moving higher after the company announced that it has entered an agreement to acquire generic drug maker Qualitest Pharmaceuticals for approximately $1.2 billion in cash. Endo also reiterated its full year guidance.

Sector News

Wireless stocks have shown a notable move to the downside over the course of the morning, dragging the NYSE Arca Wireless Index down by 1.1 percent. With the loss, the index is pulling back further off the well over four-month closing high it set last Friday.

Research in Motion (RIMM) is helping to lead the sector lower, with the wireless device maker currently down by 3.6 Percent. The loss by RIM comes after the company unveiled its BlackBerry PlayBook tablet computer, which is expected to compete with Apple's (AAPL) iPad.

Significant weakness has also emerged among networking stocks, as reflected by the 1 percent loss currently being shown by the NYSE Arca Networking Index. The index is giving back some ground after ending Monday's trading at a four-month closing high.

Most of the other major sectors have also moved to the downside on the day, with commercial real estate, gold, natural gas, and railroad stocks posting notable losses.

Stocks Driven By Analyst Comments

After moving sharply higher in the previous session, shares of LDK Solar (LDK) are giving back some ground in morning trading. The maker of wafers for solar cells is currently down by 6.2 percent after ending Monday's trading at its best closing level in over a year.

The pullback by LDK Solar comes after HSBC Securities downgraded its rating on the company's stock to Underweight from Neutral and lowered its price target to $6.20 from $8. In the previous session, LDK Solar rallied on news of an $8.9 billion credit agreement with China Development Bank.

Shares of Anadigics (ANAD) have also come under pressure after Stifel Nicolaus downgraded its rating on the chip maker to Hold from Buy. Anadigics is currently down by 4.5 percent after jumping to a two-year closing high in the previous session.

Meanwhile, shares of Greenbrier Cos. (GBX) are seeing further upside after moving sharply higher in the previous session, with the railroad freight car maker currently up by 2.6 percent. The gain by Greenbrier comes after Morgan Keegan upgraded its rating on the stock to Outperform from Market Perform.

Other Markets

In overseas trading, the major markets in the Asia-Pacific region closed Tuesday’s session lower, as the negative lead from Wall Street overnight weighed on sentiment. Japan's benchmark Nikkei 225 Index fell by 1.1 percent, while Hong Kong's Hang Seng Index ended the day down by 1 percent.

The major European markets have also come under pressure over the course of the session. The German DAX Index is currently down by 1.2 percent, while French CAC 40 Index and the U.K.'s FTSE 100 Index are down by 0.7 percent and 0.9 percent, respectively.

In the bond markets, treasuries have shown a notable move to the upside amid the weakness on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is currently down by 3 basis points at 2.487 percent.

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TSX May Dip At Open On Euro Zone Worries

Bay Street stocks may edge down at open Tuesday amid renewed worries over the euro zone debt situation after a rating agency cut its ratings on a prominent bank in the region and easing commodities prices.

Moody's Investor Services cut its rating on Anglo Irish Bank Corp. by three notches and reportedly the agency is also preparing to downgrade Spain's debt.

On Monday, the S&P/TSX Composite Index edged down 14.27 points or 0.12% to 12,190.60.

The price of crude oil was trading weak as traders await this week's crude oil inventories data from the API and the EIA. Crude for November was down $0.64 to $75.88 a barrel.

The price of gold was leveling off after rallying in the past two weeks, with gold for December losing $10.40 to $1,288.20 an ounce.

In corporate news from Canada, Valeant Pharmaceuticals and Biovail Corp. announced their merger and said Valeant share holders will receive 1.7809 of Biovail common shares for each shares held, apart from an one-time special cash dividend of $16.77 per share.

Blackberry maker Research In Motion unveiled its new professional-grade BlackBerry PlayBook tablet and BlackBerry Tablet OS and said it introduced the BBM or BlackBerry Messenger Social Platform, giving developers the tools to build applications that take advantage of the social aspects of the popular BBM service.

Oil transporting company Enbridge Inc. said it resumed operations of its 670,000 barrels per day crude supply pipeline, which was shutdown early September after a leak was discovered.

Precious metals explorer Guyana Goldfields said it got Environmental Permit for the development of the 100% owned Aurora gold project.

Monitoring instruments maker Fiber Optic Systems Technology, said it has closed the acquisition of all of the issued and outstanding securities of Marcon International Inc.

Oil exploration company Southern Pacific Resource said it would acquire North Peace Energy in exchange of 0.185 of its share for every North Peace common share.

Specialized suspension and coupling systems maker Raydan Manufacturing reported a narrower first quarter net loss of C$15,000 or C$0.001 compared with a loss of C$559,000 or C$0.034 in the year ago quarter.

Precious metals explorer Mineral Mountain Resources said it would acquire up to a 75% interest in a property owned by Shotgun Exploration for about $3.8 million in a cash and shares deal.

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Asian Markets Slip Into Negative Territory On Economic Concerns

Asian markets open for trading on Tuesday ended in negative territory with modest losses on global economic concerns, more specifically debt concerns in Europe, and possible tightening of policy measures in China to cool-off the property market in the second largest economy. Weak closing on Wall Street in the previous session amid lack of economic cues impacted market sentiment. With no major economic data in the region, traders resorted to profit taking and moved to the sidelines awaiting more cues on global economy.

In Australia, the benchmark S&P/ASX200 Index slipped 5.60 points, or 0.12%, and closed at 4,670 points, while the All-Ordinaries Index ended at 4,717, representing a loss of 5.20 points, or 0.11%.

Resource related stocks witnessed mixed trading on weak commodity prices in the international market. BHP Billiton slipped 0.58%, Rio Tinto edged down 0.19%, Gindalbie Metals lost 1.09%, Iluka Resources fell 2.37%, and Macarthur Coal shed 1.50%. Oz Minerals remained unchanged from previous close. However, Fortescue Metals advanced 0.97%, Mincor Resources gained 1.00%, Murchison Metals added 0.62% and Minara Resources climbed 2.55%.

Mixed trading was also witnessed mixed trading even as crude oil prices retreated in the global market ahead of key oil inventory data later in the U.S. Woodside Petroleum edged down 0.07%, Origin Energy lost 1.10% and Oil Search Ltd shed 0.97%. ROC Oil Ltd managed to end unchanged from previous close. However, Santos Ltd bucked the trend and ended in positive territory with a modest gain of 0.62%.

Gold related stocks ended in negative territory as bullion prices slipped down slightly. Newcrest Mining slipped 0.81% and Kingsgate Consolidated plunged 4.75%.

Bank stocks witnessed fresh buying at late trading session, offsetting some of the early losses. ANZ Bank added 0.50%, National Australia Bank advanced 0.54% and Westpac Banking Corp. was up by 0.29%. Investment banking company Macquarie Group remained unchanged from previous close. Commonwealth Bank of Australia, however, bucked the trend and ended in negative territory with a modest loss of 0.49%.

In Japan, the benchmark Nikkei 225 Index lost 107.38 points, or 1.12% to 9,496 while the broader Topix index of all First Section issues dropped 6.65 points, or 0.78%, to 843.

Exporters led the declines as the local currency strengthened against the US dollar. Canon Inc. edged down 0.26%, Sony Corp. slipped 1.11%, Sharp Corp. slipped 0.12%, Panasonic Corp. shed 0.52%, Advantest Corp. lost 1.95%, TDK Corp. plunged 4.16% and Kyocera Corp. fell 2.20%.

Shipping transport stocks ended in negative territory. Kawasaki Kisen Kaisha slipped 0.94%, Mitsui OSK Lines fell 1.45% and Nippon Yusen edged down 0.29%.

Stocks of securities firms also ended in negative territory. Mizuho Securities lost 2.56%, Matsui Securities fell 2.05%, Daiwa Securities Group declined 2.87% and Nomura Holdings plunged 3.32%.

Mixed trading was witnessed among the trading companies. Sumitomo Corp. declined 1.28%, Mitsui & Co. slipped 0.95% and Toyota Tsusho Corp. shed 0.80%. However, Mitsubishi Corp. added 0.30%, Sojitz Corp. advanced 0.66%, Marubeni Corp. rose 0.64% and Itochu Corp. climbed 1.48%.

A bout of profit taking following recent sharp gains and weakness in Asia as well as Europe ahead of U.S data on consumer confidence and lingering concerns over fresh fiscal and financial sector woes in Europe weighed on the Indian market Tuesday. Nevertheless, the benchmark indexes managed to close off the day's lows, signifying the presence of strong liquidity that has been pushing the key benchmarks sharply higher to multi-year highs in recent sessions. After falling by about 135 points to a low of 19,982 earlier in the session, the 30-share Sensex regained much of its lost ground before ending down 13 points or 0.06% at 20,105, with 15 of its components edging lower. Likewise, the broader Nifty closed off the day's lows at 6,029, down about 6 points or 0.10%.

Among the other markets in the region, China's Shanghai Composite Index declined 16.61 points, or 0.63%, to 2,611, the Strait Times Index in Singapore slipped 16.11 points, or 0.52%, to close at 3,0.97, and Taiwan Weighted Index shed 2.10 points, or 0.03%, to close at 8,189. However, Jakarta Composite Index in Indonesia bucked the negative trend and managed to end in positive territory with a modest gain of 4.67 points, or 0.13%, at 3,473.

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French Stocks Turn Positive

The French market shrugged off early losses and is in positive territory in afternoon trading Tuesday, as encouraging economic data from U.K. and Germany prompted investors to ignore weak cues from Asia as well as European debt concerns. Investors also shrugged off weaker than expected monthly drop in consumer spending for August.

Crude for November delivery is sliding $0.62 at $75.90 per barrel and gold is slipping $10.8 at $1287.8 an ounce.

In economic news, French consumer spending fell 1.6% in August from the prior month after increasing 2.7% in July, data from the statistical office Insee showed. Economists had expected only a fall of 0.2%. Annually, it grew 1.2%, faster than the consensus forecast of 0.9%.

An indicator of consumer morale among Germans rose sharply in October, reports said citing data from market research group GfK. The forward - looking consumer sentiment indicator, based on a survey of about 2,000 Germans, jumped to 4.9 from 4.1 in September. This was well over analyst expectations for a score of 4.2.

The British economy grew at a pace of 1.2% sequentially in the second quarter, unchanged from the estimate published in August, the Office for National Statistics said. This was the biggest growth since the first quarter of 2001.

Business investment in the U.K. increased a revised 0.7% between April and June to 29.2 billion pounds compared to three months ago, the Office for National Statistics said. Manufacturing investment jumped 10.4% over the second quarter to 2.7 billion pounds. Private sector non-manufacturing investment fell 0.4%, while public sector non-manufacturing investment was up 6.1%.

The latest quarterly Distributive Trades Survey from the Confederation of British Industry showed U.K. high street sales were higher in September than a year ago, surpassing expectations. This also represented the third consecutive annual increase. Around 60% of retailers surveyed said the volume of sales advanced during September, while 11% said that it declined, giving a balance of positive 49%.

The CAC 40 opened below the flat line at 3,751. After falling further in early trade, the index is currently adding 0.36%.

Telecom equipment maker Alcatel Lucent is leading the gainers adding 3.5%. Luxury good firm LVMH is rising 2.1%. Power transmission company Alstom is gaining 1.3% and Arcelor Mittal is gathering 1%.

Among banks, Credit Agricole is advancing 1.1% and Natixis is up 1%. BNP Paribas and Societe Generale are slipping 0.2% each.

Tire company Michelin is declining 9.7% after a rights issue. Hotel group Accor is sliding 1.7%. Car maker Peugeot is retreating 2.2% and Renault is sliding 0.5%.

Water utility Veolia Environnement, cosmetics giant Loreal cement company Lafarge and France Telecom are witnessing moderate downside.

Elsewhere in Europe, the UK's FTSE 100 is falling 0.14%, while the German DAX is adding 0.19%.

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Walgreen (WAG) is likely to move in reaction to its announcement that its fourth quarter net earnings rose to 49 cents per share compared to 44 cents per share last year. The recent quarter’s results included charges of 5 cents per share compared to 3 cents per share in the year-ago period. Sales rose 7.4% year-over-year to $16.9 billion. Analysts estimated earnings of 44 cents per share on revenues of $16.84 billion.

Jabil Circuit (JBL) receded in Monday’s after hours session after it reported fourth quarter core earnings of 52 cents per share compared to 16 cents per share last year. Revenues rose to $3.86 billion from $2.80 billion last year. Analysts estimated earnings of 49 cents per share on revenues of $3.89 billion. The company expects first quarter core earnings of 53-57 cents per share on revenues of $3.9 billion to $4 billion. The consensus estimates call for earnings of 53 cents per share on revenues of $4.09 billion.

Boeing (BA) may see some activity after it announced that Air China has ordered for four of its long-haul airplane 777-300Ers valued at $1.1 billion at current list prices.

Rackspace Hosting (RAX) is expected to gain ground after Standard & Poor’s announced that the company would replace AmeriCredit (ACF) in the S&P MidCap 400 Index after the close of trading on September 30th. Watsco (WSO) will replace Hewitt Associates (HEW) in the S&P MidCap 400 Index and Super Micro Computer (SMCO) will replace Watsco in the S&P SmallCap 600 Index. Additionally, Riverbed Technology (RVBD) will replace NBTY (NTY) in the S&P MidCap 400 Index.

Pfizer’s (PFE) stock may see some ripples after it announced that it will discontinue the Phase III trials for evaluating its prostrate cancer treatment SUN 1120 in combination with prednisone following an independent evaluation committee’s finding that the combination is unlikely to improve overall survival when compared to prednisone alone.

Research In Motion (RIMM) could see some buying interest after it introduced its version of the Tablet PC named ‘the PlayBook’ at its annual developers’ conference. The company also unveiled other services such as the opening of BBM as a social platform and a BlackBerry Advertising service.

Avis Budget (CAR) is also expected to be in focus after it sent a letter to Dollar Thrifty (DTG) stating that its offer provides shareholders an opportunity to participate in a larger share of the value to be created through a business combination. The company also announced two concrete proposals to counter any opposition posed by anti-trust concerns. Earlier, Dollar Thrifty’s board reaffirmed its support for the offer by Hertz (HTZ).

Valero (VLO) is likely to move in reaction to its announcement that it has signed an agreement to sell the ownership of its 185,000 barrels per day Paulsboro refinery to PBF Holdings for a net sales price of $360 million plus the value of net working capital and inventories.

Alcoa (AA) may see some strength after it announced that is has won a contract to supply alloy sheet and plate for shipbuilder AUSTAL’s vessels, including commercial ships and U.S. Navy ships. The contract will run through 2014.

United Natural Foods (UNFI) could come under selling pressure after it announced that it has commenced an underwritten public offering of 3.85 million shares of its common stock.

Peet’s Coffee & Tea (PEET) may react to its announcement that it will increase prices of most drinks by 10 cents and that of beans sold in Peet’s stores by an average of 8%, effective September 29th. The pricing action follows a 35% increase in green Arabica coffee prices.

Boston Properties (BXP) could see some activity after it said it would buy Bay Colony Corporate Center in Waltham, Massachusetts, for about $185 million.

Paychex (PAYX) is also likely to be in focus after it reported that its first quarter earnings rose 6% to 36 cents per share and revenues climbed 4% to %518.3 million. Analysts estimated earnings of 34 cents per share on revenues of $507.53 million. The company also said it expects net income for the fiscal year to improve over fiscal 2010, while analysts look for a modest rise in earnings to $1.36 per share.

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