US & World Daily Markets Financial Briefing 29-07-2010

Stocks are largely on the upside in mid-morning trading on Thursday, as the markets are focusing on a decline in jobless claims and the silver lining in a mixed bag of earnings reports. The major averages are all in positive territory, offsetting a part of yesterday's losses.

On the economic front this morning, the Labor Department released a report showing a modest decrease in initial jobless claims in the week ended July 24th.

Jobless claims dropped to 457,000 from the previous week's revised figure of 468,000. Economists had been expecting jobless claims to edge down to 460,000 from the 464,000 originally reported for the previous week.

In earnings news, Exxon Mobil Corp. (XOM) reported second-quarter net income of $1.60 per share, topping estimates that called for $1.47 per share for the period. Total revenues rose to $92.49 billion but fell short of the $98.49 billion forecast for the quarter.

Colgate-Palmolive Co. (CL) also revealed its financial results for the second quarter, including earnings of $1.17 per share compared to estimates for $1.16 per share. Sales for the quarter totaled $3.81 billion, up from $3.74 billion in the prior year quarter but short of estimates for $3.94 billion.

Motorola Inc. (MOT) reported adjusted second-quarter earnings of $0.09 per share, just above Wall Street estimates for $0.08 per share. Net sales for the quarter came in at$5.414 billion, which beat forecasts for $5.19 billion for the quarter.

After the markets closed for trading in the previous session, Japanese electronics giant Sony Corp. (SNE) reported a profit for the first quarter of fiscal 2011 compared to a loss in the same period last year. The company also raised its full year earnings outlook and maintained its revenue guidance.

Credit card service provider Visa Inc. (V) said that its third-quarter profit declined 2 percent from last year, with the drop primarily due to lower investment income. Looking ahead, the company reaffirmed its earnings outlook for fiscal years 2010 and 2011.

In recent trading, the tech-heavy Nasdaq briefly dipped into negative territory, but is has moved back above the unchanged line in the past few minutes. The Nasdaq is up 0.57 points or less than 0.1 percent at 2,265.13, while the Dow is up 28.31 points or 0.3 percent at 10,526.19 and the S&P 500 is up 2.44 points or 0.2 percent at 1,108.57.

Sector News

Oil service stocks are among the morning's strongest percentage gainers, resulting a in a 1.5 percent advance by the Philadelphia Oil Service Sector Index. The upward move has lifted the index to its best intraday level in five weeks.

The advance among oil service stocks come amid a significant increase in the price of crude oil, with oil currently up by $1.04 to $78.03 a barrel.

Strength is also visible among brokerage stocks, with buying interest in the sector being driven by strong quarterly results from Ameriprise Financial (AMP), which soundly beat second quarter earnings estimates. The stock has shot up by 9.4 percent, setting a two and a half month intraday high.

Steel and gold stocks are also trading higher, while considerable weakness among networking and semiconductor stocks is limiting the upside for the major averages.

Stocks In The News

DST Systems (DST) is notably higher in mid-morning trading after being upgraded at Robert W. Baird from Neutral to Outperform. The broker also raised its target on the stock from $48 to $50. The stock is up by 4.7 percent, reaching its best intraday price in just under three months.

Equinix (EQIX) is also on the upside after Oppenheimer lifted its rating on the stock from Perform to Outperform. Shares are currently up by 4 percent, rising to their highest intraday price in two months.

On the other hand, Advanced Micro Devices (AMD) is sliding after FBR Capital Markets dropped its rating on the stock from Outperform to Market Perform. The broker also lowered its target on the stock from $14 to $11. The stock is down by 3.8 percent, slipping further off of Tuesday's one-month closing high.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw a mixed close on Thursday. Japan's benchmark Nikkei 225 inched fell by 0.6 percent, Hong Kong's Hang Seng Index was nearly flat and India's BSE 30 Index gained 0.2 percent.

Meanwhile, the major European markets are all moving moderately higher. The U.K.'s FTSE 100 Index and the German DAX Index are both up by 0.6 percent, while the French CAC 40 Index is up by 0.9 percent.

In the bond markets, treasuries are posting modest losses. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 3.021 percent, posting a gain of 2 basis points.

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Forex Top Story

Euro, Sterling Continue Attack On Dollar

The dollar remained under heavy pressure versus other major currencies Thursday morning, extending its recent losses versus the euro and sterling.

On the economic front, traders await the customary weekly jobless claims report for the week ended July 23 from the Labor Department at 8.30 a.m. ET, for cues on the health of the job market.

Economists project that jobless claims remain unchanged at 464,000 after unexpectedly increasing by 37,000 in the previous week.

The dollar slipped to 1.3091 versus the euro -- its lowest since May 17. Early in June the dollar hit a 4-year high of 1.1805 but since tailed off badly on speculation the economic situation is Europe is better than once feared.

The eurozone's economic sentiment indicator rose to 101.3 in July from 99.0 in June, the European Commission said on Thursday. This was higher than analyst forecasts for a score of 99.1.

British house prices dropped in July for the first time since February as tight credit conditions and uncertainty over the future economic situation restricted potential home buyers from entering the market.

Still, the dollar continued to fall versus the sterling, dropping to a fresh 5-month low of 1.5662.

The dollar also fell versus the yen, slipping to a 6-day low of 86.72. A move below 86.25 would take the dollar to its lowest in 2010.

US Treasury Markets

Treasuries Inch Lower After Jobless Claims Slide

Treasuries are modestly weaker in morning trading on Thursday, as jobless claims came in lower than expected and riskier investments such as stocks are seeing early strength. The move also comes ahead of the Treasury Department's $29 billion seven-year note auction.

Bond prices moved to the downside after the jobs data but have moved off of their worst levels of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 3.021 percent, posting a gain of 2 basis points.

The ten-year yield remains in a range near the fifteen-month closing low of 2.892 percent set last week.

Bond prices gave up some ground after a report from the Labor Department showed a modest decrease in initial jobless claims in the week ended July 24th.

Jobless claims dropped to 457,000 from the previous week's revised figure of 468,000. Economists had been expecting jobless claims to edge down to 460,000 from the 464,000 originally reported for the previous week.

Despite the decrease, jobless claims remain well above the 400,000 level and well off the two-year low of 427,000 that was set in earlier in the month.

Peter Boockvar, equity strategist at Miller Tabak, said, "GM not shutting auto plants as is typical this time of the year is still a distortion but it is surprising that claims aren't lower because of it and thus current levels still remain a concern at this stage of an economic recovery."

The Labor Department also said that the less volatile four-week moving average fell to 452,500 from the previous week's revised average of 457,000.

Later today, the focus of the bond markets will be on the Treasury Department's $29 billion offering of seven-year notes. The results of the auction will be made public at 1:00 p.m. ET.

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Asia Markets Report

Asian Markets End Mixed

Mixed trading was witnessed among the major markets open for trading on Thursday. While the markets in Australia, Japan and South Korea ended in negative territory, the markets in China, Hong Kong, India, Indonesia, Singapore, and Taiwan ended in positive territory with marginal gains as traders remained cautious awaiting more cues on global economy amid concerns about sustaining economic recovery.

In Japan, the benchmark Nikkei 225 Index dropped 57.25 points, or 0.59%, to 9,696, while the broader Topix index of all First Section issues was down 4.24 points, or 0.49%, to 861.

On the economic front, a preliminary report released by the Ministry of Economy, Trade and Industry in Japan revealed that retail sales climbed 3.2% on year in June, standing at 11.004 trillion yen. That marked the sixth straight month of increase, and was in line with analysts expectations following 2.8% increase in May. The report further noted that, on a seasonally adjusted monthly basis, retail sales were down 0.4%- again matching expectations following the 2.0% contraction in May. For the second quarter of 2010, overall retail sales were up 3.7% on year to 33.463 trillion yen. Sales had climbed a revised 3.8% in the previous three months.

Panasonic Corp was the major loser in the market, having declined 7.71%, following reports that the company is mulling plans to dilute Panasonic Electric Works and Sanyo Electric its wholly owned units as early as before end of fiscal 2010. Panasonic Electric Works, following news, surged up 15.40%, while Sanyo Electric soared 26.27% on huge volume.

Trading companies ended in negative territory on profit taking. Mitsubishi Corp. declined 1.15%, Mitsui & Co., fell 1.65%, Sumitomo Corp. shed 1.28%, Itochu Corp. slipped 1.43%, and Toyota Tsusho Corp. edged down 0.22%.

Mixed trading was witnessed among automotive companies. Honda Motor added 0.33%, Nissan Motor Co., gained 1.83% and Mitsubishi Motors rose 1.75%. However, Toyota Motor slipped 0.32%, Suzuki Motor slipped 0.38% and Hino Motors plunged 5.57%.

Real estate stocks also declined on profit taking. Mitsui Fudosan declined 1.48%, Sumitomo Realty & Development lost 1.12%, Tokyu Land Corp. fell 1.52% and Heiwa Real Estate was down 1.38%. Mitsubishi Estate, however, remained unchanged from previous close.

In Australia, the benchmark S&P/ASX200 Index slipped 5.80 points, or 0.13%, and closed at 4524 points, while the All-Ordinaries Index ended at 4,536, representing a loss of 5.90 points, or 0.13%.

Mining and metal stocks ended in positive territory with modest gains. BHP Billiton added 0.65%, Rio Tinto also added 0.65%, Fortescue Metals advanced 0.46%, Iluka Resources edged up 0.18%, Mincor Resources surged up 4.66%, Minara gained 1.23% and Oz Minerals climbed 2.10%. However, Macarthur Coal bucked the trend and ended in negative territory with a loss of 2.31% and Murchison Metals edged down 0.27%.

Mixed trading was witnessed among bank stocks. ANZ Bank slipped 0.17%, and National Australia Bank edged down 0.04%. However, Commonwealth Bank ended in positive territory with a gain of 0.78% and Westpac Banking Corp advanced 0.41%. Investment banking company Macquarie Group ended in negative territory with a loss of 1.21%.

Mixed trading was witnessed among gold stocks. While Lihir Gold managed to end the session unchanged from previous close, Newcrest Mining ended in negative territory with a loss of 0.18$.

Oil stocks ended in negative territory following drop in crude oil prices in the international market. Woodside Petroleum lost 1.04%, Santos fell 1.74%, Oil Search declined 1.51% and Origin Energy edged down 0.06%. However, ROC Oil Co. ended flat, unchanged from previous close.

After trading subdued till the mid-session, the Indian market gained some strength in the afternoon session on Thursday, thanks to recovery in world markets. Chinese stocks led a recovery in Asia after Ma Delun, a deputy governor of China's central bank, said the nation will maintain a moderately loose monetary policy. The European markets bounced back on earnings optimism, helped by forecast-beating earnings from drugmaker AstraZeneca and tech firm Capgemini. The 30-share BSE Sensex opened flat at 17,962 and fell later to a low of 17,903 before finally ending up 35 points or 0.19% at 17,992, and the 50-share Nifty rose by 11 points or 0.21% to 5,409.

Among the other major markets open for trading, China's Shanghai Composite Index advanced 14.45 points, or 0.55% to 2,648, Taiwan's Weighted Index added 14.18 points, or 0.18%, to close at 7,799, Singapore's Strait Times Index was up 12.27 points, or 0.41% to close at 2,998, and Indonesia's Jakarta Composite Index increased 39.34 points, or 1.29%, to close at 3,097.

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European Market Updates

European Markets Advance Amid Upbeat Earnings, Economic Data

After briefly pausing in the previous session, the European markets are moving higher in mid-morning deals Thursday, amid another batch of encouraging corporate earning numbers and economic data.

Meanwhile, most Asian markets ended higher. While the Chinese market advanced for a second session, the Japanese market pared Wednesday's gains.

The price of crude oil is edging up even after official data from the EIA yesterday revealed a surprise 7.3 million barrels build in U.S. crude inventories in the week ended July 23. Crude for September delivery gaining $0.29 to $77.28 a barrel.

Elsewhere, the price of gold is gaining for a second session, with gold for August delivery adding $4.60 to $1,165.00 an ounce. Earlier on Tuesday, the contract tumbled $25 amid increasing risk appetite.

In economic news, German Federal Statistical Office said that the number of persons in employment living in the nation increased by 131,000 or 0.3% to 40.3 million in June from a year ago. The seasonally adjusted unemployment rate decreased to 7% in June from 7.7% recorded in the year ago period.

The French producer price index remained unchanged in June compared to the previous month, the statistical office INSEE said . Economists were looking for an increase of 0.3%.

Elsewhere, Swedish consumer confidence improved more than expected in July, the National Institute of Economic Research said . The corresponding index rose to 23.3 from 22 in June. Economists were looking for a reading of 22.1.

The European Commission said that the euro zone's economic sentiment indicator rose to 101.3 in July from 99.0 in June, beating analysts' forecast for a score of 99.1. Meanwhile, an index measuring confidence in the manufacturing sector rose slightly to -4 from -6, missing expectations for a reading of -5. The commission also said the business climate indicator for the euro area increased to 0.66 from 0.40. Economists were looking for a score of 0.39.

Communications solutions provider BT Group plc (BT, BT_A.L) is up 2.93% after reporting first-quarter profit before tax of GBP 375 million, up 38% from GBP 272 million.

Europe's largest oil firm Royal Dutch Shell Plc is gaining 1.18%. The company's second quarter net income rose to $4.39 billion from $3.82 billion a year earlier.

Electronics and electrical engineering company Siemens AG's (SI) third-quarter profit increased nearly 12% to EUR 1.411 billion or EUR 1.60 per share from EUR 1.260 billion or EUR 1.44 per share in the prior year. The stock is giving in 0.32%.

France Telecom (FTE) reported second-quarter consolidated revenues of 22.14 billion euros for the first half of 2010, down 2.2% on a comparable basis and in line with consensus estimates. The stock is gaining 5.80%

Europe's second-biggest airline Deutsche Lufthansa AG said it operating profits tripled to 159 million euros or $207 million, compared with 52 million euros a year earlier. Analysts were expecting the company to report earnings of 131 million euros. The stock is shedding 3.50%.

The FTSE 100 is currently gaining 0.78%, the DAX is adding 0.60% and the CAC 40 is up 0.51%.

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Stocks in Focus

Logitech (LOGI) reported a first quarter profit of 11 cents per share compared to a loss of 21 cents per share last year. Sales rose 47% to $479 million. Analysts estimated a profit of 3 cents per share on revenues of $456.50 million. The company raised its sales guidance for 2011 to $2.3 billion to $2.35 billion from about $2.3 billion, while analysts expect sales of $2.32 billion.

O’Reilly Automotive (ORLY) reported second quarter adjusted earnings of 81 cents per share, higher than 62 cents per share last year. Sales rose 10% to $1.38 billion. The results were ahead of estimates. The company estimates third quarter earnings of 69-73 cents per share and full year adjusted earnings of $2.75-$2.85 per share. Analysts estimate earnings of 72 cents per share for the third quarter and $2.77 per share for the year.

Tesoro (TSO) reported second quarter net earnings of 47 cents per share compared to a loss of 33 cents per share last year. The recent quarter’s results included a one-time benefit of 17 cents per share. Revenues rose to $5.14 million from the year-ago’s $4.18 billion. Analysts’ estimates, which typically exclude one-time items, called for earnings of 20 cents per share on revenues of $4.59 billion.

Credit card processor Visa (V) reported third quarter earnings of 97 cents per Class A share compared to 96 cents per Class A share last year. Operating revenues rose to
$2.03 billion from the year-ago’s $1.65 billion, ahead of the $1.97 billion consensus estimate. The company affirmed its 2010 guidance for revenue growth at the high end of the 11%-15% range and earnings per share growth of more than 20%, while analysts estimate 15.30% revenue growth.

Lincoln (LNC) reported its second quarter operating income of 86 cents per share, higher than 79 cents per share last year. Revenues rose to $2.60 billion from $1.88 billion last year. Analysts estimated earnings of 80 cents per share on revenues of $2.59 billion.

Motorola (MOT) said its second quarter non-GAAP earnings rose to 9 cents per share, while net sales fell to $5.41 billion from the year-ago’s $5.50 billion. Analysts estimated earnings of 8 cents per share on revenues of $5.19 billion. For the third quarter, the company estimates earnings of 10-12 cents per share, while analysts estimate of earnings of 10 cents per share.

Exxon Mobil (XOM) reported second quarter earnings of $1.60 per share that rose from 81 cents per share last year. On an adjusted basis, the company’s earnings rose 90% to $1.60 per share. Total revenues rose to $92.49 billion from the year-ago’s $74.46 billion. Analysts estimated earnings of $1.47 per share on revenues of $98.49 billion.

Other Corporate News

AstraZeneca (AZN) may see some activity after it said the FDA’s cardiovascular and renal drug advisory committee has recommended that the nodal agency approve the company’s investigational drug ticagrelor for the reduction of thrombotic events in patients with acute coronary syndromes.

Newmont Mining (NEM) is likely to see buying interest after it announced a 50% increase in its quarterly dividend to 15 cents per share.