US & World Daily Markets Financial Briefing 29-10-2010

Click Here

Stocks Wobbly In Mid-Morning Trading After Tepid Data

Stocks are looking for direction in mid-morning trading on Friday, as the markets are digesting a mixed batch of economic reports, including an in-line but only lukewarm reading on third quarter GDP. Traders are also parsing over data showing a slight dip in consumer sentiment and a pickup in Chicago-area business activity.

The major averages have all seen choppy movement in recent dealing and are currently mixed. While the Nasdaq is up 4.54 points or 0.2 percent at 2,511.91, the Dow is down 3.33 points or less than 0.1 percent at 11,110.62 and the S&P 500 is down 0.18 points or less than 0.1 percent at 1,183.60.

On the economic front, Reuters and the University of Michigan reported that their consumer sentiment index for October was downwardly revised to a reading of 67.7 from the previous estimate of 67.9 and is down from 68.2 in September. Economists had expected the index to be upwardly revised to a reading of 68.0.

Separately, the Institute for Supply Management - Chicago said its Chicago business barometer rose to 60.6 in October from 60.4 in September, with a reading above 50 indicating growth. The increase came as a surprise to economists, who had expected the barometer to slip to a reading of 58.0.

Before the start of trading, the Commerce Department said that gross domestic product increased at an annual rate of 2.0 percent in the third quarter following the 1.7 percent growth that was seen in the second quarter. The increase in GDP matched the expectations of economists.

Commenting on the data, James Knightley, an economist at ING Financial Markets, said, "In general, with concerns about the economic outlook persisting and inflation pressures fading further this won't alter the outcome of the FOMC meeting on Wednesday."

"The Fed seems to be hinting at an incremental programme, perhaps lasting 6 months, but which could be extended depending on the newsflow," he added. "Consequently, while the market may be disappointed by a "small" announced figure for QE, the actual end result could end up being far higher."

Among recently released quarterly earnings reports, Chevron Corp. (CVX) posted third-quarter earnings of $1.87 per share, well short of estimates for earnings of $2.15 per share, while sales came in slightly above expectations at $49.72 billion.

Merck & Co. Inc. (MRK) reported adjusted third-quarter net income of $0.85 per share, topping expectations for $0.82 per share. Sales for the quarter came in at $11.12 billion, short of estimates for $11.23 billion. The firm's full-year 2010 earnings and revenue projections were tightened closer to analyst expectations.

Additionally, Microsoft Corp. (MSFT) said that its first quarter profit rose 51 percent from last year, driven by solid enterprise growth and continued strong consumer demand for its Windows 7 operating system and Office 2010 software. The company's quarterly earnings came in above analyst expectations as did its quarterly revenue.

Sector News

Telecommunications and gold stocks are seeing some of the strongest gains despite a largely tepid market performance thus far.

Qualcomm (QCOM) is one of the strongest percentage gainers in the telecom sector, rising by 2.3 percent and on pace for its best close in nine months.

Meanwhile, the 1.1 percent advance by the NYSE Arca Gold Bugs Index comes as the price of gold futures is up by $1.60 or 0.1 percent at 1,344.10 an ounce.

Software, wireless and housing stocks are also trading higher, although most sectors are seeing only modest moves.

On the downside, some selling is visible among oil and brokerage stocks.

Stocks Driven By Analyst Comments

Cardinal Health (CAH) is on the upside after being upgraded by Robert W. Baird from Neutral to Outperform. The stock is up by 1.1 percent and on pace for a three-month closing high.

On the other hand, property reinsurer PartnerRe Ltd. (PRE) is trading lower after being downgraded by Stifel Nicolaus from Buy to Hold. Shares are currently down by 1.6 percent, sinking to a one-month intraday low in earlier trading.

MDU Resources (MDU) is also under pressure following a downgrade by Robert W. Baird from Outperform to Neutral. The stock is posting a 1.9 percent loss, falling to a one-month intraday low.

Other Markets

Overseas, stock markets in the Asia-Pacific region ended mostly lower on Friday. Japan's benchmark Nikkei 225 Index slid by 1.8 percent and Hong Kong's Hang Seng Index fell by 0.5 percent, while India's BSE 30 Index bucked the downtrend, rising by 0.5 percent.

Meanwhile, the major European markets have turned higher after seeing earlier weakness. The U.K.'s FTSE 100 Index and the German DAX Index are up by 0.1 percent and 0.2 percent, respectively, while the French CAC 40 Index is up by 0.5 percent.

In the bond markets, treasuries are showing modest strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.625 percent, posting a loss of 3.6 basis points.

We Have Two Picks for September Premium Newsletter Free to join! Click here

TSX Poised For Lackluster Session

Toronto stocks are poised for a lackluster session Friday, with cues from global equity and commodities market coming in mixed. Meanwhile, GDP numbers from both sides of the border came in line with expectations.

On Thursday, the S&P/TSX Composite Index ended flat, easing 3.16 points or 0.02% to 12,564.09.The price of crude oil edged down, with crude for December easing $0.25 to $81.93 a barrel. The price of gold was moving higher for a second session. with Gold for December adding $7.30 to $1,349.80 an ounce.

In corporate news from Canada, gold miner Eldorado Gold reported third quarter net income of $48.8 million or $0.09 per share, compared to $30.2 million or $0.08 per share in the same period a year-ago. Analysts were expecting the company to record earnings of $0.10 per share. During the third quarter, the company sold 154,655 ounces of gold at an average price of $1,231 per ounce, compared to 85,246 ounces of gold at an average price of $957 per ounce in the third quarter last year.

Silver resource company Silver Standard Resources said it would sell its Snowfield and Brucejack projects in northern British Columbia to Pretium Resources Inc. for C$450 million.

Commercial real-estate company Brookfield Properties reported improved third-quarter funds from operations of $159 million or $0.32 per share compared to $122 million or $0.28 per share in the year ago quarter. The company declared a dividend of $0.14 per share.

Financial services company Fairfax Financial Holdings reported lower third-quarter net earnings of $219.0 million or $10.24 per share, down from $562.4 million or $30.88 per share in the third quarter of 2009. The company said it would acquire First Mercury Financial Corp. for $16.50 per share in cash, representing an aggregate value of about $294 million.

Bitumen company MEG Energy Corp.  reported lower third-quarter net income of C$25.74 million or C$0.14 per share compared to C$44.08 million or C$0.30 per share a year ago.

In economic news, Statistics Canada said real gross domestic product increased by 0.3% in August following a 0.1% decline in July. The result was in line with expectations. Oil and gas extraction, wholesale trade and manufacturing were the main sources of growth in August.

In another report, the agency said the Industrial Product Price Index increased 0.2% in September compared with August, led mainly by primary metal products. Meanwhile, the Raw Materials Price Index declined 0.4% in September, led by lower prices for mineral fuels. Economists expected raw materials prices to rise 0.9%.

From south of the border, the U.S. Commerce Department said that gross domestic product increased at an annual rate of 2.0% in the third quarter following the 1.7% growth that was seen in the second quarter. The increase in GDP matched the expectations of economists.

Click Here

European Market Falls In Afternoon Trade

The European market is falling in afternoon trading Friday, taking weak cues from Asian economies, ahead of the third-quarter GDP data from the U.S. Crude for December delivery is trading lower by $0.48 at $81.70 and December gold is slipping $1.3 at $1341.2 an ounce.

In economic news, the Consumer Confidence Index for the U.K. rose to minus 19 from minus 20 in September, the market research group GfK NOP said. Economists were looking for a weaker score of minus 22. Meanwhile, number of loans secured for housing purchases in the U.K. edged down to a seven-month low in September. The number of approvals inched down to 47,474 - the lowest total since Febraury - from 47,498 in August.

German retail sales declined further in September in contrast to market expectations for a slight recovery. Retail sales after adjusting for calendar and seasonal variations dropped 2.3% month-on-month in September in real terms, provisional results of the Federal Statistical Office showed. This follows a 0.4% drop in August.

Annual inflation in the euro area rose slightly to 1.9% in October, official figures from Eurostat revealed. Economists had forecast inflation to stay unchanged at 1.8% in October. The unemployment rate rose to 10.1% in September from 10% in August. It was 9.8% in September 2009.

The UK's FTSE 100 opened at 5,678 and has been in negative territory for most of the session. The German DAX opened higher at 6,600 and has been trading in a range of 6,569-6,603. The French CAC 40 opened slightly lower at 3,832 and has been below the flat line for most of the session.

The FTSE is currently losing 0.43%, the DAX is slipping 0.22% and the CAC 40 is dropping 0.33%.

Miners are falling in London, led by Xstrata, which is dropping 3.1%. Rio Tinto, Antofagasta, Fresnillo, Anglo American, Eurasian Natural Resources and BHP Billiton are sliding between 2.2% and 1.1%.

Among lenders, Standard Chartered is down 1% and HSBC Holdings is slipping 0.9%. Royal Bank of Scotland and Lloyds Banking Group are moderately up.

British Airways is falling 2.7%. The company posted a profit for the first half of the year, but noted that even though the economic environment is positive, it continues to be subject to uncertainty.

Utilities are seeing upside. Centrica, Severn Trent, United Utilities, Scottish & Southern Energy and national Grid are notably higher.

In Germany, department stores operator Metro is falling 3.2%, reportedly on an analyst downgrade. Chipmaker Infineon technologies, electronics manufacturer Siemens, Deutsche Post and Beiersdorf are notably lower.

Deutsche Bank and Commerzbank are moderately lower. Carmakers Volkswagen, Daimler and BMW are moderately rising, while truckmaker MAN is down 0.7%. Medical technology firm Fresenius and drugmaker Merck are seeing notable gains.

Banks are falling in France. Credit Agricole is retreating 1.7%, Societe Generale is falling 1.4%, BNP Paribas is losing 0.8% and Natixis is dropping 0.5%.

Oil giant Total, which reported an increase in third-quarter profit, is falling 1%. Oil and gas services provider Technip and gas utility GDF Suez are notably rising. Drugmaker Sanofi-Aventis is adding 0.4%. Carmaker Peugeot is rising 0.3% and Renault is adding 0.02%.

DO YOU OWN THE RIGHT STOCKS?

Analyze Your Stocks FREE! – Click Here

Indian Market Ends Volatile Session Higher

Upbeat earnings reports from ITC and ICICI Bank helped the Indian market end a volatile session modestly higher on Friday. After trading in the red for most of the day, the 30-share BSE Sensex saw a late-session bounce back to end up 91 points or 0.46% at 20,032, with only 9 of its components edging higher.

The broader Nifty rose by 30 points or half a percent to 6,018, while the BSE mid-cap and small-cap indexes fell 0.87% and 1.50%, respectively, suggesting that investors are turning more cautious before the RBI monetary policy meet due on Tuesday. In the broader market, declining shares outpaced gaining ones by 2137 to 865 shares.

The central bank is likely to go for another modest rate hike next week to contain inflation, especially food inflation, which remains worryingly high. Recent data showed that food inflation rose to 13.75% in the week ended October 16.

Among the top gainers, ICICI Bank climbed 6.54% after the private sector lender reported a 22% rise in its second-quarter consolidated net profit, surpassing analyst estimates. Diversified business conglomerate ITC advanced 2.33% after posting a 23% rise in quarterly net profit.

Maruti Suzuki (up 1.86%), Reliance Industries (up 1.18%), Larsen & Toubro (up 0.92%), Jindal Steel (up 0.77%), Cipla (up 0.67%), Hindustan Unilever (up 0.58%) and HDFC Bank (up 0.24%) were the other prominent gainers.

On the flip side, metal stocks such as Sterlite, Tata Steel and Hindalco fell between 1% and 3%. Automaker Tata Motors declined 2.61%. Two-wheeler manufacturer Hero Honda Motors shed 1.86% ahead of its results to be announced later in the day.

Software exporter Wipro gave off 1.77%, telecon giant Bharti Airtel lost 1.44%, infrastructure firm Jaiprkash Associates declined 1.76%, property developer DLF eased 1.42% and state-run lender SBI ended down 0.83%.

Cairn India pared most of its initial gains to end 0.66% higher on strong results. UCO Bank, SAIL, Balaji Telefilms, ABB, Bharat Electronics and Tata Chemicals fell between 3% and 9% on disappointing results.

Radico Khaitan rose 0.88% after its Q2 net profit rose significantly to Rs.18.8 crore versus Rs 9.7 crore in the year-ago period. Mahindra & Mahindra slipped 0.22% after posting a modest 8% rise in its quarterly earnings.

Elsewhere, most Asian stocks fell on Friday, led by Japanese and South Korean shares, as Sharp Corp. and Advantest cut their profit forecasts and Samsung said oversupply in the memory semiconductor market and the recent appreciation of the Korean won will put downward pressure on its fourth quarter earnings.

Industrial production data for September from both Japan and South Korea also disappointed investors, as they awaited third-quarter U.S. GDP data due later in the day and next week's key Federal Reserve meeting and U.S. mid-term elections.

Crude prices drifted lower, after rising $0.24 on the New York Mercantile Exchange overnight, as the dollar steadied against the euro, on speculation about the magnitude and timing of Fed's second round of quantitative easing.

The major European markets also fell about half a percent in early trading and the U.S. stock futures signaled a subdued start on Wall Street Friday.

"Is your Retirement Account Government Proof?" Click Here

Dollar Uncertain Ahead Of GDP, Consumer Sentiment

The dollar was little changed against other major currencies Friday morning, ahead of the latest figures on US gross domestic product and next week's meeting of the Federal Reserve.

Friday is shaping up to be a busy day, but traders may be sidelined amid contrasting reports about the size and scope of the Fed's expected commitment to another round of quantitative easing.

Adding uncertainty, the Senate hangs in the balance on next Tuesday's mid-term elections. The House of Representatives is widely expected to go back to the Republicans, while polls show that Democrats may retain a small majority in the Senate.

The dollar was stuck at $1.3850 versus the euro, having stabilized from steep recent losses this week. Earlier this month,the dollar hit an 8-month low of 1.4150.

The buck was sitting still near 80.75 versus the yen, staying near a recent 15-year low of Y80.40. Back in 1995, the dollar hit a record low of 79.80, and should move close to that if the Fed's asset purchase package is larger than expected.

An hour before the GDP release, the dollar was at $1.5925 versus the sterling, and fetched C$1.0225 against the loonie. Canada will also release GDP figures this morning.

The Bureau of Economic Analysis of the Commerce Department will release its advance estimate of third quarter GDP report at 8.30 a.m. ET. Economists project that the economy registered a nominal growth of 2% during the third quarter, following a revised 1.7% growth registered in the preceding second quarter.

At 8.30 a.m, ET, the Labor Department will release a report on employment cost index for the third quarter. Economists expect a 0.5% increase in the cost index for the quarter, same as in the preceding second quarter.

The results of the Institute of Supply Management-Chicago's business survey for October will be released at 9:45 a.m. ET. Economists expect the business barometer index based on the survey to come in at 57.5.

The Reuters/University of Michigan's final report on the consumer sentiment index for October will be released at 9:55 a.m ET. The consumer sentiment index is expected to be upwardly revised to 68 from the mid-month reading of 67.9.

Our "Value Packed" online trading seminar will show you how you can.

Click Here To Find Out More

Investors Hub Services