Housing Data In Focus As Markets Remain Overbought - RTTNews Daily Market Analysis
Posted on: Tue, 23 Mar 2010 09:11:00 EDT
(RTTNews) - The major U.S. index futures are pointing to an almost flat opening on Tuesday, with the Dow futures and the Nasdaq 100 futures trading with a positive bias, while the S&P 500 futures are slightly lower. Notwithstanding a mixed close in the Asian markets, sentiment was bordering on the positive, as traders overlooked recent fiscal and monetary concerns. The major European markets are firmly in positive territory.
Market movement in today's session largely hinges on the existing home sales report and the house price index of the Federal Housing Finance Agency to be released after the markets open. Existing home sales are likely to decline from the month-ago levels and a worse than expected drop is likely to stir recovery concerns. Crude oil and gold futures are showing weakness, with the euro sliding further due to the uncertainty surrounding the Greek debt crisis.
U.S. stocks opened Monday's session lower, weighed down by fiscal and monetary policy concerns, but buying interest picked up in morning trading, as traders bid up healthcare stocks following the passage of the healthcare bill by the House. After a steady advance throughout the morning, the major averages moved sideways for the rest of the session to close with moderate gains.
The Dow Industrials ended up 43.91 points or 0.41% at a fresh 17-1/2 month high of 10,786 and the S&P 500 Index advanced 5.91 points or 0.51% to 1,166, while the Nasdaq Composite Index gained 20.99 points or 0.88% over the course of the session to end at 2,395.
Twenty-two of the thirty Dow components ended the session higher, with Pfizer (PFE), Intel (INTC), Home Depot (HD), Disney (DD), DuPont (DD), Caterpillar (CAT), Boeing (BA) and American Express (AXP) advancing strongly in the session.
Among the sector indexes, the NYSE Arca Airline Index rose 1.84% and the KBW Bank Index climbed 1.13%. The S&P Retail Index gained 1.24% compared to a 1.57% advance by the Philadelphia Housing Sector Index and a nearly 1% upward move by the NYSE Arca Biotechnology Index. In the technology space, the Philadelphia Semiconductor Index moved up 2.41%, the NYSE Arca Disk Drive Index rallied 2.67%, the NYSE Arca Networking Index rose 1.16% and the NYSE Arca Computer Hardware Index firmed up by 1.74%.
Currency, Commodity Markets
In their first trading session as the front month contract, crude oil futures for May delivery are trading down $0.12 to $81.48 a barrel. On Monday, the April futures expired at $81.25, up $0.57 a barrel, after the dollar retreated on an increase in risk appetite.
Gold futures are declining $2.50 to $1,097 an ounce after receding $8.10 to $1,099.50 an ounce in the previous session.
Among currencies, the U.S. dollar is trading at 90.35 yen compared to the 90.145 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.3498.
Asia
The major Asian markets had a mixed session on Tuesday, with the Japanese market, which opened after Monday's public holiday, declining along with the Taiwanese and the Chinese markets, while the rest of the markets rebounded, taking cues from Wall Street's positive performance overnight.
Japan's Nikkei 225 average opened lower and declined steadily throughout the session to close down 50.57 points or 0.47% at 10,774.
A majority of stocks declined, with All Nippon Airways leading the slide with a decline of 6%. Last week, the airline forecast that its loss for the full year may be double what it had estimated earlier. Auto, financial, construction, real estate, utility, heavy equipment and most technology stocks also came under selling pressure.
On the other hand, electronics makers showed some strength. Auto parts retailer Clarion climbed 6.25%, Mitsubishi Heavy rallied 3.10%, Olympus gained 3.33%, Sony moved up 3.55%, Toshiba advanced 3.56% and Fuji Electric Holding rose 3.17%. Toshiba received support from a Nikkei newspaper report that said the company is in discussions with a Bill Gates company to develop nuclear reactors.
Meanwhile, Australia's All Ordinaries rose sharply in early trading and consolidated its gains thereafter before ending up 40.40 points or 0.83% at 4,888, slightly off its 2-month highs reached last Friday.
Most sectors, barring telecommunications, IT, healthcare and real estate stocks advanced in the session. The major miners, with the exception of gold mining stocks Lihir Gold and Newcrest Mining, firmed up in the session. Energy and bank stocks also closed higher. On the other hand, Qantas, building contractor Leighton and CSL came under selling pressure.
Hong Kong's Hang Seng Index opened higher and moved sideways till the afternoon. Thereafter, the index pared some of its gains to close up 54.53 points or 0.26% at 20,998. Twenty of the forty-two index components closed the session higher. Retailer Esprit Holdings and Li & Fung rallied 3.06% and 4.73%, respectively. Property stocks also showed modest buying interest.
Europe
The major European markets opened Tuesday's session modestly higher. The French CAC 40 Index and the German DAX Index are rising 0.59% and 0.18%, respectively, while the U.K.'s FTSE 100 Index is moving up 0.45%.
In corporate news, oil company Cairn Energy reported that its full year 2009 net profit fell to $24.7 million from $348.8 million in the previous year, with the decline mainly due to lower one-time gains and a one-time impairment charge. However, excluding one-time items, profits rose to $53 million from $11 million last year.
Meanwhile, U.K. insurer Legal & General reported a full year profit of 863 million pounds compared to a loss of 1.07 billion pounds in the year-ago period. The company also announced a 33% increase in its dividend.
Imperial Tobacco said its first-half performance is tracking to expectations. However, the company said cigarette volumes were down around 4%.
On the economic front, French statistical office INSEE released the results of its business climate survey, which showed that the industrial economic situation in France improved. The business climate indicator rose by 4 points to 94 in March, although it remained below its long-term average. The index measuring personal production expectations improved to 3 from -4, while the index of general production expectations remained unchanged at -5.
The U.K. consumer price inflation report released by the U.K. Office for National Statistics showed that the U.K.'s annual inflation rate came in at 3% in February from 3.5% in the previous month. Economists had expected a more modest decline in the inflation rate to 3.1%. Nevertheless, the rate remains above the Bank of England's 2% target. On a monthly basis, consumer prices rose 0.4%, slower than the 0.5% increase expected by economists.
U.S. Economic Reports
The National Association of Realtors is scheduled to release its report on existing home sales for February at 10 AM ET. Economists estimate existing home sales of 5 million for the month.
Existing home sales showed a decline to 5.05 million units in January compared to 5.44 million in December. Single-family home sales as well as condominium/co-ops sales fell. Inventories measured by months supply rose to 7.8 from 7.2 in the previous month, while in absolute terms, the number of existing homes available for sales fell to 3.265 million units, the lowest since March 2006. The median selling price was flat year-over-year at $164,700.
The Federal House Finance Agency set to release its house price index for January at 10 AM ET. The index is a weighted, repeat-sales index that measures average price changes of single-family houses in repeat sales or refinancings on the same properties. The house price index fell 1.6% month-over-month in December compared to expectations for a 0.4% increase.
San Francisco Federal Reserve Bank President Janet Yellen is due to speak on the economic outlook and central bank independence to Town Hall Los Angeles at 3 PM ET.
Earnings
Walgreen (WAG) said its second quarter sales rose 3.1% to $17 billion and net earnings rose 4.6% to 68 cents per share. The second quarter's results included a charge of 2 cents per share. Analysts estimated earnings of 71 cents per share on revenues of $17.17 billion.
KB Home (KBH) reported revenues of $264 million, down 14% year-over-year. The company reported a net loss of 71 cents per share, narrower than the 75 cents per share loss in the year-ago period.
Stocks in Focus
Phillips-Van Heusen (PVH) rose in Monday's after hours session after it reported fourth quarter non-GAAP earnings of 61 cents per share, a two-fold increase from 30 cents per share in the year-ago period. Revenues rose 9% to $614.6 million. Analysts estimated earnings of 59 cents per share on revenues of $609.33 billion. Excluding the impact of its Tommy Hilfiger agreement, the company expects 2010 non-GAAP earnings of $3.20-$3.28 per share and revenues of $2.47 billion to $2.50 billion. Phillips-Van Heusen expects the Tommy Hilfiger deal to be immediately accretive to earnings on a non-GAAP basis, with the firm predicting a 20-25 cents per share earnings boost in 2010 and a 75 cents to $1 per share earnings accretion in 2011.
Delta Airlines (DAL) and US Airways (LCC) could be in focus after the companies announced an agreement to transfer 12% of the takeoff and landing slots involved in a previously announced transaction between the carriers at New York's LaGuardia and Washington's Reagan's National airports to four airlines, AirTran Airways (AAI), Spirit Airlines, WestJet (WJA.TO) and JetBlue Airways (JBLU).
RLI Corp. (RLI) may see some activity after rating agency Fitch announced that it has upgraded the company's senior debt rating to 'BBB-' from 'BBB' and raised its insurer financial strength rating for its operating subsidies to 'A+' from 'A'.
ViaSat (VSAT) could see some weakness after it announced that it has commenced an underwritten public offering of 5.5 million shares, consisting of 2.5 million shares offered by ViaSat and 3 million shares offered by certain selling shareholders.
Glacier Bancorp. (GBCI) may also be in focus after it said it has completed its previously announced public offering of 10.29 million shares at a price of $14.75 per share, a discount to its previous session's closing price of $15.94. The company expects net proceeds of $145.6 million from the offering and intends to use it for supporting growth of its banks and for general corporate purposes.
Massey Energy (MEE) may also see weakness after it announced a public offering of 8.5 million shares in a registered underwritten public offering. Abbott Labs (ABT) could also see some activity after it announced the completion of its acquisition of laboratory information management system company STARLIMS Technologies.
Coca-Cola Enterprises (CCE) is likely to move in reaction to its announcement that its subsidiary Bottling Holdings has entered into an agreement with Coca-Cola (KO) to acquire the latter's bottling operations in Norway and Sweden for $822 million.
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