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THE ECONOMIC MONITOR U.S.
MARKETS AT A GLANCE
INSIDE THE REPORT
Stock recommendations and price targets from top brokerage firms Forecasts on Economic Indicators Important Events Scheduled on 22 September
The S&P 500 slipped 0.26 percent to 1,139.78. The Dow Jones Industrial Average rose 7.41 points, or 0.1 percent, to 10,761.03. The dollar was last 0.7 percent lower at 85.09 yen. In late afternoon trading in New York, the euro was up 1.3 percent at $1.3238. Benchmark 10-year notes rose a point in price to yield 2.59 percent, the lowest since early September and down from 2.70 percent. November crude fell $1.22, or 1.6 percent, to settle at $74.97 a barrel. U.S. gold futures for December delivery slipped $6.50 during the trading session to settle at $1,274.30.
Prime Minister of Greece, George Papandreou, Speaks at Lunch Meeting of the Economic Club of New York Assistant Treasury Secretary for Financial Institutions Michael Barr speaks before a biennial conference U.S. Commerce Secretary Gary Locke gives speech to services industry conference
INDEX DJIA* NYSE Composite* Nasdaq* S&P 500* DJ Total Stock Market* Russell 2000* Global Dow* LAST 10761.03 7245.95 2349.35 1139.78 11891.6 664.66 1928.44 1989.11 4511.27 515.53 CHNG 7.41 -20.07 -6.48 -2.93 -40.46 -5.32 -0.82 -0.32 36.15 -0.83 % CHNG 0.07 -0.28 -0.28 -0.26 -0.34 -0.79 -0.04 -0.02 0.81 -0.16
Bed Bath & Beyond, Red Hat second quarter results Darden Restaurants, General Mills first quarter 2011 results
ConAgra profit misses expectation Carnival beats Street Potash bid seen running into next year Textron to lay off 700 at Cessna Abbott to cut 3,000 jobs Delay in Nokia’s N8 phone again Weight-loss drug effective over 2 years: Vivus Fed on possible further easing Housing starts at 4-mth high Student Loan shareholder sues to bar Citi deal iStar may seek pre-packaged bankruptcy: Report
Nasdaq 100* DJ Transportation Avg* S&P 100* * CLOSING VALUES
INDEX Euro (EUR/USD) U.K. Pound (GBP/USD) Japanese Yen (USD/JPY) LAST 1.3241 1.5614 85.06 PRIOR 1.3062 1.5552 85.75
All prices are at 04:14PM EDT
SETTLE Crude Oil (Oct) Natural Gas (Nov) Gold (Dec) Copper ( Dec) Wheat (Dec) 72.96 4.089 1289.70 348.35 717.00 CHANGE -1.34 0.084 8.90 -2.10 0.00
All prices are at 04:04 PM EDT
THE ECONOMIC MONITOR - U.S.
STOCK RECOMMENDATIONS BY BROKERAGE HOUSES
BROKERAGE/COMPANY JP Morgan Cameron International FMC Technologies National Oilwell Varco BMO CSX Corp Norfolk Southern Union Pacific Corp Stifel Coca-Cola Qualcomm Sterne Agee Micron Technology SanDisk Corp Longbow Nucor Corp United States Steel Macquarie Owens Illinois Citigroup Progressive Corp Jefferies Vulcan Materials Credit Suisse Raises to buy from hold on valuation Cuts to underperform from neutral; price target to $30 from $40 Underperform Raises to buy from hold on valuation Buy Raises price target to $25 from $22 Buy Cuts to neutral from outperform; lowers price target to $32 from $34 Neutral Cuts to sell from neutral Cuts to neutral from buy Sell Neutral Cuts to neutral from buy Cuts to neutral from buy Neutral Neutral Raises price target to $65 from $5 Raises price target to $49 from $47 Buy Outperform Starts with $72 target price Starts with $70 target price Starts with $95 target price Outperform Outperform Outperform Starts with overweight rating Starts with neutral rating Starts with overweight rating Overweight Neutral Overweight ACTIONS RATING
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U.S. stocks fell, dragging down S&P 500 from a four-month high, as investors bought Treasuries amid speculation the Federal Reserve will purchase more government debt to buoy the economy. While, the Nasdaq ended modestly lower, with the Federal Reserve inching closer to further steps designed to support the recovery. The S&P 500 slipped 0.26 percent to 1,139.78. The Dow Jones Industrial Average rose 7.41 points, or 0.1 percent, to 10,761.03. The Nasdaq Composite was down 6.48 points, or 0.28 percent, at 2,349.35. The dollar fell sharply against the yen and euro after the Federal Reserve suggested it stood ready to further stimulate the U.S. economy, raising fears it may print more dollars to do so. The euro surged to a 6-week high against the dollar and broke above its 200-day moving average for the first time since January, suggesting more gains were ahead. The yen powered higher against the greenback as well, breaking through the 85 level for the first time since Japanese authorities intervened to weaken the currency last week. In late afternoon trading in New York, the euro was up 1.3 percent at $1.3238 after climbing as high as 1.3281. The dollar was last 0.7 percent lower at 85.09 yen. It fell to 84.97 yen on EBS. In late afternoon trading in New York, the euro was up 1.3 percent at $1.3238 after climbing as high as 1.3281. U.S. Treasury prices rallied after the Federal Reserve signaled it was open to more policy easing in an effort to support the economy and prevent it from slipping back into recession. The yield on two-year government notes posted a series of record lows on expectations the Fed would hold short-term rates near zero even longer than previously thought, while long-dated yields declined on the Fed's acknowledgment that inflation will stay subdued and deflation is a threat. Bonds briefly pared previous gains as the Fed disappointed some traders who had bet the U.S. central bank would immediately buy more government debt and/or engage in other quantitative easing measures after its latest policy meeting. Benchmark 10-year notes rose a point in price to yield 2.59 percent, the lowest since early September and down from 2.70 percent. The 30-year bond was up 1-24/32 for a yield of 3.77 percent, down from 3.88 percent on Monday. Crude oil prices fell for the fifth time in six days on Tuesday, wilting amid high oil inventories and the Federal Reserve's continued concern about sluggish economic recovery. Crude futures extended losses right before the close of the oil's open outcry trading session in New York after the U.S. Federal Reserve said it would keep interest rates exceptionally low and that the central bank was prepared to provide additional accommodation if needed to support recovery. The October U.S. crude contract expired on Tuesday, helping keep pressure on the front month and nearby months, industry sources said. U.S. crude for October delivery fell $1.34, or 1.79 percent, to settle at $73.52 a barrel as it expired and went off the board. Trading ranged from $72.81 to $74.60. U.S. November crude fell $1.22, or 1.6 percent, to settle at $74.97 a barrel. ICE Brent for November fell 90 cents to settle at $78.42. Gold prices climbed to a fourth consecutive record high near $1,300 an ounce after the U.S. Federal Reserve inched nearer to taking new steps to stimulate the U.S. economy and expressed concerns about low inflation. As expected, the U.S. central bank did not move to extend the purchases of government debt, or quantitative easing, which helped fuel gold's 17 percent gain this year. But its renewed attention on the risk of deflation was sufficient to put gold into the black. Spot gold, which had hit five record highs in the past six days, reversed early losses and rose to a new record of $1,290.70 an ounce by 3:56 p.m. EDT from around $1,272 prior to the Fed announcement. U.S. gold futures for December delivery slipped $6.50 during the trading session to settle at $1,274.30, but after the Fed announcement the price jumped to a peak at $1,292.40 an ounce.
THE ECONOMIC MONITOR - U.S.
COMPANY NEWS ECONOMY NEWS
ConAgra profit misses expectation
ConAgra Foods Inc posted lower-than-expected quarterly earnings and cut its full-year forecast. ConAgra cited material costs that rose faster than the company's efforts to curb expenses and promotions that were more aggressive than anticipated. ConAgra forecast a rise in full-year profit of 5 to 7 percent from the $1.74 per share it earned in fiscal 2010, which ended May 30. ConAgra raised its dividend by 15 percent and affirmed its long-term target for annual earnings growth of 8 to 10 percent.
Fed on possible further easing
The Federal Reserve’s policy-setting panel made no shift in monetary policy at the end of a one-day meeting but it opened the door wider to pumping more money into the economy. It said in a statement, "The committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate." The Fed said, "With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time."
Carnival beats Street
World’s largest cruise company, Carnival Corp & Plc posted better-thanexpected third-quarter results. Excluding one-time items, Carnival reported a profit of$1.65 per share. The number of bookings in the third-quarter rose 8 percent compared with last year.
Potash bid seen running into next year
BHP Billiton, a global miner extended its offer period for its $39 billion takeover of Canada's Potash Corp, after it failed to win immediate backing from Canadian authorities. The Anglo-Australian miner also said it had no plan to change its $130-a-share offer and shrugged off talk of a China-backed rival bid emerging.
Housing starts at 4-mth high
The Commerce Department said that housing starts rose 10.5 percent, the largest increase since November, to a seasonally adjusted annual rate of 598,000 units. The residential construction rose more than expected suggesting the embattled housing market was starting to stabilize following the end of a homebuyer tax credit. July's residential construction was revised down to show a 0.4 percent gain, which was previously reported as a 1.7 percent increase. New building permits for future home construction rebounded 1.8 percent to a 569,000-unit pace last month, lifted by a 9.8 percent rise in permits for multi-family units, after an unrevised 4.1 percent drop in July. Residential construction in August was up by a 32.2 percent jump in groundbreaking activity in the volatile multi-family segment to an annual rate of 160,000 units. Single-family starts increased 4.3 percent to a 438,000-unit pace, the highest since June. Home completions increased 5.6 percent to a 603,000unit pace.
Textron to lay off 700 at Cessna
Citing soft demand for business jets, the diversified U.S. manufacturer Textron Inc said it is cutting back production at its Cessna unit. It will lay off about 700 workers at Cessna, which currently employs 8,400 people, as well as cutting operating hours, a spokesman said. It held its full-year profit target steady. The company expects to reduce outstanding receivables at its finance arm by about $2.4 billion this year, ahead of its initial target of $1.6 billion.
Abbott to cut 3,000 jobs
Following the purchase of Solvay SA's pharmaceuticals business, Abbott Laboratories Inc plans to cut 3,000 jobs. The cuts will take place over the next two years. The job cuts are part of "a series of recent strategic announcements designed to position Abbott's pharmaceutical business for sustained and future growth," Abbott spokesman Scott Stoffel said.
Student Loan shareholder sues to bar Citi deal
According to a lawsuit, a shareholder of Student Loan Corp has sued to block the sale of the company by majority owner Citigroup Inc because it benefits the Wall Street bank at the expense of minority investors. Citigroup, which owns 80 percent of the stake, agreed last week to sell it to Discover Financial Services for $600 million. The complaint by Alan Kahn seeks class action status, said Student Loans directors were acting to benefit Citigroup by selling the Wall Street bank the best loans. The shareholder said that at $30 per share, the deal is priced at a significant discount to the company's book value of $65.74 per share, even though most of the student loans are guaranteed by the U.S. government.
Delay in Nokia’s N8 phone again
Nokia said it would delay again its flagship smartphone N8 model. The N8 is seen as Nokia's first top-range model to challenge Apple's iPhone more than three years after its launch. It was originally scheduled to reach consumers in June. "In some markets, we had planned to start delivering the N8s to our pre-order customers by the end of September. To ensure a great user experience, we have decided to hold the shipments for a few weeks to do some final amends," the company said in a statement, adding that the N8s would reach consumers in October.
iStar may seek pre-packaged bankruptcy: Report
iStar Financial may look to a pre-packaged bankruptcy after creditors blocked it from amending loans, Bloomberg reported on Tuesday citing people with knowledge of the plan. The Commercial real-estate lender company expects to meet with creditors in coming weeks to discuss potential terms of a so-called pre-packaged bankruptcy, paper said. The bankruptcy may not occur until sometime next year, the report said. It has hired Lazard Ltd and Kirkland & Ellis LLP to advise on the debt restructuring, the news agency said.
Weight-loss drug effective over 2 years: Vivus
Vivus Inc said that the second year of an experimental weight loss drug trial found that patients taking the highest dose of its drug, Qnexa, lost an average of 26 pounds, or 11.4 percent of their body weight. Vivus officials declined to comment on the latest trial results, citing the sensitivity of discussions with the FDA. Although safety details were scant for the drug, which in July was turned down by a panel of U.S. experts.
THE ECONOMIC MONITOR - U.S.
NEXT TRADING DAY NEXT TRADING DAY (contd…)
General Mills is expected to post a profit of 63 cents per share for the first quarter, up from 43 cents for the same period a year ago. The company reported diminutive fiscal 2010 results in the recent fourth quarter. For the quarter, adjusted earnings dropped 4.6% to 41 cents a share compared with 43 cents in the year-ago period. For fiscal 2010, adjusted earnings jumped 16% to $2.30 per share compared with the year-ago earnings of $1.99. Net sales for the fourth quarter declined 2% to $3.57 billion from $3.65 billion in the year-ago quarter. Total revenue for the reported quarter dipped 2% year over year to $3.6 billion. The quarter experienced positive currency translation, flat volume compared with the year-ago period, but unfavorable price and product mix. WallStreet expects Red Hat to report a profit of 18 cents per share for the second quarter, up from 15 cents for the same period a year ago. The provider of open source software services, reported higher earnings for the recent first quarter helped by a 20 percent organic revenue growth. Adjusted earnings came in line with analysts’ expectation, but revenues exceeded consensus. The company's earnings increased to $24.07 million or 12 cents a share from $18.51 million or 10 cents a share in the previous year quarter. Excluding stock compensation and amortization expenses, net income was $35.58 million or 18 cents a share, compared to $28.71 million or 15 cents a share in the previous quarter last year. Total revenues for the quarter rose 20 percent to $209.14 million from $174.39 million in the comparable quarter of last year.
NEW YORK - Prime Minister of Greece, George Papandreou, Speaks at Lunch Meeting of the Economic Club of New York - 1615 GMT Greek Prime Minister George Papandreou stressed on Monday, during a visit to the New York Stock Exchange where he attended a working lunch with the stock exchange's president and leading Wall Street members, that Greece has changed dramatically over the past year, when the country's new government promoted the most ambitious monetary and structural reforms in the history of the Eurozone, with the help of the IMF and EU. He said a debt default would be a 'tragedy.' The Prime Minister said it's hard to argue with a 'prophet' like the famed 'Dr. Doom,' New York University professor, Nouriel Roubini, who says an orderly restructuring of Greece’s public debt is required in order to avoid an inevitable default. However, Papandreou said that a default would have long-term consequences, which would hit the poorer sections of Greek society in particular. WASHINGTON - Assistant Treasury Secretary for Financial Institutions Michael Barr speaks before the Corporation for Enterprise Development (CFED) biennial conference, "The Assets Movement at Its Moment: Creating the Save & Invest Economy" - 1800 GMT WASHINGTON - U.S. Commerce Secretary Gary Locke discusses challenges and opportunities of U.S. services trade with China and the Asia-Pacific in speech to services industry conference -1800 GMT
ECONOMIC INDICATOR WATCH
Mortgage Applications (Weekly)
Mortgage Index - Forecast: NA Prior: 801.5 Refinancing Index - Forecast: NA Prior: 4396.1
U.S. mortgage applications for home loan refinancing fell last week for a second straight week, dropping to its lowest level since early August, as rock-bottom interest rates failed to boost demand. The Mortgage Bankers Association on last Wednesday said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Sept. 10 decreased 8.9 percent. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 0.8 percent. The MBA's seasonally adjusted index of refinancing applications decreased 10.8 percent, reaching its lowest level since the week ended August 6. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.47 percent, down 0.03 percentage point from the previous week. The MBA said fixed 15-year mortgage rates averaged 3.96 percent, down from the previous week's 4.00 percent. Rates on one-year adjustable-rate mortgage, or ARMs, decreased to 6.89 percent from 7.00 percent. Source: Mortgage Bankers Association
Analysts expect Bed Bath & Beyond to report a profit of 63 cents per share, up from 34 cents a year earlier for the second quarter. The home furnishings retailer posted a strong profit in the recent first quarter as consumers continued to splurge on their homes, but the company forecast weak second-quarter earnings, sending its shares down 7 percent. The company reported first quarter net income of $137.6 million or $0.52 per share, compared to $87.2 million or $0.34 per share in the year-ago quarter. Net sales for the quarter increased 13.5% to $1.92 billion from $1.69 billion in the prior-year quarter. Twenty-one analysts had a revenue consensus of $1.89 billion for the first quarter. Comparable store sales in the first quarter of 2010 increased by about 8.4%, compared with a decrease of around 1.6% in last year's fiscal first quarter. WallStreet expects Darden Restaurants to report a profit of 77 cents per share for the first quarter, down from 90 cents for the same period a year ago. The casual dining chain, reported a profit that dropped below estimates in the recent fourth quarter on pre-tax charges and lower sales reflecting the absence of an extra week benefit in the prior year. The company's net earnings from continuing operations dropped to $116.0 million or $0.81 per share from $122.8 million or $0.87 per share in the same quarter a year ago. Darden's sales from continuing operations were down 5.7% at $1.86 billion, compared to $1.98 billion in the prior year quarter, missing Street expectation of $1.89 billion. The additional fiscal week contributed approximately $124 million of sales in the fourth quarter of fiscal 2009. U.S. same-restaurant sales decreased 1.5% at Olive Garden and 4.6% at Red Lobster while LongHorn Steakhouse's U.S. same-restaurant sales increased 1.8%
FHFA Home Price (July)
Forecast: NA Prior: -0.3%
Prices of U.S. single-family homes fell for the first time in four months in June, and by an adjusted 1.7 percent from a year earlier, the Federal Housing Finance Agency said in last month's release. The index fell by a seasonally adjusted 1.7 percent for the 12 months ending in June. Home prices, however, gained on a quarter-over-quarter basis. The gauge in the second quarter rose 0.9 percent from the first quarter, but dropped 1.6 percent from the second quarter of 2009. The U.S. index as of June is 12.6 percent below its April 2007 peak, the regulator said. Source: Federal Housing Finance Agency
THE ECONOMIC MONITOR - U.S.
WED 09/22 0700 0700 1000 THU 09/23 0830 0830 0830 1000 1000 1000 FRI 09/24 0830 0830 0830 0830 1000 1030 MON 09/27 0830 1200 TIME TBA Mortgage Index Refinancing Index FHFA Home Price (Jul) Initial Claims 4 Week Average Continuing Claims Existing Home Sls (Aug) Existing home sls (Aug) Lead Indicators (Aug) Durable Goods (Aug) Ex-Transportation Ex-Defense Nondefense ex-air New Home Sales (Aug) ECRI Weekly Index Chicago Fed Index Chicago Midwest (Aug) Building Permits NA NA NA 450 k NA 4.46 mln 4.1 8.40% 0.10% -1% 1% -0.40% 2% 0.29 mln NA NA NA NA 801.5 4396.1 -0.3% 450 k 464.75 k 4.485 mln 3.83 mln -27.20% 0.10% 0.40% -3.70% 0.40% -7.20% 0.276 mln 122.6 NA 81.4 NA
Stocks were cautious as Wall Street refrained from decisive moves ahead of learning later on whether the Federal Reserve takes further action to jolt the economy. The Dow Jones climbed 5.28 points to 10,758.88. Stocks attempted to swing higher Tuesday as Wall Street offered a volatile take on the Federal Reserve's decision to hold rates unchanged, with the U.S. central bank saying it is ready to do more if needed. Dow Jones rose 32.77 points to 10,786.39. Stocks lost most of their afternoon gains by the close of trading. The Dow Jones still eked out fractional gains, helped by a 2.2% advance in shares Caterpillar Inc. The blue-chip average finished up 7.41 points, or 0.1%, at 10,761.03.
DATE - 22/September2010
COMPANY NAME General Mills Lyris Versar Psivida Bed Bath & Beyond PHC Darden Restaurants Steelcase IHS Red Hat eGain Communications Carmax Jefferies EVENT Q1 2011 Q4 2010 Q4 2010 Q4 2010 Q2 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2010 Q2 2011 Q4 2010 Q2 2011 Q3 2010
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