March 31, 2009

Better Trades US News

Tuesday’s trading session resumed its upward trek as investors took recent dire economic news in stride as the final trading of the quarter comes to an end. Coming off a two-day pullback, the markets managed to remain in the green for much of the day, trying to recoup some of the past losses. Thus far, the Dow remains down more than 14% in 2009, but up more than 14.5% since setting a 12-year low reached on March 9.

In economic news, the Conference Board confirmed early Tuesday that the consumer confidence index posted a reading of 26 in March, slightly higher that the revised reading of 25.3 in February. Both readings are down a considerable amount from January’s posting of 37.4. Although the March reading stopped a three-month slide for the index, results were still below economists’ projected reading of 28. Last March, the index stood at 65.9.

In another release by the Conference Board, the Present Situation index, the sentiment of current economic situations, posted a reading of 21.5, down from February’s reading of 22.3. Additionally, the Expectations index, the economic sentiment over the next six months, increased from 27.3 in February to 28.9 in March.

Within the housing markets, home prices for January decreased at their steepest rate as the Standard & Poor’s/Case Shiller index of home prices for their 20-city reading plummeted by a record 19% from the January 2008 posting. Meanwhile, the 10-city index dropped by a record 19.4% in January. Within the 20-city report, all of the cities populating the index posted lower monthly and annual price declines, while 13 of those cities recording new annual lows, with prices dropping more than 10% in 14 separate cities.

Finally, the report from the Chicago PMI, a measure of the area’s manufacturing and commercial activity, plunged to its lowest level since July 1980, posting a reading 31.4, well below economists’ prediction of 34.5. Tuesday’s reading comes on the heels of February’s weak showing of 34.2. Typically, any reading below 50 indicates a contraction within the manufacturing industry.

There were only a handful of companies reporting earnings on Tuesday. First up was Fuqi International Inc. (FUQI), which is a leading designer of high quality precious metal jewelry in China, developing, promoting, and selling a broad range of products in the large and rapidly expanding Chinese luxury goods market. For the 4Q, FUQI posted net income of $9.7M, or $0.45 per share, compared to the previous year’s 4Q profit of $7.4M, or $0.39 per share, an increase of more than 31%. Sales for the quarter advanced as well, climbing from $55.1M to $129.5M, a surge in revenues of 135%. On average, analysts were looking for FUQI to post quarterly earnings of $0.32 per share on overall sales of $115.5M. By the close of trading on Tuesday, shares of Fuqi International were up nearly 10%, adding $0.41, to end at $4.70 per share.

Another Asian company reporting earnings on Tuesday was GigaMedia Ltd. (GIGM), which is a leading provider of broadband Internet access services and content through its cable-based television network infrastructure in Taiwan. Before the opening bell, the company confirmed that profits for the 4Q declined, as online gaming contributions were lower for the period. During the quarter, GIGM booked a profit of $9.08M, or $0.15 per share, versus last year’s earnings of $10.66M, or $0.18 per share. Revenues, meanwhile, managed to advance marginally, increasing from $44.23M to $44.58M. Analysts, in the meantime, were looking for the developer of online gaming to post earnings of $0.15 per share on total revenues of $45.24M. At the conclusion of trading, shares of GIGM were down more than 6%, falling $0.39, to close at $5.52 per share.

Lastly, a designer and manufacturer of products used to create high-performance work environments, Steelcase Inc. (SCS), acknowledged early Tuesday morning that the company fell to a loss in the 4Q, as sales slipped and one-time charges cut into profits. For the recent period, SCS recorded a loss of $65.7M, or $0.49 per share, in contrast to a profit of $30.6M, or $0.22 per share a year earlier. Impairment charges totaled $61M for the quarter. Quarterly sales dropped from $901.2M to $654.9M, a decline in revenues of more than 27%. In order to combat the massive losses, Steelcase stated that they are reducing their workforce by 300 jobs, while lowering their salaried workers’ pay in efforts to save $25M to $30M annually. By the close of Tuesday’s session, shares of SCS were in the red, losing $0.08., or 1.6%, to close at $5.01 per share.

As the markets posted a three-week rally, the price of crude followed suit. However, over the past several trading sessions, with investors cautious about an influx of government data released, the price of oil has started to retrace. However, by the close of trading on Tuesday, the price for a barrel of light, sweet crude for May delivery jumped $1.25 to settle at $49.66, following Monday’s decline of nearly $4 a barrel. In additional NYMEX trading, gasoline for April delivery added $0.02 to $1.40 a gallon while heating oil gained $0.007 to $1.3436 a gallon. Natural gas for May delivery advanced by $0.037 to $3.776 per 1,000 cubic feet.

Treasuries were mixed on Tuesday as traders were somewhat disappointed by the lack of enthusiasm from the Federal Reserve’s conservative purchasing of bonds. Expected to snatch up between $4B and $5B worth of bonds, the Fed only obtained $2.5B worth of bonds. With that, the benchmark 10-year note traded higher on the day, adding 9/32 to 100 18/32 as its yield slipped to 2.68%, down from Monday’s 2.72%. Meanwhile, the 30-year note advanced as well, gaining 31/32 to 99 5/32, with its yield sliding to 3.54% from the previous session’s 3.60%. Finally, the 2-year note increased marginally, moving up 3/32 to 100 4/32 with a yield of 0.80%, down from yesterday’s 0.86%.

By the sound of the closing bell, the Dow Jones Industrial average posted a gain of 86.90 points, or 1.16%, to 7,608.92, while the broader market indicators managed to remain in the green as well by the end of the session.

The S&P 500 index added 10.30 points, or 1.31%, to conclude the day at 797.85, just below the all important 800 mark, while the tech-heavy NASDAQ composite index climbed by 26.79 points, or 1.78%, to finish the day at 1,528.59.

2009 Better Trades Article

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BRIAN MULLIN