April 21, 2009

Better Trades US News

Following yesterday’s massive sell-off in the markets, Tuesday’s session was filled with less pessimism, despite numerous companies missing expectations along with lowering their yearly outlook. Included in dismal earnings released this morning, Bank of New York Mellon Corp. (BK) and Merck & Co. (MRK), among others, missed forecasts that were already lowered by analysts after the numerous 4Q earnings reports that came in well below expectations.

With no economic news released today and a light week overall for government data, the markets were purely driven by investors who took into account the more than fifty companies that reported quarterly performance reports Tuesday morning.

In corporate news, one of the world’s largest specialty chemical processors, E.I. DuPont de Nemours & Co. (DuPont)(DD), confirmed early Tuesday morning that the company’s 1Q profits plunged substantially as global demand for industrial goods weakened tremendously. For the recent period, DuPont booked net income of $488M, or $0.54 per share, compared to the previous year’s earnings of $1.19B, or $1.31 per share, a decline in profits of more than 58%. Overall sales for the quarter slipped as well, falling from $8.6B to $6.9B, a decrease in revenues of nearly 20%. On average, analysts were looking for DuPont to record quarterly earnings of $0.52 per share on total revenues of $7.74B. With a continuation in the worldwide recession, DuPont lowered their yearly outlook, and now anticipates earnings to range between $1.70 and $2.10 per share, down from a previously stated range of $2.00 to $2.50 per share. Analysts are looking for yearly earnings to come in at $1.88 per share. By the sound of the closing bell, shares of DD were up nearly 5%, adding $1.32, to end the session at $28.06 per share.

Caterpillar Inc. (CAT), the world’s largest construction and mining equipment maker, made it known before the opening bell on Tuesday that the company recorded a loss during the 1Q, its first such loss since 1992. Contributing the company’s decline was massive costs related to layoffs and a global decline in sales. For the period, CAT posted a loss of $112M, or $0.19 per share, versus a profit of $922M, or $1.42 per share. Costs related to layoffs reduced the company’s bottom-line by nearly $560M, or $0.58 per share. Excluding these expenses, CAT would have posted quarterly earnings of $0.39 per share, well above market expectations. Quarterly sales for CAT decreased nearly 22% year-over-year, from $11.8B to $9.23B. Analysts, in the meantime, were looking for Caterpillar to post quarterly earnings of $0.04 per share on total sales of $8.54B. In lieu of the company’s recent loss, CAT reduced their annual projections, now expecting a profit of $1.25 per share on sales of $35B, down from an earlier prediction of $2.50 per share on revenues of $40B. Analysts think that Caterpillar will post annual earnings of $1.77 per share on yearly sales of $39.04B. As the markets concluded their trading, shares of CAT were up 3% on the day, adding $0.91, to end the day at $31.39 per share.

As one of the nation’s largest defense contractors, Lockheed Martin Corp. (LMT) acknowledged early Tuesday that the company’s profit during the 1Q retreated over last year’s results as the company’s increase in pension fund costs outweighed increased sales in satellites, government IT equipment and missiles. During the quarter, Lockheed recorded net income of $666M, or $1.69, down from last year’s profit of $730M, or $1.75 per share, a decrease of nearly 9%. Due to higher pension costs, the bottom-line was lowered by $74M, hurting earnings by $0.19 per share. Overall revenues increased for the company during the quarter, inching higher by 4% to $10.4B. Meanwhile, analysts within the industry were looking for the maker of the F-35 and F-22 fighter jets to post earnings of $1.64 per share on overall revenues of $10.5B. After a solid earnings release, Lockheed upwardly adjusted their yearly earnings outlook for 2009 to a range between $7.15 and $7.35 per share. Lockheed maintained their projection on overall sales to remain between $44.7B and $45.7B. At the sound of the closing bell, shares of LMT gained $0.12, or 0.2%, to close out at $75.85.

On Tuesday, a report released confirmed that the government will provide General Motors (GM) up to $5B in additional funds to make it through June 1, while Chrysler LLC could get up to $500M by April 30. GM already has received $13.4B in government loans, while Chrysler has received $4B. GM has until June 1 to achieve its restructuring plan or seek bankruptcy protection, while Chrysler has until April 30 to make additional cuts to its restructuring plan, take on a partner or face liquidation proceedings. Shares of General Motors were up 2.4%, or $0.04, to close at $1.70 per share.

Within the crude markets, the price of oil advanced by the end of the trading day, despite investors’ renewed concerns with the overall health of the economy as the financial sector took massive hits in Monday’s trading. At the close of the day, the price for a barrel of light, sweet crude for May delivery gained $0.63 to settle at $46.51 a barrel. Today’s session follows yesterday’s sell-off as crude dropped $4.45 a barrel. Additionally, with May’s contract expiring today, investors were more interested in trading the June contracts, which was trading up $0.04 at $48.55 a barrel.

In additional NYMEX trading, gasoline for May delivery was higher by $0.0025 to $1.4144 a gallon, while heating oil added $0.0162 to $1.3478 a gallon. Natural gas for May delivery declined $0.029 to $3.511 per 1,000 cubic feet.

Inside the Forex markets, the U.S. Dollar headed into the late afternoon session mixed as the 16-nation Euro traded higher versus the greenback, buying $1.2941, up from Monday’s price of $1.2923. Meanwhile, the British pound increased in value against the Dollar as well, buying $1.4671, up from last night’s price of $1.4539. However, in contrast to the Japanese yen, the greenback advanced versus Japan’s currency, buying 98.76, up from Monday’s price of 97.84.

More currency trading saw the Dollar slip against the Swiss franc and the Canadian dollar. Against the franc, the greenback bought 1.1678, down from 1.1688. The Dollar retreated against the Canadian dollar as well, falling from 1.2378 to 1.2362.

As investors continued to place their capital into the equity markets, the bond markets retreated. By the end of the trading day, Treasuries were lower as the benchmark 10-year note slipped 18/32 to 98 22/32 as its yield increased to 2.90%, up from Monday’s 2.84%. Meanwhile, the 30-year note declined as well, falling 1 1/32 to 95 19/32 with a yield of 3.74%, higher than yesterday’s closing rate of 3.67%. Finally, the 2-year note inched lower by 1/32 to 99 28/32 as its yield advanced to 0.94% from the previous session’s 0.92%.

After trading in the red for much of the morning session, buyers reentered the markets to lead the exchanges to a positive close. By the sound of the closing bell, the Dow Jones Industrial average added 127.83 points, or 1.63%, to end the day at 7,969.32, while the broader market indicators concluded the session in the green as well.

The S&P 500 index advanced by 17.70 points, or 2.13%, to finish the day at 850.08, while the tech-heavy NASDAQ composite index climbed by 35.64 points, or 2.22%, to end the trading day at 1,643.85.

2009 Better Trades Article

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BRIAN MULLIN