April 28, 2009

Better Trades US News

As investors, and the public as a whole, continue to deal with the ever-increasing worries about the influx of reported cases of swine flu, the major exchanges traded much of the day in the red, following Monday’s down day. In a report from the World Health Organization, the entity raised their alert level to phase 4 out of 6, citing that the flu virus is more easily transmitted, but has yet to be considered a pandemic. Investors are most concerned with the outbreaks potential to curtail economic recovery, especially within those industries that rely heavily on travel and tourism.

Economically speaking, the Conference Board released their findings Tuesday morning in which the private research group showed that consumer confidence in April jumped more than 12 points within their index. For the month, a reading of 39.2 was posted, well above March’s revised reading of 26.9. Today’s level comes in at the highest mark since last November and higher than the 29.5 economists were anticipating.

In another report from the Conference Board, the Expectations Index, which measures the sentiment of consumers for the upcoming six-month period, catapulted to a reading of 49.5, up from a March reading of 30.2. Furthermore, the Present Situation index advanced marginally, up from 21.9 last month to 23.7.

Although the increases may suggest that the people are possibly foreseeing a bottom within the markets, the economy still faces monumental challenges. As companies continue to lay-off workers, consumers will still tightening their wallets in reaction to an increase in unemployment. These actions could escalate the current economic woes and lead the nation into further peril.

In regards to the housing industry, the Standard & Poor's/Case-Shiller index showed that home prices in February dropped once again, yet not setting a record in its severity for the first time in more than two years. In the 20-city index, prices plunged 18.6% year-over-year in February, while the 10-city index receded by 18.8%. Since its peak, set back in the summer of 2006, the 20-city index has seen prices drop nearly 31%, while the 10-city index has fallen almost 32%.

In a very active day in company earnings reports, one of the global leaders in the research and development of innovative lifesaving and life-enhancing treatments for heart disease, high blood pressure, stroke, diabetes, cancer, HIV/AIDS and other infectious diseases, Bristol-Myers Squibb Co. (BMY) announced early Tuesday morning that the company’s profits slipped marginally from last year’s results. For the 1Q, Bristol-Myers recorded net income of $638M, or $0.32 per share, compared to last year’s earnings of $661M, or $0.33 per share, down 3.5%. Revenues, in the meantime, were up 2.6%, from $4.89B to $5.02B. BMY stated that revenues would have come in higher if not for the unfavorable exchange rate with the Dollar, which could have bolstered sales an additional 8%. On average, analysts were looking for the maker of the anti-clotting drug Plavix to post quarterly earnings of $0.48 per share on sales of $5.13B. With another sell-off in the markets, shares of BMY were down over 4%, losing $0.89, to end the session at $19.65 per share.

Announcing company earnings before the opening bell on Tuesday, Office Depot Inc. (ODP), one of the largest suppliers of office products and services in the world, acknowledged that the company booked a 1Q loss due to restructuring charges, yet came in ahead of market expectations. For the recent period, ODP recorded a loss of $54.7M, or $0.20 per share, in sharp contrast to a profit of $68.8M, or $0.25 per share from a year ago. The company took a $120M charge related to multiple store closings and when excluded, Office Depot would have posted a quarterly profit of $27M, or $0.10 per share. Quarterly sales fell-off during the period, dropping from $3.96B to $3.23B, a decline of more than 18%. Analysts, in the meantime, were looking for the company to record a loss of $0.10 per share on overall revenues of $3.26B. With an above-analyst-expectation earnings report, shares of ODP surged in Tuesday’s trading, climbing more than 11%, or $0.29, to close out at $2.82 per share.

Another well-known drug maker, Pfizer Inc. (PFE) a research-based, global pharmaceutical company that discovers and develops innovative, value-added products that improves the quality of life of people, confirmed Tuesday morning that the company’s profits for the 1Q inched lower, despite numerous efforts to cut costs throughout the company. For the quarter, Pfizer booked net income of $2.73B, or $0.40 per share, versus last year’s profits of $2.78B, or $0.41 per share, a decrease of only 1.8%. Much like the company’s net income, overall revenues slipped as well, falling from $11.8B to $10.9B, a drop of nearly 8%. Analysts, in the meantime, were looking for the maker of Viagra to record quarterly earnings of $0.49 per share on total sales of $11.1B. Pfizer also reiterated their previous earnings forecast, released in January, of earnings between $1.20 and $1.35 per share on total revenues between $44B and $46B. At the close of trading, shares of PFE were down 0.7%, losing $0.10, to end the day at $13.39 per share.

As an owner and operator of refineries in the U.S. and Canada, with a combined throughput capacity of approximately two million barrels per day, Valero Energy Corp. (VLO) it one of the nation's top refiners of petroleum products. In a statement released before the opening bell on Tuesday, the company announced that 1Q profits surged as higher refining margins offset the lack of demand for gasoline products. For the period, Valero posted net earnings for the quarter of $309M, or $0.59 per share, compared to last year’s earnings of $261M, or $0.48 per share, an increase in profits of more than 18%. Sales, however, plummeted more than half that of the previous year, from $27.95B to $13.82B. In the meantime, analysts were looking for the refiner to post quarterly earnings of $0.50 per share on total revenues of $19.86B. With the afternoon session concluding, shares of VLO were up $0.08, or 0.4%, to close out the day at $20.82 per share.

With concerns of the spreading of the swine flu, which in turn could lead to less people traveling, the crude markets were pushed lower once again, after Monday’s trading saw oil slip $1.41 by the close. By the sound of the closing bell, the price for a barrel of light, sweet crude for June delivery was lower by $0.22 to settle at $49.92 a barrel. For the past month, oil has remained relatively close to the $50 level as investors continue to wait for signs of recovering global economy.

In additional NYMEX trading, gasoline for May delivery slipped $0.003 to $1.3977 a gallon, while heating oil dropped $0.007 to $1.3167 a gallon. Natural gas for May delivery advanced $0.068 to $3.321 per 1,000 cubic feet.

As the major indices continued to trade back in the red by the closing bell, the bond markets were down for the most part, as the swine flu news flooded the markets, along with the Treasury Department auctioning $35B worth of 5-year notes today. At the close of trading, the benchmark 10-year note was down 22/32 to 97 27/32 as its yield advanced to 3.00% from Monday’s 2.92%. Meanwhile, the 30-year note was also lower, down 2 to 92 5/32 as its yield increased from 3.84% to 3.95%. Lastly, the 2-year note was flat at 99 27/32 while yielding 0.89%.

Inside the Forex markets, the U.S. Dollar varied in value against the world’s major currencies by late afternoon on Tuesday, as the Euro traded higher versus the greenback, buying $1.3143, up from last night’s price of $1.3019. Moreover, the British pound was down against the Dollar, purchasing $1.4630, down from Monday’s price of $1.4633. Against the Japanese yen, the greenback slipped in value, buying 96.39, down from 96.74.

In additional Forex trading, the Dollar traded at 1.1433 Swiss francs, down from 1.1568 the day before, and at 1.2193 Canadian dollars, up from Monday’s price of 1.2197.

With a full slate of company earnings and a minimal impact on the sentiment of investors throughout Tuesday’s session, the markets concluded the day lower, as the rest of the week should prove to be more volatile than the first two sessions of the week. At the sound of the closing bell, the Dow Jones Industrial average was down 8.05 points, or 0.1%, at 8,016.95, while the broader market indicators ended the day in the red as well.

The S&P 500 index finished the day down 2.35 points, or 0.3%, at 855.15, while the tech-heavy NASDAQ composite index ended trading down 5.60 points, or 0.3%, at 1,673.81.

2009 Better Trades Article

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BRIAN MULLIN