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US: local achievements outweigh global problems

Dmitriy Simonyan, Analyst, Global Markets (Finam)

 

On Friday, February 22, unlike previous days rich in economic news and benchmark events US trading was marked by the absence of any tangible data out of the US. External markets saw the publication of only one major macro report, i.e. Germany’s Business Climate Index that contracted despite expectations of an improvement.

With no economic data released, investors shifted their attention to US corporate news and the Cyprus debt crisis.

Leading US corporations came out with mostly encouraging quarterly numbers and upbeat guidance. Impressive quarterly numbers were announced by the globe’s leading athletic apparel producer Nike that reported higher gross profit for the first time in nine quarters on the back of stronger product demand in China and the world’s No. 2 jewelry retailer Tiffany, whose numbers surpassed the median guidance for quarterly profit mainly after a steep rise in APR sales. Large memory microchip maker Micron Technology, despite losses due to a scheduled merger with Japanese microchip producer Elpida Memory, reported increased quarterly earnings and forecast higher earnings going forward as memory microchip prices are steadily on the rise.

The focus of investor concern was still Cyprus, which replaced Spain and Greece as the hot spot in Europe. Recent worries that dominated the markets were stoked not by persisting difficulties faced by the island nation, a minor EU member state, but by the fact that symptoms of the country’s default could have a domino affect by spilling over to other larger and debt-laden European economies. All attempts made by Cypriot authorities to enlist the financial support of European bodies and even remote Russia failed to yield any results enabling the country to bank on a bailout and retain EU membership. However, as until March 25, the deadline set by the troika of international creditors (the European Commission, the ECB and the IMF) for Cyprus, the country’s parliament still has some time to work out a stabilization plan meeting the requirements of potential creditors, investors opted to shrug off pessimistic thoughts and wait for Monday.

As a result, stock markets finished Friday with fairly hefty gains, but the trio of US benchmarks, on the whole, closed the week lower (for the second time this year).

The Dow Jones Industrial Average dropped 0.63% to 14,512.03, ending virtually flat on the week. The Standard & Poor's 500 Index advanced 0.72%, ending at 1,556.89, slipping 0.2% w-o-w. The Nasdaq Composite Index added 0.70% to 3,245.00, posting a weekly loss of 0.1%.

In the blue-chip universe, most names (22 of 30) closed in positive territory. The day’s top advancers were leading PC and printer maker Hewlett-Packard (+3.2%), the largest global retailer Wal-Mart Stores (+1.6%) and innovation technology leader 3M (+1.4%). Among the decliners, Friday’s worst plays were No. 1 US healthcare insurer UnitedHealth Group (-1.1%), technology giant Cisco Systems (-0.4%) and also industrial giant DuPont (-0.2%).

In the bull camp, drug maker Anacor Pharmaceuticals shot up 25.6% on the back of successful results of intermediary trials conducted to determine the efficiency of its new antifungal medicine.

Shares of context ad management solutions developer Marin Software spiked 16.1% on the first day of its debut trading on NYSE.

Leading global snack producer Mondelez International, which was spun off from food giant Kraft Foods when the company was broken up into two concerns, added 4.1% on British media reports that Nelson Peltz, a major shareholder of Mondelez International and another food concern PepsiCo, intends to increase his holdings in both companies and pool their assets.

Shares of large steel producer AK Steel Holding shrank 4.6% after guiding for much higher-than-expected Q1 losses as hopes for traditionally strong seasonal demand for steel missed the mark.

Infrastructure software developer Tibco Software plunged 9.4% after forecasting a steeper decline in sales and lower Q1 profit than what a pool of experts had predicted.

In commodities, gold futures for April delivery closed down USD 7.70 or 0.5% at USD 1,606.10/oz on COMEX.

Gold lost some of its luster as investors opted for profit-taking after a recent upturn in metal prices and hitting a high since late February. Despite Friday losses, the metal added 0.9% w-o-w for the third week in a row.

May light, sweet crude jumped USD 1.26 or 1.4% to USD 93.71/bbl on NYMEX.

The price of oil rose as the dollar retreated against all rival currencies and US equities headed north. On the whole, oil futures in the most traded contract position, including the switch from April to May contracts, advanced 0.3% on the week.