Stocks: Thursday's review
Japanese stocks rose, erasing earlier declines, as Isuzu Motors Ltd. led gains by exporters and Toshiba Corp. climbed after saying profit may beat its earlier forecast.
Isuzu Motors jumped 6.2 percent in Tokyo, even after it denied a report Volkswagen AG is considering taking a stake or purchasing the Japanese truckmaker outright. Toshiba, a nuclear reactor supplier, advanced 2 percent. Toshiba advanced 2 percent to 404 yen after its president said net income may beat forecasts. Net income for the year ended March 31 may exceed Toshiba’s January estimate, President Norio Sasaki told reporters today in Tokyo. Sanrio Co., the maker of Hello Kitty character goods, surged 11 percent after saying full-year net income beat its forecast.
Japanese companies resumed production after last month’s earthquake, and as an improving U.S. economy bolstered optimism the global recovery can be sustained.
European stocks declined for the third time in four days as yields on Portuguese and Greek government bonds surged to records amid concern the countries may have to reschedule debt payments.
Banca Popolare di Milano Scrl dropped 2.7 percent as people familiar with the situation said the lender is considering a share sale to boost capital. Reckitt Benckiser Group Plc, the maker of Nurofen painkillers, tumbled the most since 2003 after Chief Executive Officer Bart Becht announced his retirement. Danone rose 2 percent as sales beat analysts’ estimates.
The benchmark Stoxx Europe 600 Index retreated 0.5 percent to 277.01 at the 4:30 p.m. close in London. The gauge has declined 1.7 percent so far this week as Japan raised its alert level on the stricken Fukushima Dai-Ichi nuclear power plant and Alcoa Inc. began the U.S. earnings season with sales that missed analysts’ estimates. Google Inc. is scheduled to report first- quarter results after the close of New York markets today.
For the second straight session the stock market overcame selling pressure to finish flat. In both sessions stocks were able to do it without help from the financial sector.
Stocks dropped markedly in the first few minutes. Sellers were motivated by renewed weakness among several major foreign equity averages and a disappointing initial jobless claims count for the week ended April 9. Initial claims climbed 27,000 week-over-week to 412,000, which is greater than the 385,000 initial claims that had been widely expected. The surprisingly high tally marked the first time in more than a month that initial claims exceeded 400,000.
Separately, the Producer Price Index for March increased by 0.7%, which is less than the 1.1% increase that had been broadly expected. Excluding food and energy, producer prices for March increased by a much more tepid 0.3%, which is slightly greater than the 0.2% increase that had been expected, on average, among economists polled by Briefing.com.
Early pressure was primarily focused on tech stocks and financials. Although buying interest gradually emerged to help tech stocks pare losses, financials remained hampered by weakness among diversified bank stocks ahead of the latest report from Bank of America (BAC 13.13, -0.14) tomorrow morning. Investment bank stocks were also weak amid news that Goldman Sachs (GS 155.79, -4.38) has been accused by a Senate subcommittee for lying in a testimony during 2010. Additionally, Deutsche Bank (DB 60.57, -0.81) and Credit Suisse (CS 44.24, -0.42) were both downgraded by analysts at Societe Generale. Overall, the financial sector fell 0.9%, which comes on top of its 0.8% decline in the prior session.
Strong buying interest in consumer staples stocks and energy stocks helped lift the two sectors to gains of 0.6% gain, but the pair failed to provide much broad market leadership. Although their inability to provide a lift to the broader market left the major averages to settle near the neutral line, the flat finish actually represented considerable improvement over the tone of trade seen in the early going.
Waning negativity caused Treasuries to slip a bit. Results from the auction of 30-year Bonds didn't exactly bolster buying interest in the space. The auction drew a bid-to-cover of 2.83, dollar demand of $36.8 billion, and an indirect bidder participation rate of 47.2%.