U.S. Stocks Rebound on Durable Orders

Arthi Gupta, Mayank Mehta and Sanjay Barot
26 May, 2010
New York City

World markets and U.S. stocks rose as tensions about war in the Korean peninsula have been diffused to a great extent and the global markets made a modest recovery. Global recovery gathers momentum. U.S. durable goods orders rises by 2.9% in April.

[R]9:35 AM New York – World markets and U.S. stocks rose as tensions about war in the Korean peninsula have been diffused to a great extent and the global markets made a modest recovery. Global recovery gathers momentum. U.S. durable goods orders rises by 2.9% in April.[/R]

U.S. and world markets regain their footings after war talks in the Korean peninsula tone down. Stocks in New York rise after durable goods orders rise 2.9% in April and Toll Brothers posts narrower loss in second quarter.

Durable Goods Orders Rise 2.9%

New orders for manufactured durable goods increased by much more than expected in April, according to a report released by the Commerce Department on Wednesday, although the increase was largely due to a rebound in orders for transportation equipment.

The report showed that durable goods orders rose by 2.9% in April, while orders for March were upwardly revised to show only a slight decrease.

Excluding a 16.1% increase in orders for transportation equipment, durable goods orders actually fell 1.0% in April compared to a 4.8% increase in the previous month.

OECD Optimistic About Global Recovery

The markets across Asia and Europe recovered from the recent declines of more than 5% in the last seven trading sessions. Asian stocks recovered on bargain hunting after speculation over rising demand in China drove commodity prices higher.

The global economic recovery is building steam led by strong growth in Asia although considerable risks remain, the Organization for Economic Cooperation and Development says. Its latest economic outlook report projected gross domestic product across OECD countries to rise by 2.7% this year and by 2.8% in 2011.

The global economy is predicted to grow 4.6% this year and 4.5% in the next, according to the multi-lateral organization.

In the U.S., the GDP is expected to rise 3.2% this year and 3.2% in 2011. Euro area growth is forecast at 1.2% this year compared to 0.9% last November, while in Japan, GDP is expected to expand 3% in 2010 and 2% in 2011.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.2320 and increased against the Japanese yen to 90.33.

Crude oil increased $2.05 to $70.80 a barrel for a front month contract, natural gas edged higher $0.06 cent to $4.11 per mBtu and gasoline increased 4.420 cents to 197.50 cents.

Gold increased $14.70 in New York trading to close at $1,212.70 per ounce, silver closed higher $0.499 to $18.28 per ounce and copper for the front month delivery increased 6.950 cents to $3.11 per pound.

Yields on 10-year U.S. bonds increased to 3.22% and on 30-year U.S. bonds traded at 4.12%.

Stock Movers

American International Group, Inc. rose 1.3% after the insurer is considering selling its stake in a housing portfolio of nearly 17,000 apartments.

GTx, Inc. plunged 32.4%. The developer of a prostate-cancer drug announced top line results of Phase III clinical trial evaluating toremifene 20 mg for the prevention of prostate cancer in men with high grade PIN.

Luxury homebuilder Toll Brothers Inc. reported narrower loss for the second quarter, driven by lower write-downs and expenses.

Vertex Pharmaceuticals Incorporated, the drugmaker surged 12.8%.

Earnings Review

American Eagle Outfitters, Inc ((AEO)), the teen clothing chain reported first quarter sales rose 8% to $659.5 million from $612 million a year ago. Net income in the quarter fell 50% to $11.0 million or 5 cents per diluted share compared to net income of $22.0 million or 11 cents per share a year ago. Comparable same-store sales increased 5%.

Toll Brothers, Inc. ((TOL)), the luxury homebuilder reported second quarter revenues fell 22% to $311.3 million from $398.3 million a year ago. Net loss in the quarter was $40.4 million or 24 cents per diluted share compared to net loss of $83.2 million or 52 cents per share a year ago.

Zale Corporation ((ZLC)), the specialty retailer of fine jewelry reported third quarter revenues fell 5% to $359.8 million from $379.1 million a year ago. Net loss in the quarter was $12.1 million or 38 cents per diluted share compared to net loss of $19.5 million or 61 cents per share a year ago. Comparable same-store sales decreased 2.2%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 62.77 or 0.66% to 9,522.66, Hang Seng index in Hong Kong increased 210.95 or 1.11% to 19,196.45 and CSI 300 index in China higher 0.00 or 0.00% to 2,813.94. ASX 200 index in Australia increased 41.90 or 0.98% to 4,307.20. The FTSE Bursa KL Composite index in Malaysia closed lower 1.19 or 0.10% to 1,248.94.

The Kospi Index in South Korea increased 21.29 or 1.36% to close at 1,582.12. SET index in Thailand closed higher 7.65 or 1.06% to 728.94 and JSE Index in Indonesia increased 182.66 or 7.27% to 2,696.78. The Sensex index in India increased 365.36 or 2.28% to 16,387.84.

Europe Markets Review

In London FTSE 100 Index closed higher 105.55 or 2.14% to 5,046.23, in Paris CAC 40 Index increased 92.33 or 2.77% to 3,423.62 and in Frankfurt DAX index traded higher 114.02 or 2.01% to 5,784.06. In Zurich trading SMI increased 96.12 or 1.58% to 6,187.67.