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Date Posted: 15:58:47 05/16/10 Sun
Author: biggest point percentage gain week ended March 5.
Subject: Monday 17 May 2010==large number of S&P 500 e-mini contracts on May 6

MORNINGSTAR MORNING NOTES
Monday 17 May 2010
Overseas Market Report
Australian Market Report
Company Updates


Overseas Market Report -US Stocks Sink as European Fears Grow
US stocks sank on Friday as concerns over European debt and the advance of financial overhaul legislation sent investors scuttling away from American Express, Visa and MasterCard.

The Dow Jones Industrial Average fell 162.79 points (1.51%) to 10,620.16. Still, the measure ended up 2.31% over the week, its biggest point and percentage gain since the week that ended March 5.

The Standard & Poor's 500-share index tumbled 21.76 (1.88%) to 1,135.68, but closed the week up 2.23%. The Nasdaq Composite slid 47.51 (1.98%) to 2,346.85 on Friday, but climbed 3.58% over the week, also its biggest point and percentage gain since the week ending March 5.

Global growth prospects dimmed after new data raised the threat of deflation in Spain and concerns mounted over whether austerity measures in debt-laden European countries would undermine an economic recovery. As the euro slid to its lowest level since October 2008, the US dollar surged.

A strengthening dollar bit into commodities. Crude-oil prices slid nearly 4% to settle below $72 a barrel. Oilfield service provider Schlumberger fell $2.06 (3.1%) to $64.88. Companies tied to the Gulf of Mexico oil spill also traded lower, including Halliburton, down 92 cents (3.2%) at $28.09, and Cameron International lost 80 cents (2.1%) to $37.30.

Materials slumped as investors fretted that companies with exposure to Europe could see reduced demand as budget cuts are enacted. Dow Chemical slid $1.71 (5.9%) to $27.34, while United States Steel fell $3.17 (5.7%) to $52.81.

Though April retail sales showed an unexpected improvement on Friday, earnings and guidance from several retailers offset the data. Nordstrom lost $1.53 (3.7%) to $39.76, after its profit missed analyst estimates, while JC Penney fell 63 cents (2.2%) to $27.54, after its first-quarter earnings rose but its second-quarter and full-year outlook disappointed analysts.

Meanwhile, credit-card issuers weakened after the US Senate voted to allow the Federal Reserve to regulate fees on debit-card transactions. The measure also will allow retailers more leverage in negotiating with credit-card firms and banks over the fees for card transactions. Visa tumbled $8.47 (9.9%) to $77.26, while MasterCard dropped $19.86 (8.6%) to $212.45.

Among stocks in focus, chip maker Nvidia slid $1.69 (12%) to $12.96, on the Nasdaq, a day after the company issued a weaker-than-expected forecast. The maker of graphics microprocessors reported swinging to a quarterly profit, boosted by a 51% jump in sales, but also issued a sales outlook that fell below expectations.

Money manager Waddell & Reed Financial fell $1.81 (5.3%) to $32.25, after saying it had been "affected negatively" by the May 6 market gyration, after a report identified the company as a subject of ongoing probes by regulators. The so-called "mystery trader" who sold a large number of S&P 500 e-mini contracts on May 6 was first identified as Waddell by Reuters, though its activity isn't seen by regulators to have triggered the wild swings in US stock markets that day.

Software company CA slid $1.37 (6.3%) to $20.51, despite reporting a 55% jump in fiscal fourth-quarter profit as revenue grew and cost-cutting helped drive margins higher. Still, earnings missed analysts' expectations and the company's chief operating officer said he would leave after he "was disappointed" he wasn't considered for chief executive.

For Australian ADRs listed on the NYSE, BHP Billiton weakened $2.32 (3.38%) to US$66.39, Rio Tinto Plc dropped $1.92 (3.91%) to US$47.14, ResMed shed 53 cents (0.77%) to US$68.29, Telstra Corporation lost 28 cents (2.11%) to US$13.02, Telecom Corporation of NZ dipped 10 cents (1.32%) to US$7.48 and Westpac declined $4.68 (4.18%) to US$107.30.

In economic news, sales by retailers climbed 0.4% in April, beating economists' expectations of a 0.1% decrease. The consumer sentiment index for May increased to 73.3, from April's 72.2. Industrial production climbed 0.8% in April, as expected.

At 7:45 AM (AEST), the 10-year Treasury note yield was 3.45% and the five year yield was 2.16%.

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