Last updated: March 31, 2010 10:07 pm

S&P 500 ends best first quarter since ‘98

US stocks were under pressure after a disappointing private sector jobs report on Wednesday, forcing many investors to reassess their previously generally positive outlook for a recovery in US employment. Downgrades for Greek bank ratings further weighed on risk appetite.

The ADP jobs report showed that private employers in the US shed 23,000 jobs in March, compared with expectations for a 40,000 rise.

The report attracted more attention from investors than usual as it excluded temporary US census hiring and the effects of the severe winter weather in February.

By the close, the S&P 500 was 0.3 per cent down at 1,169.44, ending the quarter up 4.8 per cent – its best first-quarter performance since 1998.

The Dow Jones Industrial Average lost 0.5 per cent to 10,856.56, but was up 4.1 per cent during the quarter – its best first-quarter performance since 1999. The Nasdaq was 0.5 per cent lower at 2,397.96, and 5.7 per cent higher over the quarter.

Honeywell International, a maker of controls for aircraft and buildings, was in focus, rising 0.7 per cent to $45.27 as the company increased its first-quarter profit forecast to 45-49 cents per share, from 40-45 cents previously. The company cited improving customer order trends.

The stock’s target price was upgraded from $38 to $45 by JPMorgan, and from $46 to $52 by Jefferies, with the “buy” rating reiterated.

“Honeywell has an attractive collection of businesses that we believe have the potential to earn consistent and sustainable above-
average returns,” said Howard Rubel, analyst at Jefferies.

Chiquita Brands fell 4.7 per cent to $15.73 after the fruit producer said it expected first-quarter results to be “substantially lower” than a year earlier as weak European banana demand had a negative impact on sales.

Offshore oil and gas drillers were boosted by President Barack Obama’s decision to open a vast stretch of the Atlantic coastline to offshore oil and gas drilling on the east coast of the US.

Diamond Offshore Drilling rallied 4 per cent to $88.81, Rowan gained 3.5 per cent to $29.11 and Nabors Industries climbed 1.5 per cent to $19.63.

US-listed Unilever shares rallied 1.2 per cent to $30.16 as the food conglomerate was upgraded from “neutral” to “buy” by Bank of America Merrill Lynch.

The session’s three initial public offerings had mixed performances.

Meru Networks, a networking equipment maker, rose 27.8 per cent to $19.17 after selling about 4.4m shares at $15m each.

SS&C rose 0.5 per cent to $15.08 after the company that makes trading, modelling and portfolio management software sold 10.7m shares at $15.

However, oil and petroleum transporter Scorpio Tankers fell 3.4 per cent to $12.56 after selling 12.5m shares for $13, below the $14-$16 range originally indicated.

Isis Pharmaceuticals climbed 6.1 per cent to $10.93 on news that the company had signed a development deal with UK-based GlaxoSmithKline that may be worth as much as $1.5bn, plus royalties, for the biotech company. The partnership will focus on treatments for rare and infectious diseases.

Rite Aid, a leading US drugstore chain, lost 11.2 per cent to $1.50 after the company forecast a larger-than-expected loss for the year, citing falling earnings from generic drugs.

Losses for the year could reach 65 cents per share, the company said, compared with consensus estimates of a loss of 37 cents per share.

Saic , a science and engineering company that has a strong presence in the US national security sector, tumbled 6.7 per cent to $17.70 after reporting fourth-quarter results that missed estimates.

A challenging defence spending environment has led to a longer federal-
decision making process, the company said, warning that it could impact its current year earnings.

A-Power Energy Generation Systems, a China-based wind turbine manufacturer, fell 11.1 per cent to $10.70 as the company forecast full-year revenues of $380m, well below consensus analyst expectations of about $543m.

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