Morning Update

Bulls Look to Stand Tall as Jobless Claims Fall

Stocks are poised to open in the green, helped by continued optimism the government stands ready to stimulate economic activity, and the amount of jobless claims eased somewhat last week. In equity news, FedEx confirmed its preannounced 2Q earnings and reaffirmed it guidance, Nike topped analysts' estimates, and Lennar posted a large loss. Treasuries are moving higher and overseas, stocks are mixed as Asia awaits the BoJ rate decision and Germany's business confidence dropped to a level not seen in over 25 years.

As of 8:40 a.m. ET, the March S&P 500 Index Globex futures contract is 10 points above fair value, the Nasdaq 100 Index is 3 points above fair value, and the DJIA is 66 points above fair value. Crude oil is up $0.24 to $40.30 per barrel, and gold continues to advance and is up $3.00 per ounce at $871.50. The overnight LIBOR rate dipped 2 bp to 0.11%, and the three-month LIBOR rate dropped 5 bp to 1.53%.

Jobless claims fall

Weekly initial jobless claims fell 21,000 to 554,000, below the Bloomberg forecast of 558,000. The four-week moving average rose 2,750 to 543,750, and continuing claims fell by 47,000 to 4,384,000.Treasuries are higher.

At 10:00 a.m. ET, the Philly Fed's Business Activity Index is expected to decline from -39.3 in November to -40.5 in December. A reading below zero marks the line between expansion and contraction and the forecast level suggests that manufacturing in the mid-Atlantic region continues to contract at an uncomfortable pace. The Leading Index is forecast to drop 0.4%.

German data dwindles and slashed sales outlooks dampen European action

Stocks in Europe are mostly lower in afternoon action as reduced revenue guidance from a major chip equipment maker and retailer pressure sentiment, while a multi-decade low in German business confidence is exacerbating the mood across the pond. Europe's largest semiconductor equipment maker ASML (ASML $17) slashed its 4Q sales forecast from about 530 million euros to a range of 400-500 million euros and said it expects substantially lower sales in the first six months of 2009 on falling end demand for semiconductors, weak memory prices and restricted access to capital for its customers. The company also said it will cut more than 10% of its workforce. Also, retailer Carrefour (CRERY $8) is under heavy pressure after it reduced its full-year profit and revenue forecasts, prompting a couple of analysts to downgrade the firm to add to the drop in share price.

Sentiment in Europe is not getting any help from the economic front as a key reading of business confidence in Germany, Europe's largest economy, came in worse than expected. The Ifo Institute's Business Climate Index fell from 85.8 in November to 82.6 in December, versus an expected drop to 84, which was the lowest reading since 1982. The report is exacerbating fears about the depth and duration of the recession in the German economy.

Asia mostly higher as region waits on the Bank of Japan

Stocks in Asia were slightly higher in cautious action as traders awaited the conclusion of the Bank of Japan's two-day interest rate meeting. Although economists according to Bloomberg are expecting the Japanese rate to remain at 0.30%, some traders are betting that the BoJ may follow the US Federal Reserve's lead and reduce its rate. Bloomberg said traders are pricing in a 58% chance of a rate cut, based on interest-rate swap trading calculations provided by JPMorgan Chase. Financials led the way in the Asian region, while gains were limited by weakness in automakers amid continued concerns regarding the health of the sector, exacerbated by yesterday's report from Honda (HMC $21), where it cut its full-year profit forecast for the third time this year, reduced its earnings outlook by a deeper-than-expected 67% due to the surging yen and falling global auto sales, and reduced its 3Q dividend. The company now sees a profit in the year ending in March of 180 billion yen, down from 550 billion yen a couple of months ago.

However, the yen is under heavy pressure today against the dollar as Japanese officials suggested a possible intervention in the currency markets to stem the rapid advance in the Japanese currency. The Japanese Finance Minister said he is "keenly watching" the currency markets and has "the means" to slow down the yen's advance, but he declined to say whether he will intervene or not.