Morning Update

Durable Goods Drive Early Enthusiasm

Stocks are moving higher in early action as an unexpected rise in durable goods orders is helping sweeten sentiment following yesterday's decline, which gave back some of Monday's sharp rally on the Treasury's toxic banking asset plan. Also, mortgage applications surged on record low 30-year fixed rates that stemmed from the Federal Reserve's announcement that it will purchase long-term Treasuries-which is expected to begin today. Treasuries are mixed following the upbeat economic data and ahead of the Fed's purchases, while traders are waiting for US Treasury Secretary Timothy Geithner's speech just before the opening bell. Equity news is light as Jabil Circuit topped earnings expectations. Overseas, markets are mixed and Europe is lower after a 26-year low in German business confidence.

As of 8:49 a.m. ET, the June S&P 500 Index Globex futures contract is 4 points above fair value, the Nasdaq 100 Index is 6 points above fair value, and the DJIA is 33 points above fair value. Crude oil is down $1.27 to $52.71 per barrel, and gold is up $0.50 at $924.30.

Jabil Circuit (JBL $4) reported fiscal 2Q EPS ex-items of $0.13, one penny ahead of the Reuters estimate, as revenues declined 5.6% to $2.9 billion. The company said its end markets remain difficult and it continues to focus on controlling its capital and reducing costs. JBL issued 3Q guidance below analysts' expectations.

Durable goods rebound, mortgage applications surge

Durable good orders unexpectedly rose 3.4% in February, versus the expected drop of 2.5% but January's decline was revised sharply lower. Ex-transportation, orders jumped 3.9%, versus the forecast of a 2.0% decline. January was also revised much lower. Orders for non-defense capital goods ex-aircraft, which is considered a good indicator of capital spending, jumped 6.6% in February. Treasuries remained mixed following the report.

In other economic news, the US MBA Mortgage Application Index rose 32.2% to 1159.4 for the week ended March 20, on top of the previous week's 21.2% increase. The Refinance Index advanced 41.5% to 6363.2, and the Purchase Index also rose, gaining 4.2% to 267.8. The Mortgage Bankers Association said the jump in mortgage applications was fueled by a 78.5% spike in demand for refinancing as 30-year fixed-rate mortgages, excluding fees, fell to 4.63%, a new record low rate since the weekly MBA survey began in 1990. The drop in the mortgage rates followed last week's surprising announcement by the Fed that it will begin to purchase longer term Treasuries-which the Federal Reserve announced that it will make its first purchases today. The New York Fed said that the first tranche of transactions will be in notes maturing from February 2016 to February 2019, and the bank has plans to buy debt maturing from March 2011 to February 2039 in coming days. The longer dated securities were a surprise to the market, which was expecting the purchases to be in the two-year to 10-year range. A two-week purchase schedule will be released starting April 1 and every two weeks thereafter.

Meanwhile, US Treasury Secretary Timothy Geithner is expected to speak just before the opening bell at the Council on Foreign Relations. Geithner has delivered multiple speeches since releasing Monday's details of his plan to relieve toxic assets from bank balance sheets.

Other economic news due to be released later in morning action is the new home sales report for February, which is forecasted to show a 2.9% month-over-month decline to 300,000 units on an annualized rate, which would mark a new low in the pace of sales since data began in 1963. Year-over-year sales are expected to have fallen 47%. The National Association of Home Builders Index of builder confidence last week indicated that potential first-time home buyers have been hampered by tight credit conditions, while potential trade-up buyers are finding it "very tough to sell their existing homes." New home sales face tough competition from the discounted prices that foreclosed existing homes provide. The move by the Fed to attempt to facilitate lower mortgage rates may provide a better borrowing environment for future potential home buyers. However, few buyers are excited about borrowing money at 5% to purchase an asset may be declining at a 15% rate - resulting in a 20% "real" mortgage rate.

Europe under pressure as German business confidence hit 26-year low

Stocks in Europe are under pressure in afternoon action as a key economic report in Germany is doing little to promote optimism in the euro zone. Germany's Ifo business confidence report fell from 82.6 in February to 82.1 in March-the lowest reading since 1982 and just below the 82.2 forecast of economists surveyed by Bloomberg. The data comes as companies in Europe's biggest economy are cutting production and slashing jobs to try to ride out the global recession. Separately, the German government said it will sell 96 billion euros ($129 billion) of bonds and bills in 2Q.

In equity news, Europe's largest engineering firm, Siemens (SI $61) is under solid pressure after its CEO told a newspaper that the environment has become "significantly worse" since January and slumping demand at its industrial and medical technology units may jeopardize the company's full year profit goal of 8.5 billion euros. Also, HSBC (HBC $29) is under pressure after it said it will cut 1,200 jobs in the UK and said the operating environment for the banking industry was "extremely challenging" and would remain so for some time.

Asia mixed as Japanese exports tumble and Australia offers support

Stocks in Asia finished mixed as traders grappled with a plunge in Japanese exports, economic support in Australia, and a solid decline in the US following Monday's sharp rally. The Japanese Nikkei 225 Index finished lower after giving up mid-session gains on pressure in export issues after a dismal trade report on the region that relies heavily on sales outside the country. Japan's exports fell 49.4% in February-the steepest drop in nearly half a century per the Financial Times-as the global recession took its toll on demand for Japanese goods. Shipments to the US, Japan's largest market, plunged 58.4% per Bloomberg versus last year. The report weighed on export issues in the region and suggested the Japanese economy may continue to contract.

Elsewhere, Hong Kong's Hang Seng Index fell 2.1%, South Korea's Kospi Index rose 0.6%, and Australia's S&P/ASX 200 Index gained 0.8% after the government offered more assistance to help lending markets. The Australian Federal Treasurer extended a guarantee of up to A$39 billion ($27 billion) in state bonds to help regional governments increase capital amid the credit crisis.