Morning Update

Stocks Set to Advance

Stocks look to move higher today, extending yesterday's advance on economic news that was better than expected, and despite initial jobless claims that were higher than expected. Overseas markets are higher on the U.S. news from yesterday and despite a smaller-than-expected cut in the key interest rate by the ECB. In equity news, Bank of America's CEO gave an interview saying the economy may be bottoming, Dow Chemical reported a sale of its Morton Salt unit, both Monsanto and CarMax reported better earnings but lower sales than expectations, and Rite Aid reported a larger loss. The market is anticipating announcements later today on possible mark-to-market accounting rule changes, the G20 meeting, and factory sales. Treasuries are lower.

As of 8:55 a.m. ET, the June S&P 500 Index Globex futures contract is 14 points above fair value, the Nasdaq 100 Index is 23 points above fair value, and the DJIA is 91 points above fair value. Crude oil is down $2.62 to $51.01 per barrel, and gold is down $14.10 at $912.00 per ounce.

In an interview on CNBC, Dow member Bank of America (BAC $7) CEO Ken Lewis said mixed economic signals may indicate the economy is bottoming. He repeated the desire to pay back TARP money, saying "we took more TARP money than we needed, it was a mistake," but said it would be "several quarters" before they would have the opportunity to pay it back.

Dow Chemical (DOW $9) said it would sell its Morton Salt unit to K+S AG (KPLUF $46) for $1.68 billion in an all-cash transaction, to help pay for the acquisition of Rohm & Haas (ROH $79). The company said that the sale puts them ahead of schedule in deleveraging, and is the first of many steps to deliver on their plan to build value for shareholders.

Monsanto (MON $82) reported 2Q ongoing EPS of $2.16, higher than Street estimates of $2.07, but sales of $4.04 billion were lower than the forecast of $4.15 billion. The company affirmed 2009 EPS on an ongoing basis of $4.40-4.50, lower than analyst estimates of $4.70. The company said that first half progress included an increase in gross profit of 25%, a lift in margins of 5% and a rise in ongoing earnings of 41%, keeping them on track for more than 20% growth in earnings for the full year and maintenance of $1.8 billion guidance for free cash generation.

CarMax (KMX $12) announced 4Q EPS of $0.17, solidly higher than the analyst expectation of $0.02, but sales of $1.47 billion were lower than the Street's estimate of $1.62 billion. The auto dealership chain said lower expenses and a profit in its financing arm offset lower sales.

Rite Aid (RAD $0.39) reported an increase in net loss in the 4Q amid write-downs related to its acquisition of the Brooks and Eckerd chains. Excluding write-downs, the company reported a loss of $0.57 per share versus the expectation of a loss of $0.11. Revenue fell 1.7% to $6.71 billion, mostly due to store closings, lower than the expectation of $6.73 billion. The company guided for a loss for its next fiscal year of $0.26 - 0.53 per share on revenues of $26.7 billion, versus the Street estimate of a loss of $0.36 and sales of $26.65 billion.

Initial jobless claims rise, release of factory orders to come

Weekly initial jobless claims rose by 12,000 to 669,000, versus last week's figure that was downwardly revised by 5,000, and above the Bloomberg consensus, which called for claims to come in at 650,000. The four-week moving average rose by 6,500 to 656,750, and continuing claims jumped 161,000 to 5,728,000, versus the forecast of 5,590,000. The report marks the ninth straight week of claims above 600,000.

Factory orders will be released at 10:00 ET and is expected to rise 1.5% in February. Treasuries are lower despite the increased jobless claims, adding to yesterday's loss on generally improving economic data.

The heads of state of the Group of 20, which consists of 19 countries and the EU, are meeting in London today and are expected to address issues on financial regulation and IMF funding. Japan is said to be announcing plans to provide more liquidity for the global market and help boost economic growth in developing nations. Germany and France are pushing for tougher regulation for hedge funds and compensation, while the U.S. and U.K. are pressing for a united front.

European stocks climb on economic data and interest rate cut

Shares in Europe are solidly higher, following better-than-expected economic data from the U.S. yesterday that showed an improvement in manufacturing and an increase in pending home sales, as well as better-than-expected vehicle sales. Additionally, the Nationwide building society reported a 0.9% month-over-month increase in home prices in the U.K., the first increase in the key index in 18 months. Deutsche Bank (DB $41) rose after its CEO said that the bank had "solid" revenue in March. K+S AG (KPLUF $46) of Germany rose after agreeing to buy Morton Salt from Dow Chemical for $1.68 billion in an all-cash transaction. Lafarge SA (LFGEF $53) fell after the world's largest cement maker said it would issue shares to raise 1.5 billion euros ($2 billion) to cut debt. ArcelorMittal (MT $22), the world's largest steelmaker according to Bloomberg, secured $1.2 billion in funding, extending its existing financing until 2012 after the company posted a 4Q loss and sales decline.

The European Central Bank lowered its benchmark interest rate by 25 bps, to 1.25%, smaller than the expectation of a 50 bp cut. The rate for overnight deposits was also cut by 25 bps, to 0.25%. Traders are awaiting a press conference from ECB President Jean-Claude Trichet later today for comments explaining today's decision and any unconventional measures the council may make in the future.

Asia higher on better vehicle sales in March and improving economic data in the U.S.

Stocks in Asia surged as markets had their first chance to react to yesterday's reports of improving economic data in the U.S. and better-than-expected vehicle sales in March, and Japan's Nikkei 225 Index rose over 4%. Honda (HMC $26) rose after reporting a vehicle sales decline of 33.3% adjusted for the daily sales rate, and Toyota (TM $68) was higher after announcing a sales decline of 36.6%. Sony (SNE $22) rose after reports that a change in Japan's corporate tax code may boost earnings as it exempts levies on dividends paid from overseas units to parents, and a spokesperson for the company said the change is "surely a positive factor," though the amount of savings is uncertain. Elsewhere, Hong Kong's Hang Seng Index rose 7.4% and Australia's S&P/ASX 200 Index rose 2.8%.