Morning Update

Earnings and Economic Reports Lend Support

Stocks are higher in early action as a plethora of profit reports are relatively upbeat, continuing the theme that 1Q earnings season may be shaping up to be better than expected. Highlighting today's earnings calendar, Ford posted a much smaller-than-expected loss and said its cash burn rate, which improved, may be the worst for the year. In other profit news, American Express and Amazon topped expectations, Microsoft matched the consensus, while 3M fell short of forecasts. Adding to the positive sentiment, durable goods orders fell less than expected and showed a key measure of capital spending gained ground. Treasuries are lower, and the Street is waiting for new home sales, which will be released later this morning. Overseas, markets are mixed.

As of 8:46 a.m. ET, the June S&P 500 Index Globex futures contract is 2 points above fair value, the Nasdaq 100 Index is 9 points above fair value, and the DJIA is 15 points above fair value. Crude oil is up $0.81 at $50.43 per barrel, and gold is up $3.70 at $910.30 per ounce.

Ford (F $4) is much higher after the US automaker reported a 1Q net loss ex-items of $0.75, which was much narrower than the $1.23 loss the Reuters estimate called for, and revenues excluding special items was $24.8 billion. Ford's cash burn rate of $3.7 billion improved and its CFO said he expected this to be the worst rate for the year.

Dow member American Express (AXP $21 ¹) is higher after posting 1Q EPS of $0.32, well above the Street's forecast of $0.14, as revenues fell 18% to $5.9 billion. The company said revenues declined on lower card member spending, but expenses were reduced.

Fellow Dow component 3M (MMM $54) is lower after reporting 1Q EPS ex-items fell 41% to $0.81, five cents below analysts' forecasts, as revenues dropped 21.3% to $5.1 billion. The company said the global economic slowdown dramatically affected its businesses in 1Q.

Dow member Microsoft (MSFT $19) reported fiscal 3Q EPS ex-items of $0.39, matching the consensus estimate, as revenues fell 6% to $13.7 billion. The company said revenue in client, Microsoft business division, and server & tools units was negatively impacted by weakness in the global PC and server markets, while revenue from enterprise customers remained stable during the quarter. MSFT said while market conditions remained weak during the quarter, it was pleased with its ability to offset revenue pressures with swift implementation of cost-savings initiatives. The company added that it expects weakness to continue through at least next quarter. Shares are higher.

Amazon.com (AMZN $81) reported 1Q EPS of $0.41, ten cents ahead of analysts' forecasts, as net sales increased 18% to $4.9 billion. The online retailer said it was grateful and excited that sales of its Kindle-its handheld media device-have exceeded its most optimistic expectations. AMZN reported 2Q guidance in line with expectations. Shares are higher.

Durable good sales slump but less than expected

Durable good orders fell 0.8% in March, versus the expected drop of 1.5% but February's gain was revised lower. Ex-transportation, orders declined 0.6%, versus the forecast of a 1.2% decline. February was also revised lower. Orders for non-defense capital goods ex-aircraft, which is considered a good indicator of capital spending, gained 1.5% in March. Treasuries remained lower after the report.

Later today on the economic calendar, new home sales will be released, and are forecast to come in flat month-over-month, to an annual rate of 337,000 units.

Europe gains ground as German business confidence comes in sound

Stocks in Europe are higher in afternoon action, led by a rebound in commodity-related issues, after a report on German business confidence came in better than expected. Financials are also showing some strength to help the advance after American Express' favorable earnings report. The Ifo Business Confidence Index for Europe's largest economy increased from 82.1 in March to 83.7 in April, larger than the rise to 82.3 that economists surveyed by Bloomberg had anticipated. The index came off of a 26-year low as aggressive monetary policy actions and government stimulus efforts boosted optimism that the recession will slow later in 2009, per Bloomberg. However, enthusiasm was limited by a report that 1Q UK GDP fell 1.9% versus last quarter, which was a larger contraction than the consensus estimate that called for a 1.5% decline. This was the biggest drop in output since 1979, according to Bloomberg news, as manufacturing and business services posted record declines, the Office for National Statistics reported. On the earnings front, the world's second-largest truck maker, Volvo (VOLVY $7), is under pressure after reporting a 1Q net loss that came in much larger than expected.

Asia lower as earnings pour in and strength in the yen

Stocks in Asia finished mostly lower, led by a 1.6% drop in Japan's Nikkei 225 Index as traders digested earnings reports and as the yen continued to strengthen versus the dollar-stoking pessimism about the impact the stronger yen will have on profits of companies that rely heavily on sales in the US. On the equity front, shares of Samsung (SSNLF $626) came under pressure despite posting a 1Q profit that topped analysts' estimates, as the company offered cautious commentary on the recovery of consumer demand. Japan's second-largest mobile phone operator, KDDI Corp. (KDDIY $48), also traded lower after forecasting its slowest profit growth since 2006 according to Bloomberg news. Elsewhere, Nomura Holdings (NMR $6), Japan's largest brokerage firm, managed to rise in the face of reporting a larger-than-expected loss, and Mizuho Financial (MFG $4) gained ground after Japan's second-largest publicly-traded bank registered to sell 500 billion yen ($5.1 billion) in bonds to boost its capital position. On the economic front, South Korea's government said its 1Q GDP increased 0.1%, versus the Bloomberg estimate that called for a 0.2% decline, however, the Kospi Index fell 1.1%.