Morning Update

Bulls Trying to Regain Footing

Stocks are slightly higher in morning action following yesterday's steep slide on lingering fears the economy may have a longer-than-anticipated road to hoe before recovering from the global recession. Traders are treading cautiously ahead of 2Q earnings season, which unofficially kicks off with Alcoa's report following the closing bell, trying to gauge catalysts that could drive corporate bottom lines. Treasuries are higher ahead of a key $19 billion 10-year note auction and after mortgage applications rose. In equity news, the Wall Street Journal said Google is looking to launch an operating system for notebook computers, Amgen received upbeat results from a drug trial, and Las Vegas Sands announced that it is looking to raise capital. Overseas, markets are mostly lower.

As of 8:53 a.m. ET, the September S&P 500 Index Globex futures contract is at fair value, the Nasdaq 100 Index is 5 points above fair value, and the DJIA is 2 points above fair value. Crude oil is down $1.10 at $61.83 per barrel, while gold is down $10.50 at $918.60 per ounce.

The Wall Street Journal is reporting the Google (GOOG $397) posted a blog late yesterday that said the world's number-one internet search engine is preparing to launch an operating system for computers, taking aim at operating system giant and Dow member Microsoft (MSFT $23). The report said GOOG's new system, which will initially target low-end portable PCs called notebooks, would be based on its Chrome Web browser and available to consumers in the 2H 2010. The WSJ said the company said it is hopeful to eventually scale the software to full-size PCs as well. According to the story, GOOG said the goal is to address the shortcoming of PCs—including security problems and lengthy delays while computers boot up.

Amgen (AMGN $52) is higher after it said its experimental osteoporosis drug, denosumab, met its primary and secondary endpoints in a pivotal Phase 3 trial and demonstrated superior efficacy compared to Novartis' (NVS $40) treatment Zometa. AMGN said its treatment did a better job of delaying fractures and reducing other serious bone complications in patients with advanced breast cancer.

Las Vegas Sands' (LVS $7) CEO said that the casino operator wants to raise between $3-4 billion and is considering several options including an IPO of its Macau assets in Hong Kong, according to an interview given to Reuters. Reuters also said the company's chief denied reports that the firm was considering a bond issue in the US.

Mortgage applications come off of a seven-month low, traders waiting for a key auction

US MBA Mortgage Application Index rose 10.9% for the week ended July 3, off of a seven-month low, following the prior week's decline of 18.9%, in an index that can be quite volatile on a week-to-week basis. The advance was attributed to the Refinance Index, which gained 15.2%, and a 6.7% increase in the Purchase Index. The Mortgage Bankers Association (MBA) said the average 30-year mortgage was unchanged at 5.34%, still solidly above the record low of 4.61% that was reached at the end of March.

Treasuries are higher in early action and traders are awaiting today's auction of $19 billion of 10-year notes, which is a key benchmark rate used to help determine mortgage rates. Strong demand may ease the yield on the 10-year note and could soothe some concerns, which have crept up amid the jump in yields as the equity markets rallied since mid-March, that higher lending rates could thwart a recovery in the economy.

Later in the afternoon, the economic calendar will yield consumer credit for May, expected to come in at -$8.8 billion, following April's -$15.7 billion level.

Banks lead Europe lower

Stocks in Europe are under pressure in afternoon action, led by losses in financials and basic materials as concerns that the recent optimism for the global recovery may be waning is dampening the outlook for continued prosperity. The pressure on financials is being exacerbated by steep losses from Belgian bank, Dexia (DXBGF $8), which was reported to be selling 1 billion euros of five-year bonds at 270-285 basis points above a benchmark rate, which was said to be a steep premium. Dexia has not confirmed the report. Also, the Swiss government said it would seize UBS (UBS $12) data to prevent the US Justice Department from retrieving the identities of over 50,000 American account holders in a tax evasion probe. Adding to the gloomy economic backdrop across the pond, UK home prices unexpectedly fell in June, and shares of the world's second-largest cement maker, Holcim (HCMLY $11), are lower after it said it expects a "difficult" 2009 and it announced it offering new shares in a rights offering.

Asia came under pressure as yen jumps and Japanese data disappoints

Stocks in Asia were mostly lower, led by solid weakness in Japan as the yen strengthened and economic data dampened sentiment. The Nikkei 225 Index fell 2.4% and the broader Topix Index declined 2.3% after a report showed Japanese machine orders unexpectedly fell in May and following a separate report that indicated bank lending slowed in June. Export issues also came under pressure to weigh on trading in Japan as the yen reached the highest level versus the dollar since late February, stoking profit pessimism toward companies that rely heavily on sales in the US. Shares of Aeon (AONNY $9) declined almost 4% to contribute to the declined in Japan after the region's number two retailer reported its fourth net loss in five quarters, per Bloomberg news. The steep losses in the US yesterday on lingering concerns about the sustainability of the economic recovery, which prompted some chatter on Wall Street about the possibility of the need for a second stimulus package, also soured sentiment in the Asia/Pacific region and continued to weigh on commodity-related issues. However, resource-rich Australia was able to overcome the economic concerns and accompanying pressure on commodities, as its S&P/ASX 200 Index finished slightly higher after reports showed consumer confidence hit a 19-month high—according to Bloomberg—and loans for houses and apartments posted the eighth-straight monthly gain.