Morning Update

Street Seeing More Red as Economic Pessimism Persists

Stocks are under pressure in morning action as traders continue to grapple with uncertainty toward determining if the economy is on the mend or is it poised to retest previous recessionary lows. Treasuries are higher amid the economic uneasiness, and after the Import Price Index jumped and despite an unexpected narrowing of the trade gap. The equity front is doing little soothe the uneasy sentiment as Chevron warned that 2Q earnings will be hurt by refining margins, and Shaw Group missed the Street's profit projections. But, General Motors is set to announce its exit from bankruptcy, Overseas, markets are mostly lower.

As of 8:50 a.m. ET, the September S&P 500 Index Globex futures contract is 6 points below fair value, the Nasdaq 100 Index is 8 points below fair value, and the DJIA is 57 points below fair value. Crude oil is down $1.31 at $59.10 per barrel, and gold is down $7.30 at $908.90 per ounce.

Chevron (CVX $63) is under pressure after the oil company said its 2Q refining results are expected to be "significantly lower than the first quarter." CVX said US refining margins were down sharply and although its 2Q exploration and production earnings are expected to benefit from an increase in crude oil prices, it will be largely offset by "substantial unfavorable foreign currency effects."

General Motors (GMGMQ $0.84) is expected to announce that it will emerge from bankruptcy today. GM signed a deal today to sell assets to a newly formed company majority-owned by the US government. GM's CEO Fritz Henderson is expected to hold a press conference this morning to announce the maligned automaker's exit from bankruptcy.

Shaw Group (SGR $26) reported fiscal 3Q EPS ex-items of $0.57, three cents short of the Reuters estimate, as revenues were flat versus last year at $1.8 billion. The power plant builder said while its performance was relatively strong across most segments, it is disappointed with two underperforming projects that impacted results of its fossil and nuclear segment. SGR lowered its full-year profit forecast, which came in below the Street's forecast.

Import prices jump, trade gap unexpectedly narrows

The Import Price Index rose 3.2% in June, well above the expected increase of 2.0% of economists surveyed by Bloomberg. Import prices increased an upwardly revised 1.4% in May. Year-over-year, import prices are down 17.4%. Imported petroleum prices jumped 20.3% in June to contribute to the lion's share of the rise in import prices, while non-petroleum import prices rose 0.2% in June.

The trade deficit was also released this morning, and unexpectedly narrowed to $26.0 billion in May, versus the Bloomberg estimate that called for the gap to increase to $30.0 billion. April's deficit of $29.2 billion was revised to a smaller gap of $28.8 billion. Treasuries are higher in morning action, after extending gains following the trade data.

Later today, the economic calendar will yield the preliminary University of Michigan's Consumer Sentiment Index for July, which is expected to decrease slightly from 70.8 in June to 70.0 in July.

Risk aversion weighs on Europe

Stocks in Europe are under pressure in afternoon action as uncertainty regarding whether or not the global economy is in recovery mode is promoting some risk aversion across the pond. A profit report from Norway's largest bank, DnB Nor (DNBHF $7), which showed net income fell over 60% versus last year on heavy writedowns is doing little to change the soured sentiment in European trading. Also, the CEO of French automaker, Renault (RNSDF $41), said he expects 2010 to be a difficult year, which is weighing on its shares and adding to the skittish European backdrop. In economic news, UK producer prices unexpectedly fell in June bringing the year-over-year decline to 1.2%, versus expectations of a 0.8% drop.

Asia declines as traders digest data

Stocks in Asia were mostly lower following a mixed bag of data in the region. Headlining the deluge of reports, the Bank of Korea increased its outlook for GDP for 2009 and 2010 on interest rate reductions and government stimulus efforts. The BoK said the economy will contract 1.6% in 2009, a favorable revision from its previous forecast of a 2.4% drop, and it said next year's GDP will expand 3.6%, a slight increase from its prior forecast, which called for growth of 3.5%. Also, Japan announced that producer prices fell more than expected, and India reported that industrial production rose 2.7% in May, more than double the previous month's increase, and well above the 1.3% gain that had been forecasted by economists surveyed by Bloomberg. Despite the relatively upbeat data, stocks in the Asia/Pacific region finished in the red, possibly due to a report in China that showed exports fell 21.4% on a year-over-year basis in June, modestly above the decline of 21.0% that had been forecasted. China's Premier Wen Jiabao said the foundations for an economic recovery are not yet solid and pledged to continue a proactive fiscal policy and moderately loose monetary policy, according to Bloomberg news. However, Australia's S&P/ASX 200 Index managed to post a 0.8% gain, as the resource-rich nation was buoyed by strength in mining issues. In equity news, shares of India's second-largest software exporter Infosys Technologies (INFY $34) finished higher after reporting better-than-expected profits. The company managed to gain despite India's BSE Sensex 30 Index falling 1.8%.