Morning Update

Overseas Data Helping Gains in Early Action

Stocks are higher in morning action as some upbeat economic and earnings data overseas is lifting sentiment on Wall Street, with traders gearing up for key reports on manufacturing and construction to kick off what seems to be a major week for economic data. With the economic calendar likely commanding the lion's share of the Street's attention this week, there are still some 2Q earnings reports that are trickling in, with Humana topping analyst expectations on both the top and bottom lines, while Loews Corp missed the Street's profit projections on losses at a commercial lending subsidiary. Treasuries are lower as the equity markets are higher in early action. Overseas, markets are higher.

As of 8:48 a.m. ET, the September S&P 500 Index Globex futures contract is 9 points above fair value, the Nasdaq 100 Index is 17 points above fair value, and the DJIA is 72 points above fair value. Crude oil is up $1.54 at $70.99 per barrel, and gold is $6.25 higher at $960.25 per ounce.

Humana (HUM $33) announced 2Q earnings of $1.67 per share, three cents above the Reuters estimate, as revenues rose 7% to $7.9 billion, which also topped the Street's expectations. The company said it is making progress reducing costs and investing in improved health outcomes for its members, while it closely monitors events in Washington. HUM issued 3Q guidance that was in line with analysts' forecasts and reaffirmed its full-year EPS guidance.

Loews Corp (L $30) reported 2Q EPS of $0.78, below the Reuters forecast of $0.98. Revenues at the diversified corporation declined about 10% to $3.5 billion, slightly about the Street's expectation. Earnings were impacted by investment losses at CNA Financial (CNA $17), which Loews owns a 90% stake in the commercial insurer.

Full economic docket this week

With the bulk of 2Q earnings season in the rear-view mirror, sentiment on Wall Street will likely be steered by this week's economic calendar, which is bursting at the seams with key reports that could go a long way in determining the sustainability of the economic recovery. The flurry of reports will be kicked off later this morning with the ISM Manufacturing Index, forecast to show manufacturing activity improved from 44.8 in June to 46.5 in July, inching closer to breaching 50—the separation point between contraction and expansion—but a third-straight month above the 41.2 mark, which is consistent with growth in the overall economy. Separately, construction spending will be released later today and is expected to fall 0.5% in June from the 0.9% decline posted in May. Treasuries are under pressure ahead of the reports as equities start the week off in the green.

The compliment to today's key gauge of manufacturing activity will come on Wednesday, with the ISM Non-Manufacturing Index, which is expected to improve from 47.0 in June to 48.0 in July. However, this week's report that will likely grab the majority of the Street's attention is this Friday's release of the labor report, which is expected to show nonfarm payrolls fell by 325,000 jobs in July, after falling by 467,000 in June. The unemployment rate is expected to continue to rise to 9.6% in July, up from 9.5% in June. June’s report was disappointing on many fronts, and the market sold off in the following sessions. The report marked a reversal in a trend of smaller job losses, flat average hourly earnings, and a decline in the average workweek, with declines in employment spread across many sectors.

Leading up to Friday's key gauge on the employment picture, traders will be warmed up by a couple reports during the week, with Wednesday's ADP Employment Change Report and while the release has not been a particularly accurate predictor of the government’s labor data, it has gained increased attention as another read on the employment situation. The forecast is that large private sector employers shed 340,000 jobs in July, an improvement from the 473,000 loss in June. Moreover, Thursday will bring the release ofweekly initial jobless claims, expected to decline by 4,000 to 580,000.

While the unemployment rate is a lagging indicator, initial jobless claims tend to peak at the end of recessions, and the 100,000 decline in the four-week average of claims has outpaced the 40,000 decline that typically marks the end of recessions.

Other reports due out this week that deserve a mention include, personal income and spending, the Core PCE Price Index, and pending home sales on Tuesday, MBA mortgage applications and factory orders on Wednesday, and consumer credit on Friday.

Bank earnings reports and manufacturing data drive Europe

Stocks in Europe are solidly higher in afternoon action, led by respectable gains in the financial sector after two key banks in the region reported their respective profit reports. The UK's second-largest bank Barclays (BCS $21) is up about 8% after the company said first-half profits increased 10%, but below analysts' expectation, as bad debt levels almost doubled to offset strength in investment banking. Also, HSBC (HBC $51) is up 6% after Europe's largest bank reported an unexpected first-half profit. The economic front is also contributing to the advance, helping boost commodity-related stocks, after a report showed eurozone PMI manufacturing improved for a fifth-consecutive month, moving to a level just shy of the demarcation point between expansion and contraction. The final reading of the eurozone PMI Manufacturing Index for July rose from 46.0 to 46.3, versus the Bloomberg consensus of 46.0, and following June's 42.6 level.

Asian advance remains intact

Stocks in Asia were mostly higher, led by a positive earnings report in the financial sector and some upbeat manufacturing data in the region. Although Japan's Nikkei 225 index was nearly unchanged, the nation's broader Topix Index gained 0.8% after Japan's largest bank by market value, Mitsubishi UFJ Financial (MTU $6) gained about 6% as investment gains and lending income helped net income jump almost 50%, snapping a two-quarter string of losses. Economic data also helped buoy the major markets in the Asia/Pacific region, after reports showed manufacturing in China and India both expanded, sending China's Shanghai Composite Index up 1.5% and India's BSE Sensex 30 index up 1.6%. Elsewhere, South Korea's Kospi Index increased 0.5%, aided by an analyst recommendation of the region's shares.