Morning Update

US Output Revision Helps Keep Bears in Submission

Stocks have extended early gains that came from some favorable action in the overseas markets on mostly upbeat economic data, following an unexpected favorable revision to US 2Q GDP, which is helping soothe concerns from a larger-than-expected drop in private sector payrolls. Treasuries are lower after moving back to session lows following the upbeat GDP report. In other economic news, MBA mortgage applications fell and the Chicago Purchasing Managers Index is set to be released later in morning action. In equity news, Nike Inc. and Darden Restaurants both topped the Street's earnings projections. Overseas, markets are mostly higher.

As of 8:50 a.m. ET, the December S&P 500 Index Globex future is 3 points above fair value, the DJIA is 40 points above fair value, and the Nasdaq 100 Index is 4 points above fair value. Crude oil is higher by $0.79 at $67.50 per barrel, and the Bloomberg gold spot price is up $9.55 at $1001.95 per ounce.

Nike Inc. (NKE $60) is higher after reporting fiscal 1Q EPS of $1.04, seven cents above the forecast of Wall Street analysts, even as revenues declined 12% versus last year to $4.8 billion, which was slightly below the $4.9 billion that was expected. NKE said worldwide futures orders for its athletic footwear and apparel scheduled for delivery from September 2009 through January 2010, fell 6% to $6.2 billion. On a conference call with analysts, the company said people are still going to be relatively "cautious" going through the holiday period, but it sees "sequential improvement" in retail orders through spring.

Darden Restaurants (DRI $36) announced fiscal 1Q EPS rose about 16% versus last year to $0.67, one penny ahead of the Street's forecast, while sales dipped 2.3% to $1.7 billion, just shy of the $1.8 billion that had been anticipated by analysts. The parent of the Olive Garden and Red Lobster chains reaffirmed its full-year EPS target and issued a revenue forecast that came inline with expectations.

Private sector payrolls fall more than expected, final look at 2Q GDP is favorably revised

ADP reported that private sector jobs fell 254,000 in September, more than the Bloomberg estimate of a loss of 200,000 jobs, but August's 298,000 decline was favorably revised to a 277,000 decrease. The ADP report is the first read on employment conditions this week, which will culminate with the labor report from the Bureau of Labor Statistics, which is scheduled for release on Friday and expected to show 180,000 jobs were shed from nonfarm payrolls in September, and the unemployment rate rose from 9.7% to 9.8%. However, the ADP report has not been a reliable gauge of the labor report, although adjustments have been made recently. Weekly initial jobless claims will be the next piece of employment data to precede the labor report, expected to increase by 5,000 to 535,000 tomorrow.

The final revision to Gross Domestic Product, the broadest measure of economic output, was favorably revised to a 0.7% annualized rate of decline in 2Q, versus the preliminary 1.0% decline, and a lower contraction than the Bloomberg forecast, which called for a 1.2% decline. Personal consumption fell 0.9%, less than the -1.0% forecast and following the 1.0% decline in the preliminary report. Real final sales, which exclude changes in inventory, was revised higher from a 0.4% gain to a 0.7% advance.

Pricing pressures were further subdued, with the GDP Price Index remaining flat, and inline with the Bloomberg forecast. The core PCE Index, which excludes food and energy, remained at an increase of 2.0%, matching the estimate and the rate sits at the top end of the Fed's implied target of 1-2%. Treasuries are lower, moving back to session lows following the GDP revision, after paring some losses on the larger-than-expected jobs report.

In other economic news, the US MBA Mortgage Application Index declined 2.8% last week, after the index, which can be quite volatile on a week-to-week basis jumped 12.8%-the highest level since May 22nd-in the previous week. The drop was attributed to the Purchase Index, which fell 6.2%, along with a decrease in the Refinance Index, which dipped 0.8%. The decline in mortgage applications came despite a 3 basis-point decline in the average 30-year mortgage rate to 4.94% versus the previous week. The average 30-year mortgage rate remains above the record low of 4.61% that was reached at the end of March and is well below the 6.33% it sat at a year ago.

Later in morning action, the data will continue on Wall Street with the release of the Chicago Purchasing Managers Index, forecast to improve from 50 in August to 52 in September.

Europe in the green as favorable data seen

Stocks in Europe are higher in afternoon action, led by a couple of key reports on employment in Germany-Europe's largest economy-and consumer sentiment data in the UK. The German government reported that unemployment unexpectedly fell, declining by 12,000, compared to a 20,000 increase that economists surveyed by Bloomberg had expected, and its unemployment rate came in at 8.2%, versus the consensus forecast of the rate to increase to 8.4%. Elsewhere, a separate report showed UK consumer confidence improved from a -25 reading in August to -16 in September, compared to the -24 that was expected. In equity news, Man Group (MNGPY $5) is up solidly after the world's largest publicly-traded hedge fund firm reported a larger-than-expected increase in assets, helping boost financials in the eurozone region, along with the International Monetary Fund (IMF), which cut its forecast for bank writedowns. In other equity news, Marks & Spencer (MAKSY $12) is lower after the UK's largest clothing retailer reported a decline in same-store sales and said costs were rising and said it may be 2011 before the economy is fully recovered.

Asia mixed on plethora of data

Stocks in Asia were higher in most regions as traders had plenty of data to decipher. Japan's Nikkei 225 Index rose 0.3% and the broader Topix Index gained 0.7%, on a government report that showed a sixth-straight monthly advance in industrial production, and as shares of NGK Insulators (NGKIF $21) gained over 8% after it raised its profit forecast for the year. Also in Japanese equity news, Toyota Motor (TM $79) announced it would recall about 3.8 million vehicles because of a safety issue with floormats. China was mixed ahead of an eight-day holiday observance, with the Shanghai Composite Index advancing 0.9% after the People's Bank of China said it will maintain its moderately loose monetary policy to sustain an economic recovery, and after a separate economic report showed Chinese manufacturing expanded for a sixth-consecutive month, per Bloomberg. However, Hong Kong's Hang Seng Index finished 0.3% lower after a 23% drop in shares of China South City Holdings in its trading debut. Elsewhere, South Korea's Kospi Index fell 1%, led by a 10% decline Hyundai Heavy Industries (HYHZF $391) on fears the world's largest shipyard may lose orders from a French shipping line. Meanwhile, Australia's S&P/ASX 200 Index dipped 0.2% following yesterday's disappointing US consumer confidence data, which helped offset a larger-than-expected increase in retail sales in the region.