Morning Update

GDP Data Comes to the Rescue

Stocks are nicely higher in early action, as the recent uneasiness toward the economic recovery, which has weighed on the equity markets lately, is being thwarted by a larger-than-expected increase in 3Q GDP and some steep declines in key components of the weekly initial jobless claims report. The upbeat sentiment is helping offset weakness from Dow member Exxon Mobil after it posted worse-than-expected top and bottomline results. Treasuries are lower amid the strength in equities following the upbeat economic data. In other earnings news, fellow Dow component Procter & Gamble posted better-than-expected earnings, while Motorola also exceeded the Street's profit projections. Overseas, Asia was broadly lower after yesterday's sell-off in the US, while economic reports are boosting sentiment in Europe.

As of 8:50 a.m. ET, the December S&P 500 Index Globex future is 9 points above fair value, the DJIA is 76 points above fair value, and the Nasdaq 100 Index is 16 points above fair value. Crude oil is higher by $1.23 at $78.69 per barrel, and the Bloomberg gold spot price is up $9.68 at $1,037.78 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.2% to 76.31.

Exxon Mobil (XOM $74) reported 3Q EPS of $0.98, missing the $1.03 that Wall Street analysts had anticipated, with revenues of $82.3 billion, which was below the $85.2 billion consensus estimate. The Dow member said 3Q upstream-oil exploration-earnings were hurt by lower crude oil prices and its downstream earnings-refining business-were impacted by lower refining margins.

Fellow Dow component Procter & Gamble (PG $57) reported fiscal 1Q EPS of $1.06, which increased 3%, above the $0.99 that analysts had expected. Revenues were $19.8 billion, matching the Street's forecast, as organic sales growth of 2% topped the company's previous guidance of flat-to-minus three percent on better-than-expected results across most business segments. PG raised its full-year organic sales growth estimate and increased the low end of its full-year EPS forecasted range, to reflect its higher top-line growth projection.

Motorola (MOT $8) reported 3Q EPS ex-items of $0.02, beating the Street's forecast, which called for the mobile device maker to post flat EPS for the quarter, with revenues coming in at $5.5 billion, matching analysts' estimates. MOT's mobile devices segment sales fell 46% versus last year but the company said its broadband mobility solutions performed well. The company added that it continued to manage its cost structure, and as the economic environment improves, it believes its businesses are well positioned for continued success.

First look at 3Q GDP is upbeat, jobless claims dip slightly

Advance 3Q Gross Domestic Product, the broadest measure of economic output, was released this morning and showed a 3.5% annualized rate of growth, compared to the 0.7% decline in 2Q, and versus the Bloomberg forecast, which called for a 3.2% advance. Personal consumption rose 3.4%, also higher than the 3.1% forecast and following the 0.9% decline in 2Q. Real final sales, which exclude changes in inventory, was 2.5% higher.

Pricing pressures remained subdued, with the GDP Price Index increasing 0.8%, below the Bloomberg forecast of 1.4%. The core PCE Index, which excludes food and energy, rose 1.4%, matching expectations and the rate sits between of the Fed's implied target of 1-2%.

Weekly initial jobless claims dipped modestly by 1,000 to 530,000, versus last week's figure that was unrevised at 531,000. The Bloomberg consensus called for claims to fall to 525,000. The four-week moving average, considered a smoother look at the trend in claims, fell by 6,000 to 526,250. Continuing claims also fell, tumbling by 148,000 to 5,797,000, versus the forecast of 5,905,000. Treasuries are lower following the GDP and jobs reports.

Europe rebounding on upbeat eurozone confidence and bank comments

Stocks in Europe are higher in afternoon action and are looking to snap a five-session losing streak as traders are picking up shares of financials and basic materials issues, which have been hit hard amid the recent increase in fears about the continuation of the economic recovery. Also, a report showing eurozone economic confidence rose to 86.2 in October, from 82.8 in September, well above the increase to 84.4 that economists surveyed by Bloomberg had forecast, is helping soothe sentiment across the pond. Adding to the relatively upbeat economic backdrop, a separate report showed the unemployment change in Germany-Europe's largest economy-unexpectedly fell in October and the unemployment rate declined to 8.1%, versus the expectation for the rate to increase from 8.2% to 8.3%.

Financials are getting additional support to the aforementioned rebound in sentiment after Deutsche Bank (DTBKY $123) is solidly higher after Germany's largest bank announced that its net income more than tripled and its pre-tax profit beat analysts' estimates. Also, the financial firm said in the current quarter, stabilization in the money and capital markets reduced volatility and that rising asset valuations "should support banks' securities business." The upbeat mood in Europe is helping stocks overcome solid declines in the oil and gas sector after Europe's largest oil company Royal Dutch Shell (RDS/A $62) announced that 3Q net income fell more than 60% and the company's CEO warned that although there are indications energy demand and pricing are improving, the outlook remains "very uncertain" and the company is not expecting a "quick recovery." Shares of RDS are lower on the comments, overshadowing its 3Q earnings, which beat expectations when certain one-time items were excluded.

Asia solidly lower across the board

Stocks in Asia were broadly lower on the heels of yesterday's sell-off in the US on disappointing housing data, which continued the recent uneasiness about the sustainability of the global economic recovery. Japan's Nikkei 225 Index fell 1.8% as the economic uncertainty outweighed a report showing industrial production in the nation grew more than expected in September. Some disappointing earnings reports in Japan added to the soured sentiment, with the world's number-one chip testing firm, Advantest (ATE $22), down about 7% after it announced a larger-than-expected loss, along with NEC Electronics (NELTY $4), which fell about 9% after the company also widened its full-year loss forecast. China's Shanghai Composite Index and Hong Kong's Hang Seng Index both dropped 2.3%, led by weakness in shares of PetroChina (PTR $123) after China's largest oil producer reported a worse-than-expected profit, and on the government's proposed rule changes to personal lending, per Bloomberg.

Meanwhile, Australia's S&P/ASX 200 Index fell 2.4%, with shares of Australia & New Zealand Banking Group (ANZBY $20) posting a solid decline after the lender reported a full-year profit that missed the expectations of analysts surveyed by Bloomberg, and after it said the central bank should have waited longer before raising interest rates because the economy is "still fragile." Earlier this month, the Australian central bank became the first G20 nation to hike rates. Elsewhere, South Korea's Kospi Index declined 1.5%, while New Zealand's NZX 50 Index dipped 0.2% after its central bank left its key interest rate unchanged at 2.5%.