Morning Update

Global Economic Optimism Boosts Sentiment on the Street

Stocks are nicely higher in morning action as traders digest several key economic reports outside the US that are supporting the view that the global economic recovery continues to gain traction. However, the US bond markets are closed in observance of Veterans Day, and trading may be lighter than usual and moves may be exaggerated. In equity news, Macy's exceeded the Street's earnings expectations, but offered disappointing guidance, Toll Brothers offered better-than-expected revenue, while Adobe announced a workforce reduction. Overseas, markets are mostly higher following some upbeat economic data, highlighted by industrial production and export reports in China.

As of 8:52 a.m. ET, the December S&P 500 Index Globex future is 8 points above fair value, the DJIA is 53 points above fair value, and the Nasdaq 100 Index is 14 points above fair value. Crude oil is higher by $0.59 at $79.64 per barrel, and the Bloomberg gold spot price is up $9.70 at $1,115.49 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.1% at 74.95.

Macy's (M $19) announced that excluding restructuring costs, the department store posted a loss of $0.03 per share, narrower than the $0.07 loss that Wall Street analysts had forecast, with revenues down 3.9% versus last year to $5.3 billion, inline with the Street's expectation. The company posted a same-store sales decline of 3.6% versus the same period a year ago. Macy's said that its results benefitted from strong sales performance at Bloomingdale's and outstanding growth in its internet businesses. The company said it is entering the holiday season "confident," and it currently expects 4Q same-store sales to decline between 1-2%, resulting in a second-half same-store sales decline of 2.1-2.6%, compared to its previous guidance of a 5-6% drop. However, shares are under pressure as the company issued 4Q and full-year EPS guidance that missed analysts' estimates.

Toll Brothers (TOL $18) reported preliminary 4Q results, in which the luxury homebuilder said its total homebuilding revenue is expected to be about $487 million, compared to the $386 million that was forecasted by analysts. TOL said its net signed contracts of about 765 units and $431 million were up 42% and 62%, respectively, despite having fewer selling communities. The company added that its contract cancellation rate-cancellations divided by signed contracts-was at 6.9% for the quarter, which was inline with its pre-downturn historical averages. TOL added that, "Home buyers began to emerge from their bunkers in late March 2009 and the market continued to gain momentum up to Labor Day. Since then demand has been volatile: This may be due in part to typical seasonality, but the more likely cause is concern about unemployment and the overall economy." Shares are higher.

Adobe Systems (ADBE $37) announced that it plans to eliminate approximately 680 full-time positions worldwide, resulting in an aggregate pre-tax restructuring charge of $65-71 million. The software maker said the workforce reduction is aimed at aligning its costs in connection with its 2010 operating plan and the reduction relates to only those employees and facilities that were associated with ADBE prior to its acquisition of Omniture, Inc.

Bond markets closed for Veterans Day

Although there are plenty of economic reports out of Europe and Asia, today's US economic calendar will be quiet as there are no major economic releases to be reported. Also, trading activity in the US will be lighter than usual, with the bond markets closed today in observance of the Veterans Day holiday.

In global currency news, US Treasury Secretary Timothy Geithner said in Tokyo that, "I believe deeply that it's very important to the United States, to the economic health of the United States, that we maintain a strong dollar." Nonetheless the dollar is down slightly versus most major global currencies.

UK jobless data and financial earnings boost Europe

Stocks in Europe are nicely higher in afternoon action, led by basic materials on favorable industrial production and export data out of China, while a better-than-expected employment report from the UK is helping aid the economic recovery backdrop. The UK reported that its jobless claims increased by 12,900-the slowest pace in 18 months per Bloomberg-after increasing by 20,600 in September, and fewer than the 20,000 increase that economists surveyed by Bloomberg had anticipated. Financials are also among the leading sectors on a couple of upbeat earnings reports in the eurozone. Shares of Credit Agricole (CRARY $11) are up over 5% after France's third-largest bank by market value reported a smaller-than-expected drop in 3Q profits, while ING Groep (ING $15) is up almost 7% after the Dutch financial firm posted a profit in 3Q compared to a loss last year, and it said it has received strong interest in its insurance operations.

Outside of the financial equity news, shares of Holcim (HCMLY $14)-the world's number-two cement maker-are up solidly after the company reported earnings that exceeded analysts' estimates. Elsewhere, J Sainsbury (JSAIY $22) is gaining ground after the UK's third-biggest supermarket owner reported a 48% increase in first-half profits and excluding items, its earnings exceeded analysts' forecasts.

Economic data dominates the spotlight in Asia

Stocks in Asia were mostly higher outside of China and Japan, as a plethora of upbeat economic data from the two nations helped boost sentiment in the Asia/Pacific region. Japan's machine orders jumped 10.5% month-over-month in September, after rising 0.5% in August and compared to the 4.1% that economists surveyed by Bloomberg had expected. However, strength in the yen versus the dollar weighed on export issues in Japan as the stronger Asian currency dampened the outlook for profits of companies that rely heavily on sales in the US, offsetting the upbeat machine orders report, and the Nikkei 225 Index finished flat. Meanwhile, the Shanghai Composite Index declined 0.1% despite some upbeat data, which showed the year-over-year (y/y) pace of the decline in exports slowed, while industrial production and retail sales rose more than expected y/y. However, the full slate of Chinese economic data revealed that new loans and fixed asset investment both increased by a lesser amount than anticipated, which may have limited sentiment in China.

Despite the lackluster performance from the Shanghai Composite and the Nikkei 225 index's, other action in Asia was favorable, with Hong Kong's Hang Seng Index leading the way, after climbing 1.6%. Elsewhere, Australia's S&P/ASX 200 Index rose 0.5% as the aforementioned upbeat economic data helped boost global recovery optimism, which helped mining issues lead the way, offsetting a report that showed Australian consumer confidence unexpectedly declined. Meanwhile, South Korea's Kospi Index gained 0.8%, aided by a report that showed South Korea's unemployment rate declined from 3.6% in September to 3.4% in October.