Morning Update

Under Pressure Despite Favorable Jobless Claims Data

Stocks are under pressure in morning action as traders are shrugging off a larger-than-expected drop in weekly initial jobless claims and a better-than-expected earnings report from Dow member Wal-Mart. Not even a favorable 4Q earnings and revenue report and $2.7 billion acquisition of 3Com from fellow Dow component Hewlett-Packard are helping push stocks into the green in early action. Treasuries are nearly unchanged after erasing gains following the jobless claims report. In other equity news Kohl's and Applied Materials both exceeded analysts' earnings expectations. Overseas, Asia finished lower, while Europe is flat.

As of 8:52 a.m. ET, the December S&P 500 Index Globex future is 3 points below fair value, the DJIA is 43 points below fair value, and the Nasdaq 100 Index is 1point below fair value. Crude oil is lower by $0.75 at $78.53 per barrel, and the Bloomberg gold spot price is down $3.00 at $1,114.41 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is up 0.2% at 75.30.

Dow member and the world's largest retailer Wal-Mart (WMT $53) reported 3Q EPS of $0.84, three cents above the consensus estimate of Wall Street analysts, with revenues increasing 1.1% versus last year to $98.7 billion, falling short of the $99.9 billion that the Street had forecasted. The company said increased productivity and improved inventory management contributed to its strong financial performance. 3Q same-store sales at the company fell 0.4%, excluding fuel, and dropped 0.8% including the impact of fuel sales. The company said 4Q same-store sales are expected to be flat, plus or minus 1%. WMT added that the sales environment continued to be difficult, but customer traffic is up throughout the company, and it gained market share, especially in the US, UK and Mexico. Looking ahead, WMT said it continues to operate in a very challenging economy and it believes it is positioned better than any other retailer to succeed with customers this holiday season. The company raised its full-year EPS outlook and said 4Q EPS are expected to be between $1.08-1.12, compared to the Street's forecast of $1.12.

In M&A news, fellow Dow component Hewlett-Packard (HPQ $50) announced that it will acquire networking firm 3Com (COMS $6) for $7.90 per share in cash, valued at approximately $2.7 billion. Also, HPQ reported preliminary 4Q EPS ex-items were $1.14, two pennies above the Street's forecast and revenues were down 8% versus last year to $30.8 billion, above the $29.8 billion that analysts had expected. The company also increased its full-year EPS and revenue outlook.

Kohl's Corp (KSS $55) reported 3Q EPS of $0.63, two cents above the Street's forecast, with revenues increasing 6.5% to $4.1 billion, topping the $4.0 billion analyst estimate, as same-store sales rose 2.4%. KSS issued 4Q EPS guidance that missed forecasts, while it raised its full-year EPS outlook.

Applied Materials (AMAT $13) reported fiscal 4Q EPS ex-items of $0.13, compared to the $0.03 that the Street had forecasted, with revenues rising from $1.1 billion last quarter to $1.5 billion, above the $1.3 billion that analysts had anticipated. The chip equipment maker issued full-year 2010 revenue guidance above the Street's forecast, and it said it will slash up to 1,500 jobs, or 12% of its workforce.

Jobless claims fall more than expected

Weekly initial jobless claims fell by 12,000 to 502,000, versus last week's figure that was upwardly revised by 2,000 to 514,000. The Bloomberg consensus called for claims to dip to 510,000. The four-week moving average, considered a smoother look at the trend in claims, declined by 4,500 to 519,750. Continuing claims also fell sharply again, dropping 139,000 to 5,631,000, versus the forecast of 5,700,000. Treasuries erased modest gains and are nearly unchanged following the jobs data.

In other economic news, the US MBA Mortgage Application Index rose 3.2% last week, after the index, which can be quite volatile on a week-to-week basis, advanced 8.2% in the previous week. The increase was attributed to a 7 basis-point decline in the average 30-year mortgage rate to 4.90% versus the previous week, and the Refinance Index, which rose 11.3%. However, to the Purchase Index fell 11.7% to limit the advance. The average 30-year mortgage rate remains above the record low of 4.61% that was reached at the end of March.

Europe flat as traders mull mixed reports

Stocks in Europe are nearly unchanged in afternoon action amid some mixed news from both the equity and economic fronts. Telecommunications issues are nicely higher to lead advancers, as shares of BT Group (BT $23) are solidly higher after the UK's largest fixed-line phone company raised its full-year outlook and its dividend after posting better-than-expected 2Q earnings. Also, shares of Peugeot (PEUGY $36) are moving higher to help lend support to automakers and the broad market after the company increased its profit forecast as the recovery in the region's auto market accelerated faster than expected. However, the aforementioned favorable reports are being offset by a solid decline in shares of A.P. Moeller-Maersk (AMKBF $7,250) after the parent of the world's largest container shipper posted a larger-than-expected loss, while Anheuser-Busch InBev (BUD $49) is also down to weigh on eurozone trading, after the world's largest brewer reported a worse-than-expected 3Q revenue on sluggish volumes.

Economic data was also mixed across the pond to add to the lackluster action, as a report showed eurozone industrial production rose less than expected month-over-month in September, but the year-over-year decline fell less than economists surveyed by Bloomberg had expected.

Asia slumps after giving up early gains

Stocks in Asia looked like they would move higher in early action, continuing the upward momentum of the US markets, but the major indices gave up early gains and finished lower in a late-day slide. South Korea's Kospi and Hong Kong's Hang Seng Indexes both fell over 1% to pace the decrease in the Asia/Pacific region, while China's Shanghai Composite Index posted a modest 0.1% decline. Meanwhile, Japan's Nikkei 225 Index dropped 0.7%, led by losses in shares of Asia's largest drugmaker, Takeda Pharmaceutical (TKPHY $20), after Japan's Government Revitalization Unit, a committee in charge of cutting down the national budget, recommended lowering drug expenses. Also, shares of Nippon Yusen (NPNYY $7) were lower to weigh on Japanese trading after the shipping company announced that it will raise up to $1.6 billion in a stock offering.

In economic news, South Korea's government left its key lending rate unchanged at 2.0%, inline with expectations, as the nation's central bank is looking for more signs that the economic recovery is gaining traction. Elsewhere, Australia's S&P/ASX 200 Index declined 0.2% despite the nation's employment change unexpectedly increased. Also, an inflation reading in Japan fell more than expected, exacerbating some deflation fears, adding to the negative movement in Japanese and Asian trading.