Morning Update

Positive Open Ahead of Fed Chief's Speech

Stocks are nicely higher in early action, following a better-than-expected increase in October retail sales, and as the overseas markets are climbing higher, led by broad-based gains in Asia. Treasuries are mixed however, as the Empire Manufacturing Index deteriorated by a larger-than-expected amount and after excluding auto sales, retail sales came in short of expectations. Traders are also awaiting a speech by Fed Chairman Ben Bernanke later today on the economic outlook that may go a long way in the market's direction in the second half of the day. In equity news, Lowe's Companies matched earnings expectations, while General Motors showed improved 3Q results and said it plans to begin repaying government aid by the end of the year.

As of 8:52 a.m. ET, the December S&P 500 Index Globex future is 8 points above fair value, the DJIA is 46 points above fair value, and the Nasdaq 100 Index is 10 points above fair value. Crude oil is higher by $0.72 at $77.07 per barrel, and the Bloomberg gold spot price is up $10.87 at $1,129.57 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.4% at 75.03.

Lowe's Companies (LOW $22) reported 3Q EPS ex-items of $0.24, inline with the forecast of Wall Street analysts, as sales declined 3.1% to $11.4 billion, slightly higher than the $11.3 billion that the Street had expected. The number two home improvement retailer said the broad pressures of the macro-environment are clearly evident in its sales as customers continue to delay large purchases until they feel better about the economic outlook. LOW raised its full year guidance.

General Motors reported that it lost $1.15 billion from July through September, compared to last year's $2.5 billion loss. Additionally, GM said it generated $3.3 billion in cash during the period-compared to a cash burn of $6.9 billion a year earlier-and expects to begin to repaying the US and Canadian governments, beginning with $1.2 billion in December.

Retail sales rise, New York manufacturing fell, Fed Chief talks about the economy

Advance retail sales for October increased 1.4%, compared to the Bloomberg forecast of an increase of 0.9%, while sales ex-autos rose 0.2%, versus the expectation of an increase of 0.4%. Excluding autos, gasoline and building materials, the figure the government uses to calculate the consumer spending component of GDP, sales rose 0.5%.

The Empire Manufacturing Index, a measure of manufacturing in the New York region, deteriorated in November to a level of 23.51, but remains well above the level of zero that suggests conditions are neither contracting nor expanding. That was worse than the expected reading of 30.00, and the previous month's 34.57 level. New orders fell from 30.82 in October to 16.66 in November and shipments also declined, falling from 35.08 to 12.97. The report is the first major piece of data looking at manufacturing conditions in November, and later this week, the Philly Fed Manufacturing Index, expected to increase from 11.5 in October to 12.0 in the current month, will be released on Thursday and compliment the New York activity report, providing further insight into the health of the sector. Treasuries remained mixed following the retail sales and manufacturing data.

Later today, we will get the release of business inventories for September, forecast to decline 0.7%.

However, the headlining economic event today may be Federal Reserve Chairman Ben Bernanke's speech on the economic outlook at 12:15 p.m. ET. There will be a Q&A session to follow. Traders will likely be diligently scrutinizing the Fed Chief's comments on the economy, looking for any hints as to where the Fed stands in terms of the sustainability of the economic recovery, any timeframes for the further tightening of its easy monetary policy and when the Central Bank may begin increasing interest rates, and if the Fed Chairman comments on the recent weakness in the dollar.

Meanwhile, economic data will be heavy for the rest of the week with releases such as the Producer Price Index and industrial production and capacity utilization, along with the NAHB Housing Market Index tomorrow, followed by the Consumer Price Index, housing starts and building permits, and MBA Mortgage Applications on Wednesday. The second half of the week will yield key releases of initial jobless claims and the Index of Leading Economic Indicators, both set to be released on Thursday.

Europe higher on strength in materials

Stocks in Europe are higher in afternoon action, led by basic materials issues amid the strength in commodity prices, and following some upbeat economic news out of Asia. Some M&A news across the pond is also helping support sentiment, as US tech firm and Dow member Cisco Systems (CSCO $24) raised its takeover offer for Norwegian video conferencing equipment maker Tandberg (TADBY $28) by 11% to about $3.4 billion. Also, ThyssenKrupp (TYEKF $35)-Germany's largest steelmaker-is higher after announcing that it will sell its US scaffolding unit to US private equity firm Odyssey Investment Partners for an undisclosed amount. However, gains are being limited by a solid decline in shares of Hennes & Mauritz (HMRZF $64) after Europe's second-largest clothing retailer reported disappointing same-store sales results for October.

In European economic news, the eurozone CPI came in tame, increasing 0.2% month-over-month in October, versus the gain of 0.3% that economists surveyed by Bloomberg had anticipated. Year-over-year, consumer prices are down 0.1%, suggesting that inflation remains subdued in the region.

Asia advances but Japan shows mixed reaction to output data

Stocks in Asia were mostly higher, led by a 2.7% advance in China's Shanghai Composite and a 1.7% gain in Hong Kong's Hang Seng Index, supported by the pledge of the Asia-Pacific Economic Cooperation forum to keep stimulus measures in tact until there was "durable" growth in the region's economies. The pledge is inline with last week's G20 commitment to keep stimulus efforts deployed until economic recovery is assured. Meanwhile, trading in Japan was mixed, with the Nikkei 225 Index gaining 0.2% and the broader Topix Index falling 0.7%, despite the release of Japanese 3Q GDP, which rose more than expected. Japan's output expanded at an annualized rate of 4.8%, versus an upwardly revised 2.7% in 2Q, and a larger expansion than the 2.9% rate that economists surveyed by Bloomberg had expected.

Elsewhere, M&A news helped Taiwan's Taiex Index advance 1.7% after Chi Mei Optoelectronics Corp. (CMOPF $8) and Innolux Display Corp agreed to merge in a $5.3 billion transaction to create the nation's largest LCD panel maker. In other Asia/Pacific trading, solid gains in commodities helped the resource-heavy nation of Australia move higher as its S&P/ASX 200 Index rose 1%, while South Korea's Kospi Index gained 1.3%.