Morning Update

Weakness as Dollar Gains and Jobless Claims Fail to Wane

Stocks are lower in morning action as commodity prices are lower amid the strength in the dollar and following the weekly initial jobless claims report that showed claims remained at an upwardly revised 505,000. Treasuries are higher following the jobs release, which did show continued easing in other components of the report, and ahead of key data on leading indicators and manufacturing activity in mid-Atlantic region. In equity news, Sears Holdings posted a smaller-than-expected loss and Limited Brands posted unexpected earnings, while Aetna announced a workforce reduction. Overseas, European markets are lower as basic materials decline, while a stronger yen weighed on Japan, as Asian markets finished mixed.

As of 8:47 a.m. ET, the December S&P 500 Index Globex future is 8 points below fair value, the DJIA is 54 points below fair value, and the Nasdaq 100 Index is 13 points below fair value. Crude oil is lower by $0.58 at $79.00 per barrel, and the Bloomberg gold spot price is down $7.53 at $1,137.97 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.3% at 75.43.

Sears Holdings (SHLD $76) reported a 3Q net loss ex-items of $0.81 per share, narrower than the $1.09 loss that Wall Street analysts had forecasted, with revenues declining by $470 million to $10.2 billion, but above the Street’s expectation of $9.9 billion. The company said it saw some encouraging signs of progress, with same-store sales increasing at Kmart and the decline in sales at Sears moderating during the quarter.

Limited Brands (LTD $18) reported adjusted 3Q earnings of $0.02 per share, compared to a loss of $0.05 per share that analysts had expected, with revenues declining 3.5% to $1.8 billion, matching the Street’s forecast, and same-store sales falling 2%. LTD issued 4Q EPS guidance that was inline with analysts’ forecasts, while it raised its full-year EPS outlook.

Aetna (AET $29) announced that it is reducing its workforce by approximately 1.8% or 625 positions, as part of its goal of aligning its cost structure with the company’s membership outlook for 2010. The health care benefit provider has about 35,500 employees and said it anticipates making a similar number of workforce reductions by the end 1Q 2010. “The economic downturn has had a significant impact on our customers. In addition, we must prepare for the impact that health care reform and regulatory changes may have on our business,” AET’s CEO added.

Jobless claims remain above the 500,000 mark

Weekly initial jobless claims came in unchanged at 505,000, versus last week's figure that was upwardly revised by 3,000 to 505,000. The number was roughly inline with the Bloomberg consensus called for claims to come in at 504,000. The four-week moving average, considered a smoother look at the trend in claims, fell by 6,500 to 514,000. Continuing claims also declined, falling 39,000 to 5,611,000, versus the forecast of 5,598,000. Treasuries are higher following the jobs data.

Later this morning, the economic calendar will yield the releases of the Index of Leading Economic Indicators, forecast to increase for a seventh-consecutive month in October, by rising 0.4% after the previous month’s 1.0% gain. Also, the Philly Fed Manufacturing Index will be reported and is expected to improve from 11.5 in October to 12.2 in November.

Europe under pressure as materials pull back

Stocks in Europe are lower in afternoon action, led by weakness in basic materials as metals prices are under some pressure, possibly amid some profit-taking as gold prices touched another record high recently. A solid decline in shares of French food company Groupe Danone (GPDNF $63) is contributing to the weakness in European action, after the company reduced its medium-term sales growth forecast as the world’s largest yogurt maker said the world was undergoing “a profound transformational phase” that would have a lasting impact on consumer behavior. The company did confirm its earnings goals for 2009, citing strong cash flow and EPS growth. Additional pressure on trading across the pond is coming from a solid decline in shares of the world’s largest watchmaker Swatch Group (SWGAF $252) after a report showed Switzerland’s exports unexpectedly fell and watch exports fell for a twelfth-straight month—per Bloomberg. However, some of the weakness is being limited by strength in SABMiller (SBMRY $28) after the world’s number-two brewer posted better-than-expected first-half earnings.

In other economic news in the eurozone region, UK retail sales rose less than expected on a month-over-month basis in October, while the Organization for Economic Cooperation and Development (OECD) more than doubled its previous 2010 growth forecast for the eurozone region.

Asia mixed as stronger yen weighs on Japan

Stocks in Asia were mixed with gainers in the region being China’s Shanghai Composite Index, South Korea’s Kospi Index, and Australia’s S&P/ASX 200 Index, which rose 0.5%, 1.0%, and 0.2%, respectively on gains in technology and commodity issues. However, Hong Kong’s Hang Seng Index declined 0.9% and Japan’s Nikkei 225 Index fell 1.3% following yesterday’s decline in the US on disappointing housing data and as the continued strength in the Japanese yen dampened profit hopes of exporters that derive a good portion of revenue from sales outside the nation. Japanese trading was also bogged down by weakness in financials as shares of Japan’s largest bank by market value, Mitsubishi UFJ Financial (MTU $5), came under pressure as its first-half profit jump of over 50% to 141 billion yen ($1.6 billion)—on a drop in loan losses and gains in its investment portfolio—was offset by the firm’s announcement that it may raise as much as 1 trillion yen ($11.2 billion) by issuing new shares.

Elsewhere, Singapore’s Straits Times Index rose 0.5% despite an unfavorable revision to the nation’s 3Q GDP, which was revised from an annualized 21.7% to a 14.2% expansion, as the nation’s trade ministry said the economy will grow 3-5% next year.