Morning Update

Jobless Claims Boost Sentiment

Stocks are moving higher in morning action, after weekly initial jobless claims dropped below the 500,000 mark, to headline a full economic docket for today, and supporting sentiment on the Street that the economic recovery continues to gain traction. Other reports from the economic front included an unexpected drop in durable goods orders, a larger-than-expected increase in personal spending, and a drop in mortgage applications. Treasuries are lower following the reports as the equity markets advance. In equity news, Deere & Co., Tiffany & Co., and J Crew Group all exceeded analysts’ earnings expectations. Overseas, markets are higher.

As of 8:50 a.m. ET, the December S&P 500 Index Globex future is 6 points above fair value, the DJIA is 30 points above fair value, and the Nasdaq 100 Index is 13 points above fair value. Crude oil is higher by $0.32 at $76.34 per barrel, and the Bloomberg gold spot price is up $12.03 at $1,181.43 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.8% at 74.47.

Deere & Co. (DE $52) reported fiscal 4Q EPS ex-items of $0.23, easily topping the $0.03 that Wall Street analysts had expected. The company said the results exclude a previously- announced impairment of goodwill related to its landscaping unit and voluntary employee-separation expenses, but it was not clear if analysts’ estimates reflected these exclusions. DE reported worldwide net revenues declined 28% to $5.3 billion, and net sales of equipment operations of $4.7 billion, also exceeding the $4.4 billion that the Street had expected. However, shares are under pressure after the company issued full-year EPS guidance that missed the Street’s forecasts.

Tiffany & Co. (TIF $42) is nicely higher after reporting 3Q EPS of $0.34, ten cents above the estimate of Wall Street analysts, with revenues falling 3% to $598 million, also topping the Street’s $575 million estimate. The upscale jeweler said that the rate of sales declines in the US lessened as the quarter progressed and many countries in Asia/Pacific and Europe achieved considerably better-than-expected sales. TIF said it expects 4Q worldwide sales to increase by a mid-single-digit percentage, and it raised its full-year guidance.

J Crew Group (JCG $41) is also gaining ground after the specialty retailer reported 3Q EPS of $0.67, compared to the Street’s forecast of $0.58, with revenues increasing 14% over the same period last year to $414 million, versus $408 million that analysts had expected. JCG issued 4Q EPS guidance that was inline with analysts’ forecasts.

Full economic docket is mixed

Weekly initial jobless claims fell by 35,000 claims to 466,000, versus last week's figure that was downwardly revised by 4,000 to 501,000. The number was lower than the Bloomberg consensus, which called for claims to come in at 500,000. The four-week moving average, considered a smoother look at the trend in claims, fell by 16,500 to 496,500. Continuing claims also dropped, falling sharply by 190,000 to 5,423,000, versus the forecast of 5,565,000.

Durable goods orders fell by 0.6% in October, versus the 0.5% rise that had been forecast, and September’s 1.0% increase in orders was revised to a 2.0% gain. Ex-transportation, orders were down 1.3%, compared to the 0.7% growth forecast, and September’s figure was upwardly revised from a 0.9% increase to a 1.8% advance. Monthly orders data of goods intended to last at least three years can be very volatile as large orders for items such as airplanes and military equipment have a tendency to distort the data. Nondefense capital goods ex-aircraft, considered a good proxy for business spending, dropped 2.9%.

Personal income was 0.2% higher in October, above the Bloomberg estimate of 0.1%, and September was revised from a flat reading to a 0.2% gain. Personal spending increased 0.7% in October, topping the 0.5% Bloomberg expectation, while September’s 0.5% decline was unfavorably revised to a 0.6% drop. The savings rate dipped from an upwardly revised 4.6% in September to 4.4% in October.

Also, the PCE Price Index, which is released with the income and spending data, rose 0.2% year-over-year in October, above the consensus forecast of 0.1%, and September’s decline was downwardly revised to -0.6%. The core PCE Price Index, which excludes food and energy, rose 0.2%, compared to expectations of 0.1%. Year-over-year, core prices moved 1.4% higher, inline with the consensus of economists surveyed by Bloomberg. Treasuries moved lower following the full slate of economic data.

In other economic news, the US MBA Mortgage Application Index fell 4.5% last week, after the index, which can be quite volatile on a week-to-week basis, was favorably revised from a 2.5% decline to a 0.3% advance in the previous week. The decrease came despite a 1 basis-point decline in the average 30-year mortgage rate to 4.82% versus the previous week. The decrease in the application index was attributed to a 9.5% decline in the Refinance Index, while a 9.6% increase in the Purchase Index could not keep the index from declining. The average 30-year mortgage rate remains above the record low of 4.61% that was reached at the end of March.

The plethora of economic data will continue after the opening bell, with the final revision to the University of Michigan Consumer Sentiment Index for November, expected to tick higher from 66.0 to 67.0. Additionally, new home sales will be released, forecast to increase 0.4% to an annual rate of 404,000 units for October, following September’s 3.6% decline.

Europe higher on materials

Stocks in Europe are higher in afternoon action, led by basic materials issues, which are receiving a boost from today’s upbeat start in the US and after yesterday’s economic upgrade by the US Federal Reserve. The Fed issued an updated outlook, with nearly all participants now judging the risks to their forecasts as being balanced rather than tilted to the downside. Also, US policymakers upwardly revised their forecast for real GDP growth in 2009 and 2010, and lowered their estimate for the unemployment rate. However, their estimate for GDP growth in 2011 was decreased. Data out of the UK helped support the economic optimism, after the British government favorably revised its 3Q GDP figure from a 0.4% quarter-over-over decline to a 0.3% contraction. Meanwhile, some M&A news is also helping foster optimism across the pond, with France Telecom (FTE $26) announcing that it has agreed to merge its Swiss unit with Denmark’s TDC (TDCAF $42), in which FTE will pay 1.5 billion euros ($2.2 billion) for a 75% stake in a new company, making it Switzerland’s second-largest mobile-phone operator.

Asia advances on improved economic outlooks

Stocks in Asia were broadly higher, led by China’s Shanghai Composite Index’s 2.1% gain despite continued capital raising concerns toward banks, amid improved economic sentiment, supported by yesterday’s increased outlook from the US Federal Reserve. Meanwhile, Japan’s Nikkei 225 Index increased 0.4%, helped by a report that showed Japanese exports fell at the slowest pace in a year, after falling 23.2% in October, following a 30.6% decline in September, and smaller than the 26.8% drop that economists surveyed by Bloomberg had expected. Australia’s S&P/ASX 200 Index posted a 0.8% gain on the aforementioned economic sentiment, which was amplified by a Reserve Bank of Australia deputy governor saying that the nation’s economy has entered a “new upswing” and it is “reasonable to assume we will see this growth extended for a few more years yet.” Resource-related issues led the way, aided by another record high for gold prices. Elsewhere, Hong Kong’s Hang Seng Index rose 0.8% and South Korea’s Kospi Index increase 0.3%.