Morning Update

Street Cheerful to Start Holiday-Shortened Week

The bulls are in a jolly mood and stocks are higher in early action to kick off the week, which will have one less trading day and a shortened session due to the Christmas holiday. Concerns about the status of global government debt and waning uneasiness regarding the health of the European financial sector are helping support sentiment on the Street in morning trading. Treasuries are lower as the equity markets are gaining ground, as there are no major economic reports scheduled for today, but some key reports on housing and durable goods loom on the horizon, along with the final revision to US 3Q GDP. In equity news, Walgreen and ConAgra Foods both topped the Street's profit projections. Overseas, some M&A news is helping boost European trading, while the Asian markets were mixed.

As of 8:50 a.m. ET, the March S&P 500 Index Globex future is 6 points above fair value, the DJIA is 47 points above fair value, and the Nasdaq 100 Index is 11 points above fair value. Crude oil is higher by $0.09 at $73.45 per barrel, and the Bloomberg gold spot price is up by $4.48 at $1,117.68 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.2% at 77.67.

Walgreen Co. (WAG $37) reported fiscal 1Q EPS ex-items of $0.52, four cents above the consensus estimate of Wall Street analysts, with revenues increasing 9.5% compared to last year to $16.4 billion, slightly above the $16.3 billion that the Street has predicted. WAG said its same-store sales-stores open at least a year-rose 4.9%, with prescription sales, which accounted for about 66% of sales for the quarter, jumped 10%. WAG said the number of prescriptions filled increased 12% versus last year, while an early flu season and a "well-executed" flu shot campaign-launched a month earlier than last year-lifted front end and pharmacy sales.

However, the company said consumer concerns over high unemployment and the challenging economy were a drag on holiday sales at the end of November and "we've seen a similar pattern through mid-December," but the company said like every Christmas season, its performance is driven by the final days, which makes this an important week.

ConAgra Foods (CAG $22) reported fiscal 2Q EPS ex-items grew 21% to $0.52, above the $0.47 that analysts had forecasted, with revenues declining 2.4% to $3.2 billion, below the $3.3 billion that the Street was expecting. The consumer and commercial food firm said a more favorable input cost environment and strong cost savings "substantially" contributed to profit growth. CAG raised its full-year profit outlook.

Housing, durable goods, and the last look at 3Q GDP wait in the wings

Treasuries are under some pressure as the equity markets are moving higher in morning action and as there are no major economic reports scheduled for release today. Even though this week will be shorter-than-usual, with US markets closing early on Thursday and closed the entire day of Friday in observance of Christmas, there are some key reports on the economic calendar that will come out this week.

Tomorrow, we will get the third and final reading on 3Q Gross Domestic Product (GDP), and the Bloomberg survey of economists expects no change from the 2.8% second reading and the component estimates provided by the survey show no change forecasted for personal consumption at 2.9%, the GDP Price Index at 0.5%, and the core PCE Index, which excludes food and energy, at 1.3%.

Tomorrow will also bring the November report on existing-home sales, expected to have increased 2.5% month-over-month (m/m) to an annual rate of 6.25 million units after surging 10.1% to 6.1 million units in October and 8.8% in September. New home sales, which have represented a small 7% of sales in 2009, will be reported on Wednesday, forecasted to increase 1.9% m/m in November to an annual rate of 438,000 units.

Durable goods orders will be reported on Thursday, expected to rise 0.5% m/m in November, after unexpectedly falling 0.6% in October, while ex-transportation, orders are forecasted to have grown 1.0% m/m, after surprising to the downside in October, dropping 1.3%. This series is volatile on a month-to-month basis.

Other reports on this week's economic calendar include the Richmond Fed Manufacturing Index, the MBA Mortgage Applications Index, personal income and spending, the University of Michigan consumer sentiment survey and initial jobless claims.

Europe gaining ground, trying to snap two-session losing streak

Stocks in Europe are higher in afternoon action, led by oil and gas and basic materials issues, while financials are aiding the advance as concerns about government debt and capital structures of eurozone banks are abating. Economic news is light but the European Commission forecasted that the eurozone economy could expand by 0.7% in 2010 and 1.5% in 2011. However, there are some equity stories worth mentioning, as Nokia (NOK $12) is under pressure after a ratings downgrade by Fitch, while Safran (SAFRY $18) is nicely higher after announcing that it has won a $5 billion contract to provide engines for Chinese narrowbody aircraft. Elsewhere, Sanofi-Aventis (SNY $39) reported that it has agreed to acquire US healthcare firm Chattem (CHTT $70) in a cash tender offer of $93.50 per CHTT share, worth about $1.9 billion, giving SNY a presence in the US consumer healthcare market. In other M&A news across the pond, Dutch luxury car maker Spyker Cars is surging after it announced a new bid to acquire the Swedish car brand Saab from General Motors. The announcement follows last week's unsuccessful discussions, after which GM said it would wind down its Saab unit.

Asia mixed as decline in Japanese exports moderates

Stocks in Asia were mixed as Japan's Nikkei 225 Index increased 0.4%, while the nation's broader Topix Index declined 0.2%, after a report that showed exports declined at the slowest pace since the modest rise posted in September 2008. Chinese stocks were also mixed, as Hong Kong's Hang Seng Index fell 1.1% and the Shanghai Composite Index rose 0.3% after the government said it is targeting 8% growth for the nation's economy. Elsewhere, Australia's S&P/ASX 200 Index declined 0.3% after reversing a solid advance earlier in the day, with shares of the nation's largest airline, Qantas (QUBSF $2), gaining over 5% after the company forecasted a first-half pretax profit. Rounding out the day in Asia, South Korea's Kospi Index dipped 0.2%, India's BSE Sensex 30 Index fell 0.7%, while Taiwan's Taiex Index advanced 0.4%.