Morning Update

Still in the Green Even as a Lower 3Q GDP Was Seen

Already in the green on the heels of yesterday's gains and as the global financial sector absorbed the third ratings downgrade of Greece, stocks remain higher even after paring an advance following an unexpected downward revision to the US 3Q GDP. However, a key reading on the housing sector remains on the horizon and could have an impact on the equity market's direction in lighter-than-usual volume in the Christmas holiday-shortened week. Treasuries are lower but did recover some early losses after the GDP report. In equity news, Jabil Circuit exceeded Wall Street analysts' profit projections, while Take-Two Interactive Software lowered its 1Q and full-year guidance after announcing it will sell a distribution unit. Overseas, Asia was mostly higher, except for China's Shanghai Composite Index, while European stocks are gaining ground.

As of 8:52 a.m. ET, the March S&P 500 Index Globex future is 2 points above fair value, the DJIA is 20 points above fair value, and the Nasdaq 100 Index is 7 points above fair value. Crude oil is lower by $0.46 at $73.26 per barrel, and the Bloomberg gold spot price down by $1.95 at $1,091.45 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.1% at 77.97.

Jabil Circuit (JBL $15) reported fiscal 1Q core EPS of $0.32, above the $0.29 that Wall Street analysts had expected, with revenues falling 8.8% versus last year to $3.1 billion, inline with the Street's forecast. The electronics manufacturing and services company said it delivered significant margin expansion and revenue growth on a sequential basis, while it issued 2Q guidance that topped analysts' forecasts after saying it thinks it has established positive momentum.

Take-Two Interactive Software (TTWO $9) is under pressure after it announced that it will sell its Jack of All Games distribution business for about $43 million, while it cut its 1Q and full year guidance. TTWO now expects revenue to come in as high as $140 million and $910 million for 1Q and full year, respectively, and it now expects losses that could be as high as $0.55 per share for 1Q and $0.68 per share for the year. Analysts are expecting a 1Q loss of $0.47 per share on revenues of $227 million, and a full year loss of $0.48 per share, with revenues forecasted to come in at $1.1 billion.

Last look at 3Q GDP comes in lower than expected

The final revision of 3Q Gross Domestic Product, the broadest measure of economic output, was released this morning and showed a 2.2% annualized rate of growth, compared to the first revision, which was lowered to 2.8%-where the Bloomberg forecast called for it to remain-and the 0.7% contraction in output that was reported for 2Q. Personal consumption rose 2.8%, lower than the 2.9% previously reported and what was forecasted. Real final sales, which exclude changes in inventory, were up 1.5%, versus the 1.9% that was reported in the first revision of the report.

The GDP Price Index increased 0.4% versus the 0.5% previously reported and where it was expected by Bloomberg economists to remain. The core PCE Index, which excludes food and energy, increased 1.2%, versus expectations of 1.3% and the rate remains between of the Fed's implied target of 1-2%. Treasuries are lower, paring some early losses following the report.

Later this morning, the November report on existing-home sales will be released, 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. Additionally, the Richmond Fed Manufacturing Index will be released, expected to increase from 1 in November to 5 in December.

Europe in the green for second day in a row

Stocks are higher in afternoon action for the second-straight session, led by oil and gas and healthcare issues, with the UK's FTSE 100 Index up over 1% after the government revised its 3Q GDP contraction from a 0.3% decline on a quarter-over-quarter (q/q) basis to a 0.2% drop. Elsewhere, Germany's DAX Index is 0.4% higher as the advance is being limited by a report that forecasted consumer confidence in January will decline, while France's CAC 40 Index is up 0.8% after a report showed producer prices rose slightly above expectations on a month-over-month (m/m) basis in November, but at a slower pace than the previous month. Financials are gaining ground to help out the broad-based advance in Europe, even after Moody's became the third major credit rating agency to lower its rating on the nation of Greece, as a downgrade was expected and the one-notch cut by the ratings agency to A2 was smaller than some forecasted, easing some concerns that a larger downgrade may have made the country's debt ineligible as collateral to access funds from the European Central Bank. In equity news, shares of Europe's second-largest chipmaker, Infineon Technologies (IFNNY $5) is higher after it boosted its outlook for 1Q.

Asia moved higher but China's Shanghai slides

Stocks in Asia were mostly higher, with Japan's Nikkei 225 Index leading the way with a 1.9% gain, as export issues continued to receive a tailwind from the weakness in the yen versus the dollar, which is nearing a two-month low versus the greenback. The fall in the yen boosts optimism of profits of companies that rely heavily on sales in the US and outside of Japan. In equity news, shares of Toyota Motor Corp. (TM $82) were higher following reports that the automaker is looking to cut its auto parts costs by 30% as it tries to claw back to profitability. Toyota did not comment on the reports. In related industry news, Isuzu Motors (ISUZY $19) jumped over 6% on a report that the automaker is looking to discuss reviewing its joint engine-making factory venture with General Motors, which could end with the Japanese automaker pulling out of the venture or agreeing to develop new diesel engines for the US automaker. GM said there are no plans to change the relationship with Isuzu and the Japanese automaker said its North American venture serves large-size vehicles and there is definitely a question mark on that market, adding that they want to ask GM what its thoughts are on the market. The Japanese auto sector received further support from a report that showed production increased in November. In other equity news, chipmakers Toshiba (TOSBF $5) and Elpida Memory (ELPDF $12) both rose solidly on a report that the companies are raising spending to increase semiconductor production and keep pace with Samsung Electronics (SSNLF $656). Elpida did not comment, while Toshiba said the reports are not based on any announcement by the company.

Elsewhere, Australia's S&P/ASX 200 Index gained 1.5%, South Korea's Kospi Index rose 0.7%, Taiwan's Taiex Index gained 0.9%, and India's BSE Sensex 30 Index advanced 0.6%. However, stocks in China were mixed, with Hong Kong's Hang Seng Index rising 0.7%, while the Shanghai Composite Index fell 2.3% on concerns that the government may intervene with new regulations aimed at combating the risk of asset bubbles forming.