Morning Update

Advancing Ahead of Holiday Abbreviation

In the final full trading session ahead of the Christmas holiday, stocks are in the green again for the fourth-straight day, but action may be muted as volume will likely remain lighter than usual. Early gains were preserved even after personal income and spending came in a bit short of the Street's expectations. Treasuries are higher following the income and spending data but key reports on housing and consumer sentiment wait in the wings, which may impact trading shortly after the opening bell. In equity news, Micron Technology and Red Hat both topped the Street's earnings expectations, while Research in Motion's Blackberry device users suffered delays in service yesterday. Overseas, markets are higher.

As of 8:53 a.m. ET, the March S&P 500 Index Globex future is 3 points above fair value, the DJIA is 30 points above fair value, and the Nasdaq 100 Index is 6 points above fair value. Crude oil is higher by $0.42 at $74.82 per barrel, and the Bloomberg gold spot price up by $2.28 at $1,086.28 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is down 0.2% at 78.08.

Micron Technology (MU $9) reported fiscal 1Q EPS ex-items of $0.23, compared to the consensus of Wall Street analysts, which called for the semiconductor firm to report EPS of $0.07, but there is some uncertainty on the Street as to whether the analyst estimate is comparable to the company's report. Revenues came in at $1.7 billion, topping the $1.6 billion that the Street had forecasted as sales of DRAM chips increased 50% quarter-over-quarter (q/q) due to a 25% increase in sales volume and a 21% gain in average selling prices. Meanwhile sales of its NAND flash memory chips rose 21% q/q on a 16% increase in sales volume and a 5% rise in average selling price.

Red Hat (RHT $30) is higher after the business software firm reported 3Q EPS ex-items of $0.17, one penny ahead of the Street's forecast, as revenues jumped 18% from a year ago to $194 million, compared to analysts' expectations of $188 million. RHT said its subscription revenue for the quarter was up 21% to $164 million.

Research in Motion (RIMM $67) is under some pressure in morning trading on concerns about network stability after North and South American users of the company's BlackBerry smartphone suffered from widespread delays in message services yesterday. RIMM said its technical teams are working to resolve the problem.

Person outlays come up slightly below expectations

Personal income was 0.4% higher in November, just shy of the Bloomberg estimate of 0.5%, but October was revised from a 0.2% gain to a 0.3% rise. Personal spending rose 0.5% in November, below the 0.7% Bloomberg expectation, while October's 0.7% decline was downwardly revised to a 0.6% gain. The savings rate remained unchanged at an upwardly revised 4.7% in November.

Also, the PCE Price Index, which is released with the income and spending data, increased 1.5% year-over-year in November, below the consensus forecast of 1.6%, and October's modest rise was downwardly revised from 0.2% to 0.1%. The core PCE Price Index, which excludes food and energy, was flat, compared to expectations of a 0.1% increase. Year-over-year, core prices moved 1.4% higher, below the 1.5% consensus of economists surveyed by Bloomberg. Treasuries are higher following the income and spending data.

In other economic news, the US MBA Mortgage Application Index fell 10.7% last week, after the index, which can be quite volatile on a week-to-week basis, gained a modest 0.3% in the previous week. The drop came as the average 30-year mortgage rate was unchanged at 4.92%, while the Refinance Index fell 10.1%, and the Purchase Index decreased 11.6%. The average 30-year mortgage rate remains above the record low of 4.61% that was reached at the end of March.

Just after the opening bell, the economic calendar may yield today's keynote report in the form of new home sales, forecasted to increase 1.7% month-over-month (m/m) in November to an annual rate of 438,000 units. The estimated advance may carry more weight and indicate more organically generated sales compared to the surprising 6.2% jump in October, which may have been boosted by homebuyers trying to take advantage of the government's first-time homebuyer tax credit before the initial intended expiration in November. New home sales are reported when an initial contract is signed as opposed to existing home sales, where sales are recorded at the closing of home purchase. Despite the fact that new home sales make up a small proportion of home sales-averaging only about 7% of the total market in 2009-traders pay attention to the report as a harbinger of economic growth. New home sales have a favorable impact on the economy from multiple fronts as materials are used during construction of homes, labor is needed to build, and funds are demanded to finance home production. Also, new home sales can foreshadow consumer spending as homebuyers spend to decorate and furnish the new homes.

Also, the final revision to the University of Michigan's Consumer Sentiment Index for December will be released this morning, expected to tick slightly higher from the initial report of 73.4 to 73.8.

Europe higher as markets hit a 14-month high

In the final full session before the Christmas holiday, stocks in Europe are trading higher, reaching the highest level since October 2008, led by financials and basic materials issues. Miners are helping the broad-based advance as copper and other key metal prices are on the rise. Britain's FTSE 100 Index is 0.9% higher after the Bank of England released the minutes from its last policy meeting, which showed policy members voted unanimously to keep its benchmark lending rate at a record low of 0.5% and to keep its bond-purchase plan at 200 billion pounds ($320 billion). The UK central bank's minutes said, "Most members felt that there had been some positive developments for the near term, albeit relatively minor ones by comparison to the uncertainties." Elsewhere, France's CAC-40 Index is up about 0.6% even after an economic report showed an unexpected drop in consumer spending on a month-over-month basis in November, while Germany's DAX Index is 0.4% higher following a larger month-over-month increase in import prices for November. In other economic news, Italy's retail sales unexpectedly came in flat but a separate report showed consumer confidence rose more than expected, and the nation's FTSE MIB Index is up about 0.8%.

Asia advances in a half-hearted session

With Japanese markets closed for a holiday, trading in Asia was subdued as most moves by traders have been put in for the year. However, the optimism from yesterday's upbeat housing data in the US helped Asian markets trade higher. Hong Kong's Hang Seng Index increased 1.1% and China's Shanghai Composite Index advanced 0.8% to follow yesterday's steep decline to a seven-week low as the nation's central bank reiterated its pledge to keep a "moderately loose" monetary policy, which offset its commitment to curb excess capacity and combat the formation of asset bubbles, such as property market speculation. The economic news was also light, with the lone major report being the release of New Zealand's 3Q GDP, which came in at a quarter-over-quarter gain of 0.2%, but was half of the forecast of economists surveyed by Bloomberg. Nonetheless, New Zealand's NZX 50 Index rose about 1.0%. Stocks in India led the advance in Asian action today, as the BSE Sensex 30 Index jumped 3.2%, led by export issues, which caught a tailwind from the upbeat optimism about the continued recovery in the US and the global economies. Elsewhere, Taiwan's Taiex Index gained 0.6%, South Korea's Kospi Index increased 0.4%, and Australia's S&P/ASX 200 Index advanced 0.8%, rounding out the broad advance in the Asia/Pacific region.