Morning Update

Bullish Holiday Sales and Asian Data Lead Markets Higher

Stocks are slated to rise in early trading, on light news out of the US and positive indications about economic growth in Asia. In the US, the MasterCard SpendingPulse survey reported upbeat holiday results, led by e-commerce sales, while changes in the executive suite are on tap at both Whole Foods Market and Qualcomm and the Treasury Department is providing extended support for both Fannie Mae and Freddie Mac. There are no US economic releases today, and Treasuries are lower ahead of a heavy week in government debt auctions. In Asia, the strongest report on industrial production in six months in Japan and upwardly revised growth figures in China are buoying markets, with materials and energy names leading the way higher. European markets are higher on the Asian data.

As of 8:40 a.m. ET, the March S&P 500 Index Globex future is 2 points above fair value, the DJIA is 5 points above fair value, and the Nasdaq 100 Index is 2 points above fair value. Crude oil is up $0.43 at $78.48 per barrel, and the Bloomberg gold spot price is higher by $4.85 at $1,110.30 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.3% at 77.62.

MasterCard (MA $255) unit SpendingPulse released its holiday sales survey, which showed that late holiday shopping and an extra shopping day boosted sales, posting a 3.6% increase for the season, although excluding the extra shopping day, sales would have risen 1.0%. Industry forecasts range from a drop of 1.0% to an increase of 2.6% and include the last week of the month. The increase in the SpendingPulse survey was led by a mid double-digit increase in e-commerce sales, as well as gains in electronics of 5.9% and jewelry of 5.6%, while apparel sales and luxury goods were flat, and department-store sales fell 2.3%. The data is based on sales in the MasterCard payments network and estimates for all other payment forms, including cash and checks.

With the year wrapping up, changes in the executive suite are making news today, with Whole Foods Market Inc. (WFMI $28) CEO John Mackey giving up the title of chairman to director Dr. John Elstrott, while the COO of Qualcomm Inc (QCOM $46), Len Lauer, resigned and accepted a job as CEO at an unnamed company. QCOM does not plan on naming a new operating chief now, instead realigning its business groups.

Fannie Mae (FNM $1) and Freddie Mac (FRE $2 ¹) are slated to trade much higher after the US Treasury Department said it would provide capital as needed to both agencies over the next three years, and moved to allow the companies to shrink their portfolios of mortgage securities more slowly, while saying it was still “committed to the principle” of portfolio reduction. The move was announced late Christmas Eve, a week before the expiration of the Treasury’s authority to change the terms of its agreements without Congressional approval. The new terms announced allow the cap on the Treasury’s support to increase by the amount of the total net loss experienced over the next three years, beginning January 1, and the cap in place at the end of 2012 would apply thereafter.

Economic releases light in last shortened week of the year

There are no scheduled economic releases today, although Treasuries are trading lower ahead of this week’s $118 billion auction of government debt, with a $44 billion 2-year note auction scheduled for 1:00 EST today.

The Tuesday release of the S&P/CaseShiller Home Price Index will kick off the US economic calendar this week, expected to show a decline of 7.1% year-over-year (y/y) for October, which would be the smallest 12-month drop since 2007, and would extend the month-over-month increase to six months. The housing market is stabilizing as inventory has been declining in 2009, housing affordability is near 40-year highs due to low mortgage rates and steep declines in prices as the recession intensified, and the homebuyer tax credit has boosted demand.

Additional economic releases this week include Tuesday’s Consumer Confidence Index, forecasted to improve from 49.5 in November to 53.0 in December, Wednesday’s Chicago PMI, expected to decline in December to 55.1 from 56.1 and Thursday’s report on weekly initial jobless claims, forecasted to increase to 460,000 from 452,000 the week prior.

European shares higher, following news out of Asia

Stocks in Europe are rising, led by basic materials, energy and industrial shares on better-than-expected economic news out of Asia, while Europe is relatively quiet in terms of economic data releases and the UK stock market is closed today. In equity news, Volkswagen AG’s (VLKAY $22) luxury Audi brand said it has budgeted 7.3 billion euros ($10.5 billion) in investments in new models and plant upgrades through 2012. Volkswagen, Europe’s largest carmaker according to Bloomberg, has a goal of surpassing Toyota Motors (TM $85) by 2018 in global deliveries and profit margins. Audi’s CFO said that the company will be developing electric and hybrid cars, as well as improve existing engine technology to lay the foundation for growth.

Asian shares jump, led by China

Shares in Asia rose on positive indications about recovery after Japan’s government said their economy will expand for the first time in three years and industrial production rose at the fastest pace in six months in November, while China upwardly revised prior growth figures. Japan’s Nikkei 225 Index rose 1.3% after it was reported that industrial production rose 2.6% in November versus the 2.5% estimate, despite a bigger drop in large retailer sales than expected at -9.6%. The Japanese government said on Dec. 25 that its 7.2 trillion yen ($78.8 billion) stimulus package unveiled earlier this month would probably boost GDP by 0.7% in 2010 and create about 200,000 jobs.

In China, the estimate of 2008 GDP was upwardly adjusted to 9.6% from 9.0% and the government said this year’s previously reported quarterly figures will also increase. Chinese Premier Wen Jiabao reiterated the desire to cool property prices, saying that “property prices have risen too quickly in some areas and we should use taxes and loan interest rates to stabilize them,” while maintaining a “moderately loose” monetary policy and a “proactive” fiscal stance, saying it would be a mistake to withdraw stimulus too quickly. Wen added that China will “absolutely not yield” to calls to allow the yuan to appreciate. Despite the property comments, shares of Chinese property stocks rose, and the Shanghai Composite increased 1.5%. Prices of property were also on the mind of investors in Hong Kong, after the city’s government sold two sites at prices below market expectations, and the Hang Seng Index was the only major equity benchmark in Asia to decline, falling 0.2%, while Australia’s S&P/ASX 200 Index rose 1.1% and South Korea’s Kospi Index increased 0.2%. In equity news, China Mobile (CHL $45) erased early losses and gained 0.3% despite a report that the company’s Vice Chairman was being investigated by the government in connection with an unspecified “serious disciplinary breach.”