Morning Market Update

Trying to Stabilize After Friday’s Slide

Stocks are modestly higher in morning action as the bulls are licking their wounds from Friday’s steep decline that came from the announcement the Hungary is being threatened by elevated debt levels and on a separate report that showed the amount of US jobs added to payrolls came in well below economists’ forecasts. Treasuries are lower in early action as the equity markets rebound, and amid a relatively light economic calendar. Equity news is also relatively light, with Sprint Nextel Corp announcing that its 4G phone sales posted a record day, and Talecris Biotherapeutics Holdings Corp announcing that it has signed a definitive agreement to be acquired by Spain’s Grifols SA for approximately $3.4 billion. Overseas, Asian markets tumbled and Europe is modestly lower after coming well off of the worst levels of the day.

As of 8:50 a.m. ET, the June S&P 500 Index Globex future is 5 points above fair value, the Nasdaq 100 Index is 10 points above fair value, and the DJIA is 42 points above fair value. Crude oil is down $0.04 at $71.47 per barrel, and the Bloomberg gold spot price is down $5.90 at $1,214.00 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is flat at 88.24.

Sprint Nextel Corp. (S $5) announced that its sales on Friday of its 4G phone named EVO, which is made by HTC Corp. (HTCKF $43), marked the largest quantity of a single phone sold in one day ever for Sprint. The company said the record pace of sales led to temporary shortages of the device at some of its sales locations across the US.

In M&A news, US firm Talecris Biotherapeutics Holdings Corp. (TLCR $16) announced that it has signed a definitive agreement to be acquired by Spain’s Grifols SA (GIFLY $9) for a combination of cash and GIFLY shares, for approximately $3.4 billion. The deal is expected to create a vertically integrated and diversified international plasma protein therapies company.

Economic calendar light in the first half of the day, and week

Treasuries are lower in morning action as the equity markets are modestly higher and there are no major economic reports due out in the first half of today’s trading session (economic calendar). However, consumer credit will be released in the final hour of trading today, expected to contract by $2 billion in April following a $2 billion rise that was seen in March.

The economic docket will not heat up until Wednesday, with the afternoon release of the Beige Book, wherein Fed staffers summarize anecdotal economic data from all twelve Federal Reserve districts in preparation for the next Federal Open Market Committee (FOMC) meeting scheduled for June 22-23, and is used as an input to the Fed’s decision on whether to make any changes in monetary policy. The prior report showed a broadening of economic recovery, with bright spots in retail and vehicle sales and tourism, while the overall services sector was seen as mixed. Manufacturing was noted on the rebound, and housing activity had increased. Meanwhile, commercial real estate and banking were seen as weak sectors.

Meanwhile, the other headlining economic event will come in the form of advance retail sales for May, set to be released on Friday, forecasted to advance by 0.2% month-over-month (m/m), after growing 0.4% in April, while sales ex-autos are estimated to increase 0.1% in May, on the heels of a rise of 0.4% in April. Same-store sales results —sales at stores open at least a year—reported by retailers were hampered by weather, while a shift of the Memorial Day holiday into May distorted results. The retail sales report includes spending at supermarkets and gas stations.

Other releases on this week’s economic calendar include, wholesale inventories, MBA Mortgage Applications, initial jobless claims, business inventories and the University of Michigan consumer sentiment survey.

Europe modestly lower as debt fears linger

Stocks in Europe are slightly lower in afternoon trading as the euro-area debt crisis remains in focus, exacerbated by Friday’s news that Hungary may be the latest nation to fall victim to suffocation of elevated debt levels. However, financials are modestly higher to help the major equity markets across the pond come off of the worst levels of the day, along with some favorable data out of Germany—Europe’s largest economy. German factory orders unexpectedly rose, jumping 2.8% m/m in April, on top of March’s strong upwardly revised 5.1% increase and compared to the 0.4% decline that economists had expected. In other economic news in the region, the meeting of G20 nations over the weekend did not provide any major new developments on the euro-area debt crisis and the continuation of the global economic recovery, but noted that the global economic rebound faces “significant challenges.” Also, France said many of the G20 nations are in favor of a tax on banks and details could be revealed over the next few weeks, per CNBC. Meanwhile, Germany is discussing measures to rein the nation’s deficit, including measures to cut social welfare benefits, public sector job cuts, and tax hikes.

The UK FTSE 100 Index is 0.2% lower, France’s CAC-40 Index is off 0.1%, Germany’s DAX Index is advancing 0.2%, and Spain’s IBEX 35 index is up 0.1%, while Hungary’s Budapest Stock Exchange Index is sliding 1.5% and Greece’s Athex Composite Index is dropping 3.8%.

Asia falls on disappointing US jobs data and continued euro troubles

Stocks in Asia finished solidly lower across the board on the heels of the unfavorable jobs data out of the US and amid more uneasiness toward the euro-area debt crisis. Japan’s Nikkei 225 Index fell 3.8% as the strength in the yen on flight-to-safety buying, which hit an eight-year high versus the euro, dampened the outlook for revenues of companies that rely heavily on sales outside Japan, adding to the uneasy sentiment in the region. China shares also came under pressure with Hong Kong’s Hang Seng Index falling 2.0% and the Shanghai Composite Index declining 1.6% following the steep losses in the US and euro-area on Friday. Meanwhile, Australia’s S&P/ASX 200 Index fell 2.8%, led by weakness in resources and metals issues on concerns toward the global economic recovery and the impact a slowdown could have on demand for commodities. The decline in Australia came despite a solid increase in job advertisements for May, which followed a decline in April. In other economic news, Taiwan’s consumer prices rose less than expected and its trade surplus expanded by more than anticipated. Taiwan’s Taiex Index fell 2.5%. Elsewhere, South Korea’s Kospi Index was 1.6% lower, and India’s BSE Sensex 30 Index dropped 2.0%.