Morning Market Update

Higher As Tech Earnings and Cool Inflation Support Sentiment

The US equity markets are higher in morning action on the heels of better-than-expected earnings results from Oracle Corp and Research in Motion, which are teaming up with a cooler-than-forecasted reading of core consumer prices to help stocks advance. Also, a $7.5 billion increase in a share repurchase program and increased dividend by Texas Instruments Inc is adding to the support for the tech sector and the early advance in the equity markets. Treasuries are higher following the inflation data, while a read on consumer sentiment is on the horizon. Meanwhile, it is quadruple witching day—the simultaneous expiration of multiple forms of options and futures contracts—which could add to some of the volatility at the beginning and end of the session. Overseas, Asia was mostly higher as the Japanese yen is holding onto its losses that came after the government intervention on Wednesday, while Europe is mixed as financials are weaker to limit some enthusiasm in the tech sector and amid some M&A news.

As of 8:54 a.m. ET, the December S&P 500 Index Globex future is 5 points above fair value, the Nasdaq 100 Index is 9 points above fair value, while the DJIA is 44 points above fair value. Crude oil is down $0.07 at $74.50 per barrel, and the Bloomberg gold spot price is up $1.85 at $1,277.10 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is flat at 81.23.

Oracle Corp. (ORCL $25) posted fiscal 1Q EPS ex-items of $0.42, five pennies above the Reuters estimate, with revenues jumping 50% year-over-year (y/y) to $7.6 billion, above the $7.3 billion that analysts were expecting. The business software company said its software business grew strongly in all regions with new license sales up 25%, while its hardware business also grew faster than it anticipated.

Research in Motion (RIMM $46) announced 2Q EPS of $1.46, ten cents above the Street’s expectations, with revenues rising 31% y/y to $4.6 billion, above the $4.5 billion that analysts forecasted. The company said it added about 4.5 million new BlackBerry subscriber accounts, while it set a new record with over 12 million BlackBerry smartphone shipments. RIMM said its expects a continuation of this momentum in 3Q as it extends and rolls out new products as it heads into the holiday buying season. The company issued 3Q guidance above analysts’ forecasts.

Texas Instruments Inc. (TXN $25) reported that its Board of Directors authorized the company to repurchase an additional $7.5 billion of its common stock and it will repurchase shares at times and prices considered appropriate by the company. Additionally, TXN said it plans to raise its quarterly cash dividend by $0.01 per share to $0.13.

Consumer prices remain in check, consumer sentiment read on deck

The Consumer Price Index showed prices at the consumer level were up 0.3% in August month-over-month (m/m), matching the forecasted gain by economists surveyed by Bloomberg, as well as the increase seen in July. Meanwhile, the core rate, which strips out food and energy, was flat in August, after rising 0.1% in July, and compared to estimates calling for a 0.1% gain. On a year-over-year basis, consumer prices were up 1.1% in August, down from the 1.2% rate in July, and the core CPI was 0.9% higher y/y, after rising by the same amount in July. Treasuries are higher after the report.

Later this morning, the preliminary University of Michigan Consumer Sentiment Index for September will be released, expected to increase to 70.0 from a previous reading of 68.9, although still below the 89 average in the five years leading up to the recession (economic calendar).

Europe mixed despite M&A news and rising technology issues

Stocks in Europe are mixed in afternoon action, with the technology sector getting support from the favorable earnings from Oracle Inc and Research in Motion, while news that a sizeable M&A deal may be in the offing is helping boost sentiment in the biotech sector. However, financials and oil & gas issues are lagging behind to bog down the advance. Shares of Crucell NV (CRXL $21) are up over 50% after Dow member Johnson & Johnson (JNJ $61) said it is in advanced talks to offer 1.75 billion euros ($2.3 billion) to acquire the remaining shares it does not already own in the Dutch biotech firm. In other equity news, shares of Carrefour SA (CRERY $10) are solidly higher after the French retailer said it will spend 1.5 billion euros ($1.96 billion) to revamp its largest stores in Europe.

In economic news across the pond, German producer prices came in unexpectedly flat m/m in August, compared to the 0.3% increase the was forecasted by economists, euro-zone construction output fell in July, while the euro-area’s current account surplus more than doubled in July, and Italy’s m/m industrial orders fell much more than expected in July.

The UK FTSE 100 Index is 0.2% higher and France’s CAC-40 Index is up 0.1%, while Germany’s DAX Index is declining 0.1% and Italy’s FTSE MIB Index is falling 0.5%.

Asia mostly higher as yen maintains weakness and yuan rises

Stocks in Asia were mostly higher on the heels of the aforementioned better-than-expected earnings reports from some major North American technology firms, which boosted shares in the sector, and as some favorable currency moves in the region buoyed sentiment. Japan’s Nikkei 225 Index rose 1.2% supported by export issues on eased concerns about the recent surge in the Japanese yen versus the US dollar and other major currencies—and its impact on overseas profits—as the Asian currency remains near the levels that followed Wednesday’s government intervention. The Japanese government sold the yen to help try arrest the strong advance in the Asian currency, which was threatening the nation’s economy, and yesterday, Japan’s Prime Minister Kan reiterated that the country will continue to intervene in the market when necessary, per Dow Jones Newswires. In other currency moves, the Chinese yuan posted the best weekly gain versus the US dollar since May 2008, per Bloomberg, and shares of Hong Kong companies that rely on business in China helped the Hang Seng Index increase 1.3%, but the Shanghai Composite Index dipped 0.2% in lighter-than-usual volume ahead of long holiday’s in China the loom on the horizon.

Meanwhile, a the optimism in the tech sector and a solid rise in shares of LG Electronics helped South Korea’s Kospi Index gain 0.9% after the world’s third largest mobile-phone maker announced the replacement of its CEO. Elsewhere, Australia’s S&P/ASX 200 Index rose 0.7%, India’s BSE Sensex 30 Index increased 0.9%, and Taiwan’s Taiex Index gained 0.7%. The economic news was relatively light, with Japan announcing that its department store sales fell 3.2% y/y in August, while South Korea’s department store sales rose 8.5% y/y in August.