Morning Market Update

Early Gains Wane as Street Digests Inline Labor Report

The US equity markets are modestly lower in early action following the nonfarm payroll report, which showed jobs grew by an amount that was roughly inline with expectations, although the unemployment rate ticked lower again. Stocks gave up early gains in reaction to the data, suggesting traders expected a larger increase in jobs in the wake of stronger-than-anticipated employment reports that preceded today’s release. Treasuries are modestly lower after the jobs data. In equity news, Dow member Wal-Mart Stores Inc increased its annual dividend by 21%, and chip maker Marvell Technology Group Ltd posted 4Q earnings and revenues that missed the Street’s forecast. Overseas, Asia moved higher on economic optimism following upbeat data in the US yesterday, and European stocks are higher in the wake of yesterday’s signal from the European Central Bank that it may raise rates next month.

As of 8:42 a.m. ET, the March S&P 500 Index Globex future is 1 point below fair value, the Nasdaq 100 Index is 3 points below fair value, and the DJIA is 4 points below fair value. Crude oil is $1.27 higher at $103.18 per barrel, and the Bloomberg gold spot price is up $4.90 at $1,420.91 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is unchanged at 76.45.

Dow member Wal-Mart Stores Inc. (WMT $52) announced that its Board of Directors has approved a 21% increase in the company’s annual dividend to $1.46 per share, to be paid out in quarterly installments of $0.3650 per share. The world’s largest retailer said, “We continue to generate ample free cash flow to fund store growth across all our markets, make strategic acquisitions and deliver returns to shareholders through dividends and share repurchase.” The company added that its underlying operations around the world “remain strong.”

In earnings news, Marvell Technology Group Ltd. (MRVL $18) reported 4Q earnings ex-items of $0.40 per share, one penny short of the consensus estimate of analysts surveyed by Reuters, with revenues growing 7% year-over-year (y/y) to $901 million, also shy of the $928 million that the Street had expected. The communications chip maker said 4Q results were affected by seasonal declines in its mobile and wireless end markets, but it is “well positioned” to take advantage of the trends in the coming years.

Nonfarm payrolls rise roughly inline with forecasts, but unemployment rate declines

Nonfarm payrolls rose by 192,000 jobs in February, compared to the consensus estimate of economists surveyed by Bloomberg, which forecasted a 196,000 increase, and the initial 36,000 gain seen in January was revised to growth of 63,000 jobs. Additionally, excluding government hiring and firing, private sector payrolls increased by 222,000, versus the forecast of a gain of 200,000, after expanding by an upwardly revised 68,000—from an initially reported 50,000 gain—in January. The unemployment rate fell again, declining from 9.0% to 8.9%, compared to expectations for the rate to increase modestly to 9.1%. Average hourly earnings were unchanged month-over-month (m/m), versus the Street's forecast of a 0.2% increase, and average weekly hours were also flat at 34.2, versus expectations of the figure to increase to 34.3.

Treasuries are modestly lower following the employment data, with the yield on the two-year note unchanged at 0.76%, while the yield on the 10-year note is 1 bp higher at 3.56%, and the 30-year bond yield is up 2 bps to 4.64%.

Later this morning, the economic calendar will yield the release of factory orders, forecasted to rise 2.0% m/m in January, after increasing 0.2% in December.

Europe gaining ground on upbeat corporate news and economic enthusiasm

The equity markets are higher in afternoon action, led by healthcare and oil & gas issues, buoyed by some favorable news from the corporate front and continuing economic optimism, which are overshadowing lingering anti-government unrest in Libya and yesterday’s signal of a rate hike by the European Central Bank. Economic news across the pond is light, with a larger-than-expected decline in UK home prices the lone report worth noting, and traders are reacting modestly to the mostly inline US nonfarm payroll report.

In equity news, shares of Hermes International (HESAY $21) are higher after the handbag maker posted better-than-forecasted operating profits, and SBM Offshore (SBFFY $26) is gaining solid ground after the floating oil rig maker reported earnings that exceeded expectations. Elsewhere, Areva (ARVCY $5) is nicely higher after the nuclear fuel and services provider said the company does not need to raise additional capital.

The UK FTSE 100 Index is 0.6% higher, France’s CAC-40 Index is gaining 0.3%, and Germany’s DAX Index is rising 0.7%.

Asia broadly higher on economic optimism

Stocks in Asia finished higher as oil prices took a breather from its recent surge and favorable US economic data helped support sentiment. Japan’s Nikkei 225 Index rose 1.0%, led by strength in export issues as the Japanese yen weakened against the US dollar and the euro following the positive jobless claims and service sector activity data in the US and as the European Central Bank signaled it may raise rates next month. Commodities gained ground on increased optimism regarding the global economy, helping Australian stocks gain ground, as the S&P/ASX 200 Index increased 1.2%, while the South Korean market posted a strong advance, with the Kospi Index rising 1.7% to pace the advance in the region. Moreover, equity markets in China contributed to the broad-based upward move, as the Shanghai Composite Index increased 1.4% and the Hong Kong Hang Seng Index advanced 1.2%. However, stocks in India did not contribute to the gains in Asia, as the BSE Sensex 30 Index finished flat.