Morning Market Update

Earnings Continue to Boost Investors’ Bottom Lines

Despite a smaller-than-forecasted decline in weekly initial jobless claims, US stocks remain higher in early action ahead of the three-day Easter holiday weekend, as another plethora of favorable earnings reports are buoying sentiment. Apple Inc easily topped the Street’s earnings and revenues forecasts, while Dow members General Electric Co and Travelers Companies Inc complimented their forecast-topping profit reports by announcing dividend increases. Elsewhere, Dow components DuPont, McDonald’s Corp, and Verizon Communications Inc also achieved earnings that were above analysts’ expectations. Finally, Morgan Stanley posted profits that bested the Street’s projections. Treasuries are mostly higher in morning action following the employment and earnings data, ahead of reads on Mid-Atlantic manufacturing activity and leading indicators. Overseas, Asia was broadly higher on the heels of yesterday’s earnings-fueled advance in the US, while some upbeat earnings releases are helping European markets gain ground.

As of 8:49 a.m. ET, the June S&P 500 Index Globex future is 7 points above fair value, the Nasdaq 100 Index is 20 points above fair value, and the DJIA is 32 points above fair value. WTI crude oil is $0.28 higher at $111.73 per barrel, and the Bloomberg gold spot price is up $1.65 at $1,504.05 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.5% at 73.95.

Apple Inc. (AAPL $342) reported fiscal 2Q EPS of $6.40, well above the $5.38 consensus estimate of analysts surveyed by Reuters, with revenues jumping over 80% year-over-year (y/y) to $24.7 billion, topping the $23.4 billion that the Street was looking for. In typical AAPL fashion, the company issued conservative guidance, with its 3Q outlook coming in below expectations.

Dow member General Electric Co. (GE $20 ¹) announced 1Q EPS ex-items of $0.33, five cents above the Street’s expectations, with revenues increasing 6% y/y to $38.4 billion, easily beating the $34.6 billion that analysts forecasted. Additionally, GE announced that it raised its quarterly dividend by $0.01 per share to $0.15.

Travelers Companies Inc. (TRV $59) posted 1Q EPS ex-items of $1.89, north of the $1.52 that analysts projected, as revenues increased 4% y/y to $5.4 billion, compared to the expectation of $5.3 billion. The Dow member also announced that it has raised its quarterly dividend by 14% to $0.41 per share.

DuPont (DD $55) achieved $1.52 per share in 1Q earnings, exceeding the $1.36 that the Street anticipated, with sales increasing 18% y/y to $10.0 billion, versus the $9.2 billion that analysts forecasted. The Dow component also raised its full-year EPS outlook.

Dow member McDonald’s Corp. (MCD $78) reported 1Q profits of $1.15 per share, compared to the $1.14 that analysts were expecting, as revenues rose 9% y/y to $6.1 billion, above the $6.0 billion that was forecasted on the Street. Global same-store sales—sales at stores open at least a year—increased 4.2% y/y.

Verizon Communications Inc. (VZ $38) posted 1Q EPS of $0.51, one penny above analysts’ projections, with revenues roughly flat y/y at $27.0 billion, slightly above the $26.9 billion that the Street estimated. The Dow component said it is on track to meet its revenue and earnings objectives for the year.

Morgan Stanley (MS $26) announced 1Q EPS, excluding a discrete tax item and a loss in a Japanese securities joint venture, of $0.46, compared to the $0.34 that analysts were looking for, but revenues declined 16.5% y/y to $7.6 billion, compared to the $7.7 billion that the Street forecasted.

Jobless claims decline, Philly Fed and leading indicators data later this morning

Weekly initial jobless claims declined by 13,000 to 403,000, versus last week's figure which was upwardly revised by 4,000 to 416,000, but were above the 390,000 level that economists surveyed by Bloomberg had expected. The four-week moving average, considered a smoother look at the trend in claims, rose by 2,250 to 399,000, while continuing claims dipped by 7,000 to 3,695,000, above the forecast of economists, which called for continuing claims to come in at 3,675,000.

Treasuries are mostly higher in morning action following the employment and corporate earnings data, with the yield on the two-year note nearly unchanged at 0.66%, while the yields on the 10-year note and the 30-year bond are declining 3 bps to 3.38% and 4.43%, respectively.

Later this morning, the economic calendar will yield the releases of the Philadelphia Fed Manufacturing Index, forecasted to decline from 43.4 in March to 36.8 in April, and the Index of Leading Economic Indicators, expected to increase 0.3% in March.

Please note that all US markets will be closed tomorrow in observance of the Good Friday holiday.

Europe higher as earnings optimism continues

The equity markets in Europe are higher in afternoon action, led by strength in financials, basic materials, and technology as better-than-forecasted earnings reports continue to poor in from the US and across the pond. Shares of Nokia Corp. (NOK $9) are solidly higher after the mobile phone maker posted larger-than-expected earnings and sales that also exceeded forecasts. Meanwhile, shares of Akzo Nobel (AKZOY $73) are posting sizable gains after the world’s largest paint maker, per Bloomberg, reported profits that were above analysts’ projections.

However, gains may be being limited by a report that showed business confidence in Germany—Europe’s largest economy—declined for a second-straight month in April, with the Ifo Business Climate Index declining to 110.4 from 111.1 in March, compared to the drop to 110.5 that economists forecasted. The two consecutive monthly drops came after reaching a record high in February, as concerns about the impact of higher oil prices dampened sentiment. But there were some favorable reports that were released in the region, as UK retail sales unexpectedly increased month-over-month (m/m) in March, while a separate report showed UK public sector net borrowing rose at a level below forecasts.

The UK FTSE 100 Index is 0.1% higher, France’s CAC-40 Index is gaining 0.6%, and Germany’s DAX Index is rising 0.8%. European markets will be closed tomorrow, per Bloomberg.

Asia boosted by earnings rally in the US

Stocks in Asia finished broadly higher following the solid advance posted in the US yesterday, which was fueled by a plethora of favorable earnings reports, highlighted by results from the tech sector, which was one of the best performers in today’s session. Japan’s Nikkei 225 Index rose 0.8% but gains were somewhat limited by continued uneasiness about the impact on production and supply of the massive earthquake and tsunami that hit the nation in March. Per Reuters, Bank of Japan Governor Mishimura said that supply constraints resulting from the natural disaster are likely to ease around autumn and beyond. South Korea’s Kospi Index posted another record high on the strength in technology issues, gaining 1.3%, also aided by gains in oil refinery stocks. Meanwhile, commodity stocks gained ground on the optimism in the US and the global economy, helping Australia’s S&P/ASX 200 Index increase 1.1%, despite a report that showed the nation’s 1Q producer prices came in hotter than economists’ forecasts. Finally, Chinese equity markets were also higher, as the Hong Kong Hang Seng Index rose 1.0% and the Shanghai Composite Index advanced 0.7%. According to Bloomberg, several markets in Asia, including Australia, Hong Kong, India and New Zealand, will be closed tomorrow.