Morning Market Update

Markets Moving Upward in Morning Action

The US equity markets are higher in early action with concerns about the euro-area debt crisis relatively subdued ahead of a key confidence vote in Greece, which could help clear up some uncertainty regarding a default of the debt-troubled nation. Treasuries are modestly lower amid the morning advance in stocks, ahead of the release of existing home sales and the beginning of the Federal Reserve’s monetary policy meeting. In equity news, Walgreen Co topped the Street’s profit expectations, but announced that it is not planning on being part of Express Scripts Inc’s pharmacy provider network, while CVS Caremark Corp announced that it has been selected to administer prescription drug benefits for the California Public Employees’ Retirement System. Overseas, Asia finished broadly higher ahead of the Fed’s meeting and the vote in Greece, while European equities are nicely higher in afternoon action, despite a disappointing read on German economic sentiment.

As of 8:51 a.m. ET, the September S&P 500 Index Globex future is 6 points above fair value, the Nasdaq 100 Index is 8 points above fair value, and the DJIA is 41 points above fair value. WTI crude oil is $0.98 higher at $94.61 per barrel, and the Bloomberg gold spot price is up $3.23 at $1,543.83 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.3% at 74.76.

Walgreen Co. (WAG $45) reported fiscal 3Q earnings of $0.65 per share, above the $0.63 consensus estimate of analysts surveyed by Reuters, with revenues rising 6.8% year-over-year (y/y) to $18.4 billion, inline with the Street’s forecast. The pharmacy retailer said its same-store sales---sales at stores open at least a year—increased 4.1% y/y. However, shares are under pressure after the company also announced that renewal negotiations with pharmacy benefit manager Express Scripts Inc. (ESRX $55) “have been unsuccessful,” and as a result, WAG is planning not to be part of ESRX’s pharmacy provider network as of January 1, 2012.

In related industry news, CVS Caremark Corp. (CVS $37) announced that the California Public Employees’ Retirement System has selected the company to administer prescription drug benefits for more than 346,000 members of the pension plan. The deal is a three-year contract that represents about $565 million in annual drug spending.

Existing home sales after the opening bell, while Fed is set to begin policy meeting

Treasuries are mostly lower in early action as there are no major US economic reports scheduled for release before the opening bell, with the yield on the 2-year note up 2 bps to 0.39%, while the yields on the 10-year note and the 30-year bond are 1 bp higher at 2.97% and 4.21%, respectively.

After the opening bell, existing home sales will be reported, forecasted to fall 5.0% month-over-month (m/m) to an annual rate of 4.80 million units in May, after declining to an annual rate of 5.05 million units in April.

Elsewhere, the Federal Open Market Committee’s (FOMC) two-day monetary policy meeting is set to begin today. No major changes to the Fed’s stance are expected and the statement will be released at its new time at 12:30 p.m. EST tomorrow, followed by the post-statement news conference and Q&A session led by Fed Chair Ben Bernanke beginning at 2:15 p.m. EST.

Europe gains ground as Greek leader faces a vote

The equity markets in Europe are nicely higher in afternoon action amid relative optimism that Greece will receive additional eurozone financial aid in time to meet its July debt obligations. However, Greek Prime Minister Papandreou faces a confidence vote tonight that could prove pivotal in Greece’s ability to implement tough austerity measures in order to qualify for further financial aid to the debt-laden nation. Meanwhile, stocks across the pond are showing some resiliency in the face of a larger-than-expected decline in a read on economic sentiment in Germany—Europe’s largest economy. The German ZEW Survey of Economic Sentiment fell to -9.0 in June, from 3.1 in May, compared to the decline to -3.0 that economists had expected. Elsewhere, some equity news is helping support stocks, with shares of Syngenta AG (SYT $64) moving higher after the chemical company offered a favorable outlook, and software firm Misys Plc. (MUSJF $6) is sharply higher after the company said it has received a preliminary approach that may or may not lead to a takeover offer. In other economic news, UK public sector net borrowing rose by a smaller-than-anticipated amount in May, but was nearly double the figure posted in April. Finally, fellow peripheral euro-area nation Spain, which is a key player in the eurozone debt crisis, conducted a debt auction that raised 3 billion euros, near the country’s maximum target, while yields ticked higher compared to previous bond auctions.

The UK FTSE 100 Index is 0.9% higher, France’s CAC-40 Index is gaining 1.3%, Germany’s DAX Index is advancing 1.0%, Spain’s IBEX 35 Index is rising 1.5%, and Greece’s Athex Composite Index is rallying 3.3%.

Asia higher to follow gains in the US

Stocks in Asia finished higher following the advance in the US yesterday and with no new developments surfacing regarding the debt crisis in Greece, keeping default concerns relatively subdued and fostering some bargain hunting in the region. However, traders remained cautious ahead on tonight’s confidence vote in Greece and tomorrow’s conclusion of the US Federal Reserve’s monetary policy meeting. Japan’s Nikkei 225 Index rose 1.1%, led by strength in automakers, despite a solid decline in shares of Tokyo Electric Power Co. (TKECY $5) after Moody’s Investors Service cut the credit rating of the operator of the nuclear facility that was damaged by the March earthquake and tsunami to junk status yesterday.

Meanwhile, mining and banking issues led Australia’s S&P/ASX 200 Index to a 1.3% advance, while a sharp gain in shares of Foster’s Group Ltd. (FBRWY $5) also contributed to the solid rise in the region, after Australia’s largest brewer rejected a A$9.5 billion ($10.1 billion) cash takeover offer from SABMiller Plc. (SBMRY $36). SABMiller said it will “continue to seek engagement” with the Australian beer maker, per Bloomberg, boosting expectations that a sweetened offer may be in the offing. In economic news, the Reserve Bank of Australia (RBA) released the minutes from its latest monetary policy meeting, which showed economic growth was forecasted to grow “somewhat above” trend over the next few years, and a gradual pick-up in inflation could be expected. The RBA added that this outlook suggested that further tightening in policy “would be necessary at some point.” Elsewhere, stocks in China moved nicely to the upside, with the Shanghai Composite Index gaining 1.0% and the Hong Kong Hang Seng Index rising 1.2%, led by construction stocks, while South Korea’s Kospi Index rose 1.4% on strength in technology and financial issues.