Morning Market Update

Bulls Hoping for Early Fireworks to Kick Off Q3

US equities are higher in early action, as traders anxiously await the release of the ISM Manufacturing Index later this morning, as well as data on consumer sentiment. The markets are looking to extend a four-day rally that closed out the second quarter, ahead of the holiday weekend. In equity news, Darden Restaurants matched the Street’s EPS and revenue expectations, while Blackboard agreed to be acquired by an investor group led by Providence Equity Partners for about $1.64 billion. Overseas, Asian stocks finished modestly higher, despite indications of a slowdown in manufacturing in China, while European markets are mostly flat.

As of 8:55 a.m. ET, the September S&P 500 Index Globex future is 1 point above fair value, the Nasdaq 100 Index is 2points above fair value, and the DJIA is 17 points above fair value. WTI crude oil is $1.33 lower at $94.09 per barrel, and the Bloomberg gold spot price is down $11.80 at $1,488.38 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.1% at 74.47.

Darden Restaurants Inc. (DRI $50) announced fiscal 4Q EPS of $1.00, matching the Street’s expectation, as revenues rose 6.8% y/y to $2.0 billion, also inline with analysts’ forecasts. The parent of Olive Garden and Red Lobster said its same-restaurant sales-sales at restaurants open at least a year-increased 2.2% y/y. DRI gave a positive outlook for the next fiscal year that exceeded analysts’ expectations, but its shares traded lower on a weak showing at its Olive Garden restaurant.

In M&A news, Blackboard Inc. (BBBB $43) announced that it has agreed to be acquired by an investor group led by affiliates of Providence Equity Partners in an all-cash transaction valued at around $1.64 billion. The purchase price represents a 21% premium over the April 18th, 2011 closing price of BBBB, the day the company publicly announced that it was evaluation strategic alternatives.

Reads on manufacturing and consumer sentiment due out later this morning

Later this morning, the US economic calendar will bring a look at service-sector activity for June, in the form of the ISM Manufacturing Index, expected to fall from 53.5 in May to 51.8, remaining above the 50 level that denotes expansion. Additionally, construction spending will be released, expected to rise 0.1% month-over-month (m/m) in May, and the final reading of the University of Michigan’s Consumer Sentiment Index, forecasted to be revised up to 72.0 from the initial reading of 71.8.

Europe flat as four-day rally stalls

Equity markets across the pond are mostly unchanged in afternoon action, as the sentiment boost from the Greek austerity plan earlier this week begins to fade and focus shifts back to the global economic recovery. Following the global trend, focus is on manufacturing data, which slowed in June, particularly in the region’s weaker economies. The final revision to the eurozone’s PMI manufacturing report was unchanged, while figures from Italy and Germany were slightly below expectations and the French number met estimates. Meanwhile, factory production in the UK ticked slightly higher in June.

In equity news in the region, shares of Vodafone (VOD $27) are lower after the company warned that the tax bill for its 2007 acquisition of Hutchison Essar could double, from $2.5 billion to nearly $5 billion.

The UK FTSE 100 Index is up 0.4%, France’s CAC-40 Index is flat, Germany’s DAX Index is 0.1% higher, and Italy’s FTSE MIB Index is 0.3% to the upside.

Asia mostly higher amid a slew of manufacturing reports

Stocks in Asia finished modestly to the upside, as mostly positive economic data and leftover enthusiasm from the Greek austerity plan helped lift sentiment, although gains were tempered by some cautious manufacturing reports out of the region. China’s PMI data came in weaker-than-expected, as the factory sector grew at its slowest pace in 28 months in June on weak demand abroad. The report helped guide the Shanghai Composite Index 0.1% lower and also weighed on Australian stocks, as did a 0.2% drop in new home sales, leading the S&P/ASX 200 Index 0.4% to the downside. Elsewhere, PMI manufacturing in Taiwan fell below the 50-point level that denotes expansion, while South Korea saw only a slight decrease in its manufacturing figure and a widening in its trade balance. Economic data out of Japan was mixed, as the Tankan index of sentiment at large manufacturers showed companies plan to increase hiring an investment, as the country continues to recover from the March earthquake and tsunami. Additionally, household spending declined more than expectations, while the jobless rate saw an unexpected decline and the May CPI was flat on a month over month basis. The Nikkei 225 Index posted a modest 0.5% gain, Taiwan’s Taiex Index rose 1.0%, while the BSE Sensex 30 Index fell 0.4%.