Morning Update

In the Green as Data Floods the Scene

Stocks are higher in morning action, as overseas markets are advancing, led by Europe after the Bank of England left its key lending rate unchanged—joining the European Central Bank—but expanded its bond purchase program by more than $80 billion. Also, a much larger-than-expected drop in weekly initial jobless claims is also helping extend gains in early action. The aforementioned favorable sentiment is helping limit the sting from Cisco Systems' cautious commentary that followed its better-than-expected profit report, and some generally disappointing same-store sales announcements for July by the nation's retailers in the US. Elsewhere, Comcast topped its earnings expectations. Treasuries have turned lower after giving up gains following the jobs report.

As of 8:51 a.m. ET, the September S&P 500 Index Globex futures contract is 5 points above fair value, the Nasdaq 100 Index is 5 points above fair value, and the DJIA is 49 points above fair value. Crude oil is down $0.33 at $71.64 per barrel, and gold is up $5.63 at $969.08 per ounce.

Dow member Cisco Systems (CSCO $22) reported fiscal 4Q EPS of $0.31, two cents above the Reuters estimate, as revenues fell 18% versus last year to $8.5 billion, roughly in line with the Street's consensus. The networking company said its saw a number of positive signs this quarter in the economy and its business, especially comparing its sequential quarter-over-quarter order trends. However, shares are under pressure as the company's CEO John Chambers sounded a cautious tone regarding its outlook.

Comcast Corp. (CMCSA $15) posted 2Q EPS of $0.33, above the Street's forecast of $0.26, with revenues increasing 4.5% to $8.9 billion, above analysts' expectations that called for the company to report sales of $8.8 billion. The company said it delivered solid results, driven by the strength of its subscription business and its continued focus on expense and capital management.

Target (TGT $42) reported July same-store sales dropped 6.5%, inline with its internal forecast but a larger decrease than the Reuters estimate, which called for the company to record a 5.8% decline. TGT said, "While our sales remain challenging, we continue to experience favorable gross margin performance within categories and disciplined expense control in our retail segment, as well as modestly improving risk trends in our credit card segment."

Costco (COST $49) reported July same-store sales fell 7%, a larger decline than the Reuters estimate, which called for the company to record a 6.7% decline.

Macy's (M $14) reported same-store sales dropped 10.7% in July, versus the Street's forecast, which called for the company to post a 9.1% decline. The department store issued 2Q EPS ex-items guidance that topped analysts' forecasts.

Gap, Inc. (GPS $17) said its same-store sales fell 8% for the month of July, which was better than the 8.5% drop that the Street had forecasted, as the retailer said its merchandise margins were "significantly" above last year.

Jobless claims fall, but continuing claims rise to snap streak of declines

Weekly initial jobless claims fell 38,000 to 550,000, versus last week's figure that was upwardly revised by 4,000 to 588,000. The Bloomberg consensus called for claims to reach 580,000. The four-week moving average declined for a sixth-straight week, falling by 4,750 to 555,250. Continuing claims failed to drop for a fourth-consecutive week, rising by 69,000 to 6,310,000, versus the forecast of 6,250,000. Treasuries have turned lower after relinquishing early gains following the report.

Financial sector supporting advance in Europe, key eurozone rate decisions announced

Stocks in Europe are higher in afternoon action, led by strength in the financial sector on a plethora of upbeat earnings reports, highlighted by Belgium bank KBC Groep (KBCSF $24), which is up almost 18% after posting a surprise profit on favorable credit spreads. In other equity news across the pond, shares of Unilever (UL $26) are nicely higher after the world's second-largest consumer goods maker said its western European sales performance bested the forecasts of analysts surveyed by Bloomberg.

The economic front is in focus, as a report showed factory orders in Germany—Europe's largest economy—jumped 4.5%, compared to the 0.6% Bloomberg forecast, helping support the eurozone advance. Also, some key central banks announced their interest rate decisions, beginning with the Bank of England, which left its key lending rate unchanged at 0.5%, as expected, but announced that it will increase its bond purchase program—its unconventional measures to try to stem the recession—by 50 billion pounds ($84 billion) and saying the UK recession is deeper than policymakers expected. Elsewhere, the European Central Bank also held its key interest rate steady, keeping it at 1.0%, and traders are paying attention to the press conference, which followed the announcement, held by ECB chief Jean-Claude Trichet for comments on the economy, inflation, and any changes to their stimulus efforts to try to stoke economic growth.

Asia advances but China stalls

Stocks in Asia were mostly higher as commodity-related issues led the way on higher resource prices, and on upbeat employment data in Australia. However, shares in China did not participate in the advance, with the Shanghai Composite Index falling 2%, led by declines in the financial sector on lending concerns after the central bank said it will fine-tune monetary policy and ensure "appropriate" lending growth. Japan's Nikkei 225 Index rose 1.3% and shares of Nippon Telegraph & Telephone Corp. (NTT $21) posted a solid advance after the number one Japanese phone operator said quarterly operating profits at its fixed-line units jumped by at least 76%. But shares of Nikon Corp. (NINOY $180) fell 10% after the camera maker forecasted a wider full-year loss when it announced a net loss for the quarter ended June 30. Hong Kong's Hang Seng Index rose 2%, despite a 3.6% drop in shares of Cathay Pacific Airways (CPCAY $8) when it said sales slumped 27% in the first half of the year and that business conditions had not improved. Elsewhere, Australia's S&P/ASX 200 Index rose 1.5% to help the advance in the Asia/Pacific region on a jump in shares of Alumina (AWC $6), who has a partnership with Dow member Alcoa (AA $13) to produce material used to produce aluminum, after it posted a smaller-than-expected loss for the first half of the year. Also, sentiment in Australia was boosted by a favorable labor report, which showed the number of people employed unexpectedly rose, and the jobless rate came in lower than expected, holding at 5.8%, versus the 6.0% that economists surveyed by Bloomberg had anticipated.