Morning Update

Sentiment Wanes on an Unexpected Rise in Jobless Claims

The equity markets were looking to open slightly higher on the heels of some favorable earnings reports, headlined by a sizeable beat by Goldman Sachs, and as China's 4Q GDP came in stronger than expected. However, stocks have moved modestly below the flatline in early trading after an unexpected increase in weekly initial jobless claims and as the upbeat sentiment that followed the strong data out China was tempered by concerns the Chinese central bank may need to further rein in its monetary policy, which could hamper the global economic recovery. Treasuries are slightly lower after paring losses following the jobs reports and ahead of a key report on business activity in Philadelphia and before the release of the Index of Leading Economic Indicators. In other equity news, Starbucks and eBay both topped the Street's profit projections. Overseas, Asia was mixed amid a plethora of economic data out of China, while Europe is modestly higher as traders digest a slew of PMI data.

As of 8:52 a.m. ET, the March S&P 500 Index Globex future is 2 points below fair value, the Nasdaq 100 Index is 1 point above fair value, and the DJIA is 15 points below fair value. Crude oil is up $0.11 at $77.85 per barrel, and the Bloomberg gold spot price is lower by $5.18 at $1,105.88 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is up 0.2% at 78.48.

Goldman Sachs (GS $168) reported 4Q EPS of $8.20, easily topping the estimate of Wall Street analysts, which expected the company to report earnings of $5.20 per share. Revenues were $9.6 billion, roughly inline with the $9.7 billion that the Street was expecting. The company's investment banking revenues rose 58% year-over-year (y/y) and 82% higher than 3Q, while its trading and principal investments fell from $10.03 billion last quarter to $6.41 billion in 4Q, but compared to negative net revenues of $4.36 billion in the same period last year. The company's CEO said despite significant economic headwinds, it is seeing signs of growth and remain focused on supporting that growth by helping companies raise capital and manage their risks.

Starbucks Corp. (SBUX $23) reported fiscal 1Q EPS ex-items of $0.33, topping the $0.28 forecast of analysts, with revenues increasing 4% to $2.7 billion, just above the $2.6 billion that was forecast. SBUX reported that its same-store sales-sales at stores open at least a year-rose 4%, driven by increased traffic and average ticket price. SBUX increased its full-year EPS outlook.

eBay (EBAY $22) posted 4Q EPS ex-items of $0.44, four cents above the Street's forecast, as revenues rose 16% y/y to $2.4 billion, slightly above the $2.3 billion that was expected by analysts. The company said it delivered double-digit revenue growth driven by exceptional performance at its PayPal unit and turnaround progress and momentum in its core eBay business. The company issued full-year EPS guidance that exceeded analysts' expectations.

Jobless claims rise, more data on tap

Weekly initial jobless claims unexpectedly rose, increasing by 36,000 to 482,000, versus last week's figure which was revised slightly higher to 446,000, and compared to the consensus, which called for claims to decrease to 440,000. The four-week moving average, considered a smoother look at the trend in claims, rose to 448,250 from 441,250, and continuing claims declined by 18,000 to 4,599,000, compared to the 4,598,000 forecast. Treasuries are modestly lower, paring losses following the report.

Just after the opening bell, the economic calendar will yield the Philadelphia Fed's Business Activity Index, expected to deteriorate slightly from an upwardly revised 22.5 in December to 18.0 in January, and the Index of Leading Economic Indicators, which is forecast to rise 0.7% in December, from a 0.9% gain in November.

Europe slightly higher amid heavy dose of data

Stocks in Europe are holding onto modest gains in afternoon action, as some favorable manufacturing data is helping limit weakness in industrials, materials, and financials on continued concerns that China may further rein in its monetary policy-exacerbated by today's strong data out of the Asian nation-and lingering concerns about the health of the sovereign debt of Greece. Headlining today's economic reports in the Euro area, the European Commission reported that its January advance reading of manufacturing PMI in the region moved further into expansionary territory, increasing from 51.6 in December to 52.0 in January, exceeding the 51.9 reading that economists surveyed by Bloomberg had anticipated. However, a similar report showed service sector business activity expansion slowed. Other reports across the pond included a larger than expected reading of manufacturing PMI in Germany-Europe's largest economy-while its growth in service sector activity slowed, and France's manufacturing PMI matched expectations and its services component missed expectations. In Eurozone central bank news, the European Central Bank reiterated that it will likely keep its record low interest rates at current levels after it said the Governing Council expects the Euro area economy to grow at a moderate pace in 2010.

On the equity front, shares of navigation device maker TomTom (TMOAF $9) are sharply lower after Nokia (NOK $13)-the world's largest mobile phone maker-reported that it will offer free navigation software for its phones.

Asia mixed as China output surges

Stocks in Asia were mixed as traders digested a plethora of economic reports out of China, headlined by the report on the country's 4Q GDP. The government reported that its real-inflation adjusted-4Q GDP jumped 10.7% year-over-year (y/y), above the 10.5% forecast of economists surveyed by Bloomberg, and following the upwardly revised 9.1% in 3Q. However, reaction in the Asia/Pacific region was mixed as the stronger-than-expected results increased speculation that the Chinese government may take more aggressive actions to fight an overheating of the economy, as Bloomberg is reporting that shortly after the release, the government increased the interest rate on three-month bills for the second time in as many weeks. China's Shanghai Composite Index eked out a 0.2% advance, while Hong Kong's Hang Seng Index fell 2.0%. The output report in China was one of many reports that were released today in the nation, as separate reports showed producer and consumer prices rose more than expected, retail sales exceeded expectations, industrial production unexpectedly fell but was up 18.5% y/y, and fixed asset urban investment rose 30.5% y/y. Meanwhile, there were some reports outside of China that are worth a mention, including Japan's Leading Index being revised from a preliminary reading of 91.2 to 90.7 for November, India's food inflation rising over 15%, and retail sales in New Zealand growing more than forecast.

Elsewhere, Japan's Nikkei 225 Index rose 1.2%, aided by weakness in the Japanese yen versus the dollar, which helped buoy export issues on optimism of higher revenues of companies that rely on business in the US. Rounding out the action in Asia, South Korea's Kospi Index rose 0.5%, Australia's S&P/ASX 200 Index fell 0.8%, Taiwan's Taiex Index dropped 1.1%, and India's BSE Sensex 30 Index decreased by 2.4% as the aforementioned inflation data sparked some concerns that its central bank may need to tighten monetary policy.

In equity news in the region, Hynix Semiconductor, moved higher after the South Korean firm and world's second largest computer memory chip maker, per Bloomberg, posted a 4Q profit, while shares of India's largest engineering firm, Larsen & Toubro (LTOUF $36), fell solidly after it reported a sharp drop in 3Q profit and cut its sales forecast for the year.