Morning Update

Moving Higher Despite Disappointing Headline Durables

After rebounding somewhat yesterday as the Federal Reserve maintained its monetary policy stance, stocks are moving higher on eased concerns in the financial sector as President Barack Obama pared back his tone toward financial regulation and seemed to be focusing on job creation. The relatively upbeat sentiment is overshadowing a disappointing reading of headline durable goods orders and a smaller-than-expected drop in weekly initial jobless claims, which has Treasuries mixed. Also, some upbeat earnings reports from Ford Motor, and Dow member 3M CO. are helping to boost the equity markets in morning action. However, fellow Dow member Procter & Gamble missed the Street’s profit estimates, while AT&T matched expectations. Overseas, markets are higher.

As of 8:51 a.m. ET, the March S&P 500 Index Globex future is 3 points above fair value, the Nasdaq 100 Index is 10 points below fair value, and the DJIA is 41 points above fair value. Crude oil is up $0.49 at $74.16 per barrel, and the Bloomberg gold spot price is higher by $4.45 at $1,092.35 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.1% at 78.73.

Dow component AT&T (T $26) posted 4Q EPS of $0.51, inline with the consensus estimate of Wall Street analysts, with revenues declining slightly from $31.1 billion in the same period a year ago to $30.9 billion, also matching the Street’s forecasts.

Dow member Procter & Gamble (PG $61) announced fiscal 2Q EPS ex-items of $1.10, compared to the analysts estimate of $1.43, as revenues grew 6% year-over-year (y/y) to $21.0 billion, versus the $19.5 billion that was expected by the Street.

Dow member 3M Co. (MMM $82) reported 4Q EPS of $1.30, beating the $1.21 that the Street forecasted, with revenues rising 11% y/y to $6.1 billion, which also exceeded analysts’ forecasts, as the consensus called for the company to report revenues of $5.9 billion.

Ford Motor (F $12) reported 4Q EPS ex-items of $0.43, well above the $0.26 consensus of analysts, with revenues jumping 22% y/y to $35.4 billion, beating the $32.6 billion that was forecasted by analysts.

Durable goods come in below expectations, jobless claims decline less than forecasted

Durable goods orders rose by 0.3% in December, versus the 2.0% rise that had been forecast, and November’s 0.2% increase in orders was downwardly revised to a decline of 0.4%. Ex-transportation, orders were up 0.9%, compared to the 0.5% growth forecast, and November’s figure was favorably revised from a 2.0% increase to a 2.1% advance. Monthly orders data of goods intended to last at least three years can be very volatile as large orders for items such as airplanes and military equipment have a tendency to distort the data. Nondefense capital goods ex-aircraft, considered a good proxy for business spending, increased 1.3%.

Weekly initial jobless claims declined by a smaller amount than expected, falling by 8,000 to 470,000, versus last week's figure which was revised lower to 478,000, and compared to the consensus, which called for claims to decrease to 450,000. The four-week moving average, considered a smoother look at the trend in claims, rose by 9,500 to 456,250, and continuing claims fell by 57,000 from an upwardly revised 4,659,000 to 4,602,000, compared to the 4,593,000 forecast.

Treasuries are mixed following the manufacturing and jobless claims data, and after yesterday’s monetary policy announcement from the Federal Reserve, in which it expectedly left the fed funds rate unchanged at a range of 0-0.25% and reiterated that the Fed continues to anticipate that “economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” However, there was a dissenting vote by Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.

Europe moves higher amid earnings and economic data

Stocks in Europe are higher in afternoon action, on the heels of US President Barack Obama’s toned-down rhetoric on financial regulation and after the US Federal Reserve said it will keep its loose monetary policy intact, which is boosting financial issues. However, technology shares are posting sizeable gains to pace the advance across the pond on a more than 10% jump in shares of Nokia (NOK $13) after the world’s largest maker of mobile phones announced that its 4Q profit jumped 65% to top analysts’ forecasts. The economic front is also helping lift sentiment as the unemployment change in Germany—Europe’s largest economy—rose less than economists surveyed by Bloomberg had expected and Italian business confidence improved more that anticipated. However, the headlining economic report in the region was the tenth-consecutive improvement in Eurozone economic confidence, which rose from an upwardly revised 94.1 in December to 95.7 in January, exceeding the 92.3 that economists had expected. Germany’s DAX Index is 0.4% higher, the UK’s FTSE 100 Index is up 0.5%, Italy’s MIB Index is 0.3% in the green, and France’s CAC-40 Index is up 0.5%.

In other equity news, Europe’s second-largest clothing retailer Hennes & Mauritz (HNNMY $11) is up solidly after posting better-than-expected earnings, while AstraZeneca (AZN $50) is under pressure after the UK drugmaker reported earnings that came up short of analysts’ estimates.

Asia rebounds as earnings reports take the stage

Stocks in Asia finished mostly higher, rebounding from several negative sessions as traders sought out the stocks that were most battered during the recent slide in the region on fears that the global recovery could be hampered by efforts in China to reel in excess liquidity to prevent the formation of assets bubbles. Japan’s Nikkei 225 Index rose 1.6%, as the aforementioned bargain hunting was amplified by a rebound in the dollar versus the yen, which put shares of export issues in demand on the optimism of higher revenues of companies that rely heavily on sales in the US. Also, shares of Canon (CAJ $41) moved higher as the world’s largest camera maker benefitted from the weakness in the yen and reaction to its report after yesterday’s close that it expects operating profit to jump by 52%. Elsewhere in Japanese equity news, Nippon Electric Glass (NPEGF $15) moved solidly higher after the maker of LCD glass issued better-than-expected full-year profit guidance. Meanwhile, shares of Sony Corp (SNE $33) and Honda Motor Corp (HMC $34) both posted solid gains on the heels of a report by the Nikkei newspaper that the two companies will report higher earnings. Neither company commented on the report.

Outside of Japan, South Korea’s Kospi Index rose over 1% after a business surveys showed manufacturing and non-manufacturing outlooks improved and after shares of the nation’s largest automaker Hyundai Motor (HYMTF $16) moved nicely higher after it reported that 4Q profits that easily topped analysts’ estimates. Down under, Australia’s S&P/ASX 200 Index increased 0.6%, while New Zealand’s NZX 50 Index declined 0.3% after yesterday’s late-day announcement from the nation’s central bank, where it left its benchmark interest rate unchanged at 2.5%. Rounding out the day, Hong Kong’s Hang Seng Index rose 1.6%, the Shanghai Composite Index gained 0.3%, Taiwan’s Taiex Index jumped 1.8%, and India’s BSE Sensex 30 Index moved 0.1% higher.