Morning Update

Unchanged as Jobless Claims Fall and Greece Finds Support

The equity markets are nearly unchanged in morning action as traders react to a larger-than-expected decline in weekly initial jobless claims and are showing little enthusiasm to the European Union’s announcement that is has agreed to offer some help to Greece, as details of a plan still have not been released. Treasuries are lower following the employment report. In equity news, PepsiCo reported 4Q earnings that came up just shy of analysts’ forecasts and its revenues matched expectations, while Activision Blizzard and Viacom Inc. both topped the Street’s forecasts. Overseas, Asia moved higher amid some favorable data, and Europe is mostly in the green amid a plethora of earnings reports and as traders react to the support for Greece.

As of 8:51 a.m. ET, the March S&P 500 Index Globex future is at fair value, the Nasdaq 100 Index is 5 points above fair value, and the DJIA is 24 points above fair value. Crude oil is up $0.33 at $74.85 per barrel, and the Bloomberg gold spot price is higher by $10.80 at $1,082.90 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.1% at 80.08.

PepsiCo Inc. (PEP $60) reported 4Q EPS of $0.90, one penny shy of the Wall Street estimate, with revenues increasing 4.5% year-over-year (y/y) to $13.3 billion, matching the Street’s forecast. PEP said for the full-year 2010, it is targeting an 11-13% growth rate of its core EPS from $3.71 in 2009. Analysts are expecting the company to report full-year 2010 EPS of $4.16.

Activision Blizzard (ATVI $10) announced 4Q EPS ex-items of $0.49, five cents above the consensus estimate of analysts, with revenues of $2.5 billion, also besting the Street’s forecast, which called for the video game publisher to post sales of $2.2 billion.

Viacom Inc. (VIA/B $29) posted 4Q EPS ex-items of $1.09, easily beating the $0.87 that analysts were expecting, but revenues declined 3% y/y to $4.1 billion, just shy of the $4.2 billion that the Street had anticipated. The media firm said the decline in revenues was due to lower results in its media networks and filmed entertainment.

Jobless claims fall

Weekly initial jobless claims fell, declining by 43,000 to 440,000, versus last week's figure which was revised upward by 3,000 to 483,000, and compared to the consensus, which called for claims to decrease to 465,000. The four-week moving average, considered a smoother look at the trend in claims, dipped by 1,000 to 468,500, and continuing claims dropped by 79,000 to 4,538,000, compared to the 4,600,000 forecast. Treasuries remained lower following the report.

Please note, a report on advance monthly retail sales for January was scheduled to be released this morning, but has been delayed until tomorrow due to inclement weather.

Europe advances as Greece deal confirmed, but details still yet to come

Stocks in Europe are higher in afternoon action, led by oil and gas and materials issues amid some favorable data out of Asia and some upbeat earnings reports in the energy and mining sectors. Also, sentiment is being soothed as some of the uncertainty regarding the deficit problems in Greece was cleared up as European leaders reached an agreement to provide support for the Greek nation. The European Commission President Jose Barroso told reporters following a meeting of Eurozone leaders in Brussels that, “There is an accord,” per Bloomberg news, which also reported that German Chancellor Angela Merkel said, “Greece won’t be left alone but there are rules and these rules must be adhered to. On this basis we will agree on a statement.” No details were released about a plan for Greece. Despite the report, financials are lagging behind in afternoon trading, suggesting that a plan may have already been factored in and traders are awaiting the details of the plan.

In other economic news in the Eurozone, wholesale prices in Germany—Europe’s largest economy—increased 1.3% month-over-month (m/m) in January, following a 0.2% m/m gain in December, and y/y, wholesale prices were up 1.9% in the first month of the year. Also, Spain reported that its 4Q GDP contracted 0.1% m/m, matching expectations, and its y/y GDP contraction was 3.1%, slightly more than economists expected. Meanwhile, Sweden’s central bank left its benchmark lending rate unchanged at 0.25%, as was expected.

There is a plethora of earnings reports that are worth a mention, with Credit Suisse (CS $43) gaining ground despite reporting that 4Q profits missed expectations as the Swiss bank’s CEO offered upbeat comments about the rate it was winning client assets and transactions. Also, shares of Rio Tinto (RTP $199) are nicely higher after it posted a second half profit that exceeded analysts’ forecasts and reinstated its dividend, while Europe’s third-largest oil firm Total (TOT $56) is gaining ground after it announced 4Q earnings that topped analysts’ projections. However, shares of Alcatel-Lucent (ALU $3) are solidly lower after it posted disappointing 4Q revenue—although it did post its second quarterly profit since 2006 per Bloomberg—and cut its 2010 operating margin target.

Britain’s FTSE 100 Index is 0.9% higher, France’s CAC-40 Index is declining 0.2%, Germany’s DAX Index is decreasing 0.3%, Spain’s IBEX 35 Index is down 1.3%, Greece’s Athex Composite Index is 1.0 higher, and Sweden’s OMX Stockholm 30 Index is advancing 0.9%.

Asia moves higher amid some favorable data

Stocks in Asia were broadly higher as some generally better-than-expected data in the region helped boost sentiment, along with growing expectations that some form of relief may come for Greece, although no confirmation had been made. With markets in Japan and Taiwan closed for the session, Hong Kong’s Hang Seng Index led the way, gaining 1.9%, amid some reports on inflation and lending in China. The government reported that consumer prices rose 1.5% y/y in January, versus the 2.1% increase that economists had expected, soothing some concerns about an overheating economy, which the Chinese government has pledged to control through various actions aimed at minimizing excess liquidity. However, a separate report showed producer prices rose 4.3% y/y, above the 3.5% that was forecasted. Moreover, China reported that its new yuan loans increased from 379.8 billion in January, to 1,390 billion, more than the 1,375 billion that was expected. The reaction from the Shanghai Composite Index was more subdued, as it eked out a 0.1% gain. However, trading may have been lighter than usual in China as the nation prepared for a week-long holiday beginning on February 15th.

Meanwhile, Australia’s S&P/ASX 200 Index rose 0.9% amid some favorable employment data, which showed the employment change rose by 52,700 in January, following the upwardly revised 37,500 advance in December, and well above the 15,000 forecasted gain of economists. Consequentially, the country’s unemployment rate unexpectedly fell, declining from 5.5% to 5.3%, versus the 5.6% that was projected. In other economic news, South Korea’s central bank kept its benchmark lending rate unchanged at 2.0%, which was expected, and the Kospi Index increased 1.8% to help the advance in Asia. Rounding out the day, India’s BSE Sensex 30 Index advanced 1.5%.