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Unchanged Even After GDP Was Revised Higher

After a late-day bout of resiliency helped the equity markets pare solid losses yesterday, stocks are nearly unchanged in morning action, despite an upward revision to US 4Q GDP. Treasuries showed little reaction to the report and are slightly higher, but a major report on the housing market, along with a final revision to a consumer sentiment gauge and a look at manufacturing activity in the Midwest are still to come, which could move the markets in either direction. In equity news, Gap Inc. topped the Street’s profit estimates and reported an increase in its dividend and an additional share repurchase plan, while government bailed out insurer AIG posted an adjusted $7.2 billion loss. In M&A news, Thomas H. Lee Partners announced an agreement to acquire fast food firm CKE Restaurants Inc. Overseas, Asia moved mostly higher, and Europe is rebounding after the UK revised its 4Q GDP upward.

As of 8:50 a.m. ET, the March S&P 500 Index Globex future is 1 points above fair value, the Nasdaq 100 Index is at fair value, and the DJIA is 2 points above fair value. Crude oil is up $0.51 at $78.68 per barrel, and the Bloomberg gold spot price is up $4.60 at $1,110.95 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.1% at 80.69.

Gap Inc. (GPS $20) reported 4Q EPS of $0.51, one penny ahead of the expectation of Wall Street analysts, with revenues rising 4% year-over-year (y/y) to $4.2 billion, inline with the Street’s forecast. Separately, the retailer said it plans to increase its annual dividend by 18% and it authorized an additional $1 billion share repurchase plan.

In M&A news, CKE Restaurants Inc. (CKR $9) reported that it has entered into a definitive merger agreement under which Thomas H. Lee Partners will acquire the parent of Carl’s Jr. and Hardee’s fast food chains for approximately $928 million, including the assumption of debt. CKE stockholder will receive $11.05 per share in cash for each share held.

Bailed out insurance firm American International Group (AIG $28) reported an adjusted 4Q loss of $7.2 billion. The company’s main insurance businesses weighed on results, while its financial products division and higher investment income helped limit the losses. Shares are lower.

Another look at GDP improves slightly

The second look at 4Q Gross Domestic Product , the broadest measure of economic output, was released this morning and showed a 5.9% annualized rate of growth, compared to the 5.7% advance in the initial report and 3Q, which rose 2.2%. The Bloomberg forecast called for output in the final quarter of the year to remain at a 5.7% increase. Personal consumption advanced 1.7%, below the 2.0% that was forecasted. Real final sales, which exclude changes in inventory, were 1.9% higher, versus the 2.2% that was originally reported.

The GDP Price Index rose 0.4%, versus the 0.6% consensus rise of economists surveyed by Bloomberg. The core PCE Index, which excludes food and energy, gained 1.6%, versus expectations of 1.4% and the rate remains between of the Fed’s implied target of 1-2%. Treasuries are slightly higher, showing little reaction to the report.

Later this morning, the economic calendar will yield the Chicago Purchasing Manager Index, expected to decline to 59.7 in February from 61.5 in January, while the final February reading of the University of Michigan consumer sentiment survey is expected to rise to 73.9 from 73.7.

However, the report after the opening bell that will likely garner the most attention will be the release of existing-home sales, expected to have increased 0.9% m/m in January to an annual rate of 5.5 million units. The report comes on the heels of a sharp decline in new home sales reported Wednesday, which are seen as a more current picture of the state of the housing market as sales are recorded as contracts are signed, while existing home sales reflect closings from contracts entered one to two months earlier. The monthly figures have been distorted by the end of the initial tax credit at the beginning of November, which was subsequently extended and expanded mid-November, as well as holiday seasonality and weather. Despite new home sales falling 11.2% in January versus the expectation of a 3.5% gain, the subdued market action seemed to imply the view that the data is “noisy,” but if continued negative data is received from the housing market, doubts about the sustainability of the economic recovery will likely increase.

UK data helps Europe rebound

Stocks in Europe are higher in afternoon action, rebounding from yesterday’s solid decline on resurfaced Greek debt concerns, led by some favorable data out of the UK. The British government revised its 4Q GDP figure from a 0.1% quarter-over-quarter (q/q) gain to a 0.3% advance, compared to the 0.2% that the reading of output in the region was expected by economists to be revised to. Also, a separate report showed UK consumer confidence unexpectedly improved in February, helping offset a report that showed home prices in the nation fell unexpectedly. In other economic news across the pond, Eurozone consumer prices declined 0.8% month-over-month (m/m) in January to match expectations, Italian producer prices grew more than anticipated, and Swedish retail sales rose more than forecasted.

There are some equity reports that also deserve a mention, with Lloyds Banking Group (LYG $3) falling solidly after posting a wider full-year loss than was anticipated, and drug maker Bayer (BAYRY $68) is under pressure after it forecasted a 2010 profit that came up short of expectations, and after reporting 4Q and 2009 results that missed analysts forecasts. On a positive note, shares of Europe’s largest building materials provider, Saint-Gobain, posted profits that exceeded forecasts, and Telefonica (TEF $70) is up amid a positive reaction to its full-year profit report, which matched expectations.

Britain’s FTSE 100 Index is 0.7% higher, France’s CAC-40 Index is 0.8% in the green, Germany’s DAX Index is up 0.7%, Italy’s FTSE MIB Index is rising 0.6%, and Sweden’s OMX Stockholm 30 Index is flat.

Asia advances despite US and Eurozone worries

Stocks in Asia were mostly higher, as traders digested a slew of economic data, while shrugging off yesterday’s uneasy sentiment in the US and Europe that came from disappointing employment data and continued fears about Greece. Japan’s Nikkei 225 Index rose 0.2% amid a few economic reports, which showed consumer prices in January declined roughly inline with economists’ expectations, industrial production increased 2.5% m/m in January, more than double forecasts, housing starts declined y/y by a smaller amount than anticipated and vehicle production jumped over 30% y/y, while large retailers’ sales fell more than expected in January. Meanwhile, India’s BSE Sensex 30 Index advanced 1.1% to help lead gains in the region, even after a report showed 4Q GDP grew 6% y/y, versus the expectation of a 6.9% increase, supported by soothed deficit concerns after the nation’s Finance Minister pledged to trim the deficit from a 16-year high, per Bloomberg news. Elsewhere, Australia’s S&P/ASX 200 Index rose 1.0% following a solid gain in shares of retailer Woolworths (WOLWF $22) after it announced a share repurchase plan, while Australia & New Zealand Banking Group’s (ANZBY $20) 4% gain buoyed the financial sector after it posted a 16% increase in four-month profit and said charges for bad debt fell.

Rounding out the day, Hong Kong’s Hang Seng Index rose 1.0%, China’s Shanghai Composite Index declined 0.3%, South Korea’s Kospi Index was 0.5% higher, and Taiwan’s Taiex Index gained 0.1%.