Evening Update

Investors Uninspired

Without any major economic reports or market-moving equity news to grab hold of, markets finished the day mixed, but mostly unchanged, in lackluster action. The passive sentiment may continue throughout the week as the economic calendar is relatively light, however, Friday will bring the advance retail sales report, which will likely gain interest. However, there were some positive reports on the equity front as Dow member McDonald’s Corp posted better-than-expected same-store sales results, American International Group said it will sell its international life insurance unit to MetLife for about $15.5 billion, Applied Materials increased it quarterly dividend by 17% and disclosed a new $2 billion share repurchase program, and Sprint Nextel’s CFO offered upbeat comments. On the downside, AstraZeneca reported disappointing results from a late-stage trial of its colon cancer drug. Treasuries finished mostly lower.

The Dow Jones Industrial Average fell 14 points (0.2%) to close at 10,553, the S&P 500 Index was flat at 1,139, while the Nasdaq Composite gained 6 points (0.3%) to 2,332. In light volume, 907 million shares were traded on the NYSE and 2.2 billion shares were traded on the Nasdaq. Crude oil was $0.37 higher at $81.87 per barrel, wholesale gasoline rose $0.02 to $2.29 per gallon, and the Bloomberg gold spot price fell $12.34 to $1,122.31 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—was up 0.3% to 80.44.

Dow member McDonald’s Corp (MCD $65) was higher after the world’s largest fast-food chain reported February same-store sales—sales at stores open at least thirteen months—rose 4.8%, topping the 4.0% estimate per Bloomberg. However, US sales rose 0.6%, compared to the 1.0% estimate, and European sales gained 5.4%, versus the 6.5% estimate. Meanwhile, sales in Asia/Pacific, Middle East and Africa led the way, rising 10.5%, above the 6.5% that the Street had expected.

American International Group (AIG $29) announced that it has reached a definitive agreement for the sale of its international life insurance unit American Life Insurance Company (ALICO) to MetLife (MET $41) for approximately $15.5 billion, including $6.8 billion in cash and the remainder in equity securities of MET. If AIG were to convert some of the securities included in the deal into MET common shares, it would have about a 20% stake in MET. AIG said the cash portion of the deal will be used to reduce its outstanding balance owed to the government. MET said it expects the deal to increase its 2011 operating earnings by about $0.45-0.55 per share, excluding items. Shares of both firms were higher.

Applied Materials (AMAT $12) announced that it has increased its quarterly dividend by 17% to $0.07 per share and it reported a new $2 billion stock repurchase program. The chip equipment maker said the dividend increase reflects its confidence in the company’s near and long-term prospects for growth and profitability. Shares were higher.

Shares of AstraZeneca (AZN $45) were under pressure after a phase-3 trial of its experimental colon cancer drug Recentin failed to match results of Roche Holding’s (RHHBY $42) Avastin for treating the cancer.

Sprint Nextel (S $3) was up nearly 4% after the wireless provider’s CFO Robert Brust hinted at revenue growth in the next few quarters on a conference call, according to Dow Jones Newswires. Brust said he expects revenue to stabilize over the year with fewer contract customers dropping service and growth in its pre-paid business.

Traders not likely to get some economic clarity from this week’s calendar

The yield curve steepened even as there were no major reports released in the US today. The yield on the 2-year note was flat at 0.89%, while the yields on both the 10-year note and the 30-year bond increased 3 bp to 3.71% and 4.68%, respectively.

Tomorrow’s economic docket will also be dormant, and the rest of the week will be relatively light, which may result in another week of lackluster sessions amid uncertainty regarding what will drive the next leg of the economic recovery. Traders are treading cautiously, waiting for some clarity amid the clouded economic horizon, as several issues are hamstringing sentiment. When/how the Fed will deploy further actions of its exit strategy, growing government debt, high unemployment, and persistent headwinds stymieing the housing recovery are all sources of the aforementioned uncertainty that is clouding the economic outlook.

Greece aid concerns ease further

Concerns toward Greece abated somewhat following last week’s release of austerity measures to pare its deficit and a successful 5 billion euro ($6.8 billion) bond auction, but comments aimed at speculators from French President Nicolas Sarkozy, after his meeting with Greek Prime Minister George Papandreou over the weekend, provided additional calm. Sarkozy said, “I want to be very clear: if it were necessary, the states of the euro-zone would fulfill their commitments. There can be no doubt in this regard.” He continued, saying that although Greece does not need help today, “we have measures, we are ready, we are determined.” Elsewhere, Portugal, which is also mired in debt and looking to soothe investor worries, announced plans to get a handle on its finances, including the sale of 6 billion euros in assets.

In economic news internationally, industrial production in Germany rose 0.6% m/m in January, compared to the 1.0% decline in December, but short of the 1.0% increase that economists had expected. Also, a measure of French business sentiment conducted by the bank of France showed that the indicator for manufacturing fell to 102 in February from 104 in January, while the service industry sentiment ticked higher to 90 in February from 89 in the prior month. Elsewhere in Europe, Switzerland’s unemployment rate dipped to 4.4% in February, matching expectations, while the nation’s retail sales for January almost doubled expectations. Elsewhere, an investor confidence report of the euro-zone for March unexpectedly improved.

Further east, Japan reported a larger-than-expected trade surplus in January of 899.8 billion yen, compared to a deficit a year earlier, on the back of shipments to China that rose at the fastest pace since 1985. Economists polled by Bloomberg were expecting a surplus of 783.9 billion yen. Taiwan, however, reported a smaller-than-expected trade surplus in February, with growth in exports slowing to a pace below economists’ estimates.

Tomorrow’s international economic calendar includes Japan’s Leading Index and machinery orders, trade balances from the UK, France and China, as well as the CPI from Switzerland.