Morning Update

Jobless Claims Fall and Retailers Stand Tall

After yesterday’s lackluster action, stocks continue to be marred by a lack of conviction, moving modestly higher in morning trading. However, the equity markets did overcome early pressure on the heels of a larger-than-expected drop in weekly initial jobless claims and a plethora of better-than-forecasted February same-store sales results from major retailers. Meanwhile, Wal-Mart Stores Inc’s increased dividend is providing some added color to the upbeat backdrop for the retail sector. Treasuries are near the unchanged mark, showing little reaction to the aforementioned data and after a separate report showed nonfarm productivity was revised higher for 4Q. Pending home sales and factory orders are set to be released after the opening bell. Overseas, Asia was lower on concerns about China’s efforts to rein in liquidity, while Europe is modestly lower after the European Central Bank and the Bank of England both left their benchmark interest rates unchanged.

As of 8:52 a.m. ET, the March S&P 500 Index Globex future is 2 points above fair value, the Nasdaq 100 Index is 4 points above fair value, and the DJIA is 23 points above fair value. Crude oil is down $0.16 at $80.71 per barrel, and the Bloomberg gold spot price is down $2.05 at $1,137.85 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.2% to 80.12.

Dow member Wal-Mart Stores Inc. (WMT $54) increased its annual dividend by 11% to $1.21 per share, saying that its underlying operations remain strong, and with its free cash flow it has the capacity to fund returns to shareholders. Shares are higher.

Target (TGT $52) is headlining the plethora of February same-store sales—sales at stores open at least a year—reports from the retail sector, announcing that its sales increased 2.4% year-over-year (y/y), compared to the Reuters estimate of 1.0%. TGT said that it continues to experience y/y increases in traffic at its stores, partly reflecting a slowly recovering economic environment.

Macy’s Inc. (M $20) is highlighting the department stores’ releases as it said sales rose 3.7% y/y, above the 1.4% increase that analysts’ had expected, saying that the winter storms during the month hampered results. The company said its same-store sales would have gained approximately 5%, if not for the storms.

Inside the mall, Gap Inc. (GPS $22) reported that its same-store sales increased 3% y/y, above the 1.8% that the Street was forecasting. Limited Brands Inc. (LTD $23) announced that its February same-store sales grew by 10% y/y, just above the 9.7% increase that was anticipated.

Meanwhile, yesterday the wholesalers weighed in, with Costco Wholesale (COST $61) reporting February same-store sales grew 9% y/y including the impact of fuel and foreign exchange, versus the 8.5% that analysts had anticipated. Additionally, BJ’s Wholesale Club (BJ $35) announced that its February same-store sales increased 7.5% y/y, including fuel, compared to the 6.3% gain that the Street was looking for.

Jobless claims fall, productivity revised higher

Weekly initial jobless claims fell by 29,000 to 469,000, versus last week's figure which was revised upward by 2,000 to 498,000, and compared to the consensus, which called for claims to decline to 470,000. The four-week moving average, considered a smoother look at the trend in claims, declined by 3,500 to 470,750, and continuing claims dropped by 134,000 to 4,500,000, compared to the 4,600,000 forecast.

Elsewhere, final nonfarm productivity rose at a 6.9% annual rate in 4Q, above the Bloomberg forecast of 6.3%, and the preliminary report of a 6.2% gain. Unit labor costs fell 5.9%, versus a drop of 4.5% that was estimated, and the 4.4% decline that was initially reported. Treasuries are nearly unchanged, with the short end of the curve ticking lower after the jobless claims and productivity reports.

Later today, the economic calendar will yield pending home sales for January, expected to rise by 1.0% month-over-month (m/m), along with factory orders, which are forecasted to increase 1.8% for the month of January.

Europe slightly lower amid central bank actions and eurozone economic uncertainty

Stocks in Europe are under modest pressure in afternoon action, amid concerns about whether Greece’s $6.5 billion deficit reduction plan announced yesterday will be sufficient enough to invoke support from other eurozone members. Also, Greece conducted a 10-year euro-denominated bond auction today and the demand, which saw strong bids for the issue, drew close scrutiny and sentiment seems to be soothed by its success. Meanwhile, major central bank announcements are also in focus across the pond today, with the Bank of England keeping its benchmark interest rate unchanged at a record low of 0.5%, while keeping its bond purchase program on hold. Also, the European Central Bank left its key lending rate unchanged at 1.0%, as expected, and traders are paying attention to the customary press conference that followed the rate decision, which is held by ECB President Jean-Claude Trichet.

There are some other economic reports that are worth noting, with the eurozone 4Q GDP remaining at a 0.1% gain, matching economists expectations, and a gauge of UK housing prices unexpectedly fell m/m in February. Elsewhere, France’s unemployment rate increased more than anticipated, rising from 9.5% to 10.0% in 4Q, compared to the increase to 9.8% that was forecasted.

On the equity front, the world’s largest brewer Anheuser-Busch InBev (BUD $51) is under pressure after it posted 4Q earnings that missed analysts forecasts and offered a disappointing outlook for the first half of 2010, due to weakness in the US beer market. Moreover, Amsterdam-based retailer Royal Ahold (AHONY $13) is nicely higher after the company raised its dividend by almost 30% and announced a share repurchase program.

The UK FTSE 100 and France’s CAC-40 Indexes are 0.1% lower, and Germany’s DAX Index is declining 0.2%.

Asia slides but Australia managed to skip the ride

Stocks in Asia were mostly lower, led by markets in China, as the Shanghai Composite Index fell 2.4% and Hong Kong’s Hang Seng Index declined 1.4%, amid lingering concerns that the nation will continue to deploy measures to rein in lending to control excess liquidity and prevent asset bubbles from forming. China’s Premier is set to give a key speech tomorrow to the National People’s Congress, per Bloomberg news. Equity news in the area did not help, with China Mobile (CHL $48) coming under pressure amid concerns about the investing outside of its main business as it said it is considering an investment in Shanghai Pudong Development Bank, aimed at expediting its move into e-commerce. Meanwhile, Japan’s Nikkei 225 Index fell 1.1%, bogged down by the aforementioned Chinese concerns and uneasiness regarding the recent strength in the yen versus most major currencies, which dampened the outlook for potential profits of exporters that rely on sales outside the nation. Also weighing on Japanese action, shares of Mitsubishi Motors Corp. (MMTOF $1) were sharply lower after the company announced that it and France’s Peugeot (PEUGY $28) did not come to terms on a capital alliance. The pressure in Japan more than offset a report that showed capital spending fell by a smaller amount than economists’ forecasts.

However, Australia’s S&P/ASX 200 Index managed to escape the broad-based pressure on the Asia/Pacific region, led by higher mining issues as metals and commodity prices gained ground, and after a report showed that its trade deficit narrowed by a larger amount than economists had expected. Elsewhere, South Korea’s Kospi Index declined 0.3%, India’s BSE Sensex Index ticked lower by 0.2%, and Taiwan’s Taiex Index finished 0.8% lower after a 6.4 magnitude earthquake hit the southern region of the country.