Morning Update

Retailers’ Registers Ring to Help Bulls Sing

As the week has been void of any major economic news, which has led to several subdued sessions, the final trading day of the week delivered an unexpected rise in retail sales, and stocks are moving higher in morning action. Treasuries moved lower following the favorable retail sales report, and ahead of readings on consumer sentiment and business inventories. In equity news, Yara International announced that it will not improve its $4.1 billion cash bid to acquire Terra Industries, paving the way for CF Industries Holdings Inc’s $4.72 billion cash and stock offer. Also, Aeropostale Inc. reported earnings that exceeded expectations and it issued 1Q guidance that also topped forecasts. Overseas, Asia finished mixed as Japanese shares gained ground, while Europe is higher after a favorable industrial production report.

As of 8:45 a.m. ET, the June S&P 500 Index Globex future is 6 points above fair value, the Nasdaq 100 Index is 6 points above fair value, and the DJIA is 44 points above fair value. Crude oil is up $0.85 at $82.96 per barrel, and the Bloomberg gold spot price is up $2.95 at $1,112.45 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.5% to 79.89.

Following up on a recent M&A battle in the agriculture industry, Norway’s Yara International (YARIY $41) announced that it will not improve its $4.1 billion cash bid for US fertilizer firm Terra Industries (TRA $47), paving the way for CF Industries Holdings Inc’s (CF $101) $4.72 billion cash and stock bid that it announced last week, which TRA categorized as a superior offer earlier this week. YARIY will receive a $123 million breakup fee. Meanwhile, Canadian firm Agrium Inc. (AGU $67) announced that it will no longer pursue an acquisition of CF. Shares of YARIY and AGU are higher, while CF and TRA are lower.

Aeropostale Inc. (ARO $27) reported 4Q EPS of $0.99, four cents above the consensus estimate of Wall Street analysts, with revenues increasing 16% year-over-year (y/y) to $801 million, compared to the $792 million that the Street was looking for. Same-store sales—sales at stores open at least a year—rose 9% y/y. ARO issued 1Q EPS guidance that exceeded analysts’ forecasts, saying it is “very excited” about its strong start to the new fiscal year. Shares are higher.

Retail sales unexpectedly rise, consumer sentiment on the horizon

Advance retail sales (chart) for February rose 0.3%, compared to the Bloomberg forecast of a decrease of 0.2%, while January’s 0.5% increase was revised to a 0.1% gain. Sales ex-autos rose 0.8%, versus the expectation of an increase of 0.1%. Sales ex-autos and gas gained 0.9%, versus the 0.3% rise that was anticipated. Treasuries moved lower following the report.

Later this morning, the economic calendar will yield the preliminary University of Michigan’s Consumer Sentiment Index for March, expected to improve to 74.0 from 73.6 in February, along with business inventories, which are expected to show stockpiles rose 0.1% in January, following the 0.2% decrease that was seen in December.

Europe higher on favorable industrial production report

Stocks in Europe are higher in afternoon action, as weakness in healthcare issues is being offset by strength in financials and industrials, following a report that euro-zone industrial production increased by an amount more than doubling economists’ forecasts. Output in the euro-area rose 1.7% month-over-month (m/m) in January—the largest jump since 1989 per Bloomberg—compared to the rise of 0.7% that was expected, and December’s 1.7% drop was revised to a 0.6% advance. In other economic news, German wholesale prices rose by a smaller-than-expected amount in February, France’s current account deficit came in at a smaller amount than was anticipated, Greece’s unemployment rate unexpectedly fell, and Spain’s consumer prices declined by a larger-than-anticipated amount in February.

In equity news, the weakness in healthcare issues is coming on the heels of a solid decline in shares of Roche Holding AG’s (RHHBY $42) announcement that its cancer treatment Avastin failed in a late-stage prostate cancer trial.

Britain’s FTSE 100 Index is up 0.2%, France’s CAC-40 Index is 0.5% higher, Germany’s DAX Index is advancing 0.7%, Spain’s IBEX 35 Index is rising 1.0%, while Greece’s Athex Composite Index is 0.1% in the red.

Asia mixed amid central bank stimulus speculation

Stocks in Asia finished mixed with Japanese stocks leading to the upside, led by export issues on the outlook that the yen could weaken amid speculation that the Bank of Japan may expand its stimulus measures, possibly boosting its 10-trillion yen ($110 billion) fund that provides loans to banks, according to Bloomberg, which cited two central bank officials. The report also said that the nation’s finance minister noted that foreign-exchange intervention is an option, in an attempt to slow down the appreciation of the Japanese currency. The Bank of Japan has not confirmed the reports and it is scheduled to conduct a policy meeting beginning on March 16th. A weakened yen increases the outlook for profits of companies that rely heavily on sales outside Japan and these issues helped the Nikkei 225 Index gain 0.8%. The economic front also helped sentiment in Japan, with a report showing that January industrial production was revised from a 2.5% advance to a gain of 2.7%.

Meanwhile, continued concerns that the Chinese government may step in to rein in stimulus measures to prevent an overheating of its economy, exacerbated by yesterday’s hotter-than-expected inflation data in the country, stymied the equity markets, with the Shanghai Composite Index falling 1.2%, while Hong Kong’s Hang Seng Index declined 0.1%, as separate reports showed the pace of declines in producer prices and industrial production eased in 4Q, which may have limited losses in the region. Elsewhere, South Korea’s Kospi Index increased 0.4%, while Australia’s S&P/ASX 200 Index, Taiwan’s Taiex Index, and India’s BSE Sensex 30 Index all finished nearly unchanged.