Morning Update

Losses Don’t Last as Inflation Cooler than Forecast

The equity markets overcame early losses and are nearly unchanged in morning action after another report showed inflation remains tame, continuing to pose little threat to Fed’s low interest rate monetary policy outlook. The economic front is heavier than normal as separate reports showed weekly initial jobless claims fell by a smaller amount than expected and the nation’s current account balance widened to a smaller amount than forecasted. Treasuries are mixed, showing little reaction to the aforementioned data, and ahead of releases of the Index of Leading Economic Indicators and the Philly Fed Business Activity Index. On the equity front, FedEx Corp and Nike Inc both reported earnings that topped analysts’ forecasts. Overseas, Asia finished mixed in lackluster trading and Europe.

As of 8:51 a.m. ET, the June S&P 500 Index Globex future is at fair value, the Nasdaq 100 Index is 2 points above fair value, and the DJIA is 9 points above fair value. Crude oil is down $0.44 at $82.49 per barrel, and the Bloomberg gold spot price is up $5.38 at $1,125.72 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.4% to 79.95.

FedEx Corp. (FDX $90) reported fiscal 3Q EPS more than doubled year-over-year (y/y) to $0.76, four cents above the consensus estimate of Wall Street analysts, with revenues increasing 7% y/y to $8.7 billion, compared to the $8.4 billion that the Street had forecasted. The package delivery firm said its earnings and revenues increased as a result of higher shipment growth, particularly in international express and at FedEx Ground, along with “strict cost controls,” while increased fuel costs and an operating loss at FedEx Freight impacted results. The company increased its full-year EPS guidance to a range of $3.60-3.80, from $3.45-3.75, and analysts are expecting FDX to post full-year EPS of $3.64.

Nike Inc. (NKE $71) reported fiscal 3Q EPS of $1.01, compared to the Street’s expectation of $0.88, with revenues increasing 7% y/y to $4.7 billion, just above the $4.6 billion that analysts had forecasted. The athletic goods firm said its futures orders for footwear and apparel, scheduled for delivery from March through July 2010 are up 9% y/y to $7.1 billion, led by strong gains in orders from the emerging markets and Western Europe, while orders in Japan are down.

Consumer prices tame, jobless claims dip

The Consumer Price Index showed prices at the consumer level came in unchanged in February month-over-month (m/m), compared to the forecast of economists surveyed by Bloomberg, which called for the index to rise 0.1%. Meanwhile, the core rate, which strips out food and energy, expectedly rose by 0.1% m/m for February. While food and energy is the smallest component in the CPI basket, it tends to be the most volatile and often explains a majority of changes in the index at the headline level. On a year-over-year basis, consumer prices were up 2.1% in February, compared to the forecast of 2.3%, and the core CPI was 1.3% higher y/y, compared to the 1.4% forecast.

Weekly initial jobless claims declined by 5,000 to 457,000, versus last week's figure which was unrevised at 462,000, and compared to the consensus, which called for claims to decline to 455,000. The four-week moving average, considered a smoother look at the trend in claims, declined by 4,250 to 471,250, and continuing claims increased by 12,000 to 4,579,000, compared to the 4,522,000 forecast.

In other economic news, the 4Q current account deficit increased to $115.6 billion, versus 3Q’s $102.3 billion, which was revised to a narrower deficit, and compared to the increase to a $119 billion deficit that economists had forecasted. Treasuries are mixed following the inflation, employment, and trade reports, modestly paring early gains.

Later this morning, the economic calendar will yield the Index of Leading Economic Indicators, which is expected to have increased 0.1% in February, after rising 0.3% last month, which was the tenth consecutive increase. Also the Philadelphia Fed’s Business Activity Index will be reported, and economists predict it will rise to 18.0 in March from a previous reading of 17.6 in February.

Europe overcoming festering Greece fears

Stocks in Europe are slightly higher as some strength in the healthcare sector is offsetting worries about the lack of support from the euro-zone nations to help Greece solve its deficit problems. Germany continues to dampen hopes that a financial aid package will be made available to the debt-ridden nation, while Greek Prime Minister George Papandreou is urging euro-zone leaders to come up with a mechanism to help the nation by next week’s euro-area leaders summit. Also, Papandreou has warned that it would not be able to make its planned deficit cuts unless borrowing costs come down, per Reuters, and Bloomberg is reporting that the Greek Prime Minister has hinted that he may turn to the International Monetary Fund (IMF) if a plan is not agreed upon by European nations. Going to the IMF is considered a non-desirable option as it could diminish confidence that the European Union can handle its own crises.

In other economic news, the euro-zone trade balance swung to a deficit in January, and the trade deficit in Italy surged in January, while Switzerland’s trade surplus shrunk by a larger amount than expected by economists. Also, separate reports showed Switzerland’s 4Q industrial production rose more than expected and Sweden’s unemployment rate unexpectedly declined to 9.3% in February.

In equity news, GlaxoSmithKline (GSK $38) is nicely higher after fellow drug maker Novartis (NVS $55) decided not to pursue US development of a generic version of GSK’s lung drug Advair.

Britain’s FTSE 100 Index is 0.2% higher, France’s CAC-40 and Germany’s DAX Indexes are up 0.1%, Italy’s FTSE MIB Index is 0.2% higher, and Switzerland’s Swiss Market Index is up 0.1%, while Sweden’s OMX Stockholm 30 Index is down 0.3% and Greece’s Athex Composite Index is declining 2.7%.

Asia mixed on light data day

Stocks in Asia finished mixed following yesterday’s broad-based rally as there was a lack of any major pieces of data in the region to drive sentiment, and trading was a bit cautious amid lingering fears regarding euro-zone debt problems and ahead of the consumer inflation report in the US. Japan’s Nikkei 225 Index fell 1.0% as traders booked some profits from the two-month high the index reached yesterday, led by weakness in real estate issues. On the Japanese economic front, the nation’s Leading Index was revised slightly lower from the preliminary figure of 97.1 to a reading of 96.7 for January. Stocks in China finished modestly lower with the Shanghai Composite Index declining 0.1%, and Hong Kong’s Hang Seng Index decreasing 0.3%, despite a report that showed Hong Kong’s unemployment rate fell more than expected, dropping from 4.9% in January to 4.6% in February, versus the decline to 4.8% that economists had forecasted. Elsewhere, Taiwan’s Taiex Index rose 0.5%, while South Korea’s Kospi Index declined 0.5%. Australia’s S&P/ASX 200 and India’s BSE Sensex 30 Indexes both gained 0.2% to round out the day.