Evening Market Update

Bulls Find Greener Pastures as Greece Aid Talks Move Faster

Stocks remain nicely higher as talks between EU and IMF officials heat up and optimism is growing that Greece will avoid default by gaining approval to tap into the euro-zone bailout package before debt obligations come due in mid-May. The solid gains in the equity markets come despite a disappointing profit report from Dow member Exxon Mobil Corp, and disappointing sales and guidance from fellow Dow component Procter & Gamble Co. M&A news out of the Dow is also helping sentiment, as Hewlett-Packard Co announced that it has agreed to acquire Palm Inc for $1.2 billion. In other equity news, Visa Inc and Time Warner Cable Inc posted earnings that exceeded the Street’s profit forecasts, Motorola Inc reported an unexpected profit, while Eastman Kodak Co missed the Street’s profit estimates. In economic news, weekly initial jobless claims declined roughly inline with expectations, while Chicago business activity improved. Treasuries are higher in afternoon action. Overseas, earnings and economic data helped amplify gains in Europe.

At 1:01 p.m. ET, the Dow Jones Industrial Average and the S&P 500 Index are up 1.3%, while the Nasdaq Composite is advancing 1.4%. Crude oil is up $1.93 at $85.15 per barrel, wholesale gasoline is $0.03 higher to $2.37 per gallon, and the Bloomberg gold spot price is up by $1.50 at $1,167.20 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.4% at 82.02.

Dow member Exxon Mobil Corp. (XOM $69) reported 1Q earnings grew 38% year-over-year (y/y) to $6.3 billion, or $1.33 per share, seven cents below the consensus estimate of Wall Street analysts, with revenues increasing 41% y/y to $90.3 billion, compared to the $97.6 billion that the Street was forecasting. The company said its 1Q earnings growth reflected higher crude oil prices and stronger chemical margins, but its downstream—refining—margins remained “weak.” Also, XOM said its corporate and financing expenses rose by $364 million y/y to $800 million, mainly due to a charge related to the US health care legislation signed into law in March 2010. Separately, the company announced late yesterday that it increased its quarterly dividend to $0.44 per share, from $0.42 per share. Shares have overcome early losses and have moved modestly higher.

Fellow Dow component Procter & Gamble Co. (PG $62) announced fiscal 3Q EPS ex-items of $0.89, above the $0.82 forecast of analysts, with revenues growing 7% y/y to $19.2 billion, below the $19.5 billion that the Street was anticipating. The company said volume growth was “strong” with organic sales growth—which excludes the impacts of acquisitions, divestitures and foreign exchange—increasing 4% y/y, and cost and productivity efforts aided its bottomline results. However, PG is under pressure after the company issued disappointing 4Q EPS guidance.

Visa Inc. (V $93) posted fiscal 2Q EPS of $0.96, five cents above the Street’s expectations, with revenues rising about 19% y/y to $2.0 billion, above the $1.9 billion that was expected by analysts. The credit card processing firm said its payments volume growth increased 13% y/y and total processed transactions gained 14% y/y to 10.6 billion. Shares are lower.

Motorola Inc. (MOT $7) reported an unexpected 1Q profit, posting EPS ex-items of $0.02, compared to the $0.01 per share loss that was forecasted by analysts, but revenues fell 6% y/y to $5.0 billion, roughly matching the Street’s estimates. The mobile device maker said it shipped a total of 8.5 million handsets, including a sequential increase in smartphone shipments of 2.3 million. MOT issued 2Q EPS ex-items guidance that topped analysts’ expectations. MOT is nicely higher.

Outside of earnings but in related industry news, shares of Palm Inc. (PALM $5) are solidly higher after Dow member Hewlett-Packard Co. (HPQ $53) announced that it has entered into an agreement to acquire the mobile device maker for $5.70 per share in cash, or about $1.2 billion, including debt. The news is overshadowing PALM’s slashed guidance. HPQ is under slight pressure.

Time Warner Cable Inc. (TWC $56) announced 1Q EPS ex-items of $0.82, above the $0.75 estimate of analysts, with revenues increasing 5.4% y/y $4.6 billion, which was inline with the Street’s forecasts. The company added 276,000 net video, high-speed data, and phone subscribers. Shares are solidly higher.

Eastman Kodak Co. (EK $7) is sharply lower after reporting 1Q EPS ex-items of $0.82, six cents below the Street’s expectation, with revenues increasing about 30% y/y to $1.9 billion, mostly matching analysts’ estimates. However, EK’s consumer digital imaging group sales more than doubled, driven by a jump in revenues from its inkjet printers and ink. The company reaffirmed its full-year outlook.

Jobless claims fall, Chicago business activity improves

Weekly initial jobless claims fell by 11,000 to 448,000, versus last week's figure which was upwardly revised by 3,000 to 459,000, and compared to the consensus estimate of economists surveyed by Bloomberg, which called for claims to decline to 445,000. The four-week moving average, considered a smoother look at the trend in claims, rose by 1,500 to 462,500, and continuing claims fell by 18,000 to 4,645,000, compared to the decline to 4,618,000 that was anticipated.

In other economic news, the Chicago Fed National Activity Index, was released, improving to -0.07 in March from a favorably revised -0.44 in February, and compared to the -0.20 reading that economists expected.

Treasuries are modestly higher in afternoon trading after overcoming early losses on the employment data.

Earnings and economic data help Europe rebound

Stocks in Europe finished higher, rebounding from the recent bout of pressure on growing debt concerns in the region, exacerbated by Standard & Poor’s sovereign debt ratings downgrades of Greece—to “junk status”—Spain, and Portugal in the last two trading sessions. Concerns about a Greek default eased as talks between the EU and International Monetary Fund (IMF) continue and there is increasing optimism that the debt-ridden nation will gain approval to receive financial aid—expected to be increased from 45 billion euros to 120 billion over three years—in time to avoid a default as some debt obligations are set to mature in mid-May. Amid the backdrop of relatively waning debt fears, the earnings and economic fronts across the pond helped lead the advance.

Shares of Banco Santander (STD $12) were nicely higher after Spain’s largest bank reported 1Q profits that exceeded analysts’ estimates, while consumer goods producer Unilever (UL $30) also posted a solid advance after its 1Q earnings bested analysts’ forecasts.

Meanwhile, on the economic front, Germany’s unemployment change fell by 68,000 in April—the fastest pace in more than two years per Bloomberg—compared to the 10,000 decline that economists had expected, leading to an unexpected drop in the unemployment rate in Europe’s largest economy to 7.8% from 8.0%. Elsewhere, UK house prices rose more than expected in April, while euro-zone economic confidence rose more than expected.

Britain’s FTSE 100 Index was 0.6% higher, France’s CAC-40 Index closed up 1.4%, and Germany’s DAX Index advanced 1.0%. Meanwhile, Greece’s Athex Composite Index surged 7.1%, Spain’s IBEX 35 Index finished 2.7% higher, while Portugal’s PSI General Index overcame early losses and moved 4.5% to the upside.