Morning Market Update

Stocks Continue to Shine

The equity markets are nicely higher in morning action, as easing debt concerns in the euro-zone are helping stocks overcome 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 of out 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 posted earnings that exceeded the Street’s profit forecasts. In economic news, weekly initial jobless claims declined, while Chicago business activity improved. Treasuries are nearly unchanged in morning action. Overseas, Asia was lower, while earnings and economic data are helping amplify gains in Europe.

As of 8:53 a.m. ET, the June S&P 500 Index Globex future is 9 points above fair value, the Nasdaq 100 Index is 13 points above fair value, and the DJIA is 51 points above fair value. Crude oil is up $1.11 at $84.33 per barrel, and the Bloomberg gold spot price is down $1.35 at $1,164.35 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.5% at 81.96.

Dow member Exxon Mobil Corp. (XOM $69) reported 1Q EPS of $1.33, seven cents below the consensus estimate of Wall Street analysts, with revenues of $90.3 billion, compared to the $97.6 billion that the Street was forecasting.

Fellow Dow component Procter & Gamble Co. (PG $63) announced fiscal 3Q EPS ex-items of $0.89, above the $0.82 forecast of analysts, with revenues growing 7% year-over-year (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.

Visa Inc. (V $94) 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 increase 13% y/y and total processed transactions gained 14% y/y to 10.6 billion.

Outside of earnings, 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.

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 nearly unchanged after overcoming early losses on the employment data and following yesterday’s decline amid optimism that Greece will avoid a default. Also, treasuries extended losses yesterday following the Federal Open Market Committee (FOMC) meeting, in which the Fed left its benchmark interest rate unchanged at a range of 0-0.25%, maintained its “extended period” language and increased its outlook on the labor market.

Earnings and economic data help Europe rebound

Stocks in Europe are higher in afternoon action, 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 are easing 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 are helping lead the advance.

Shares of Banco Santander (STD $12) are nicely higher after Spain’s largest bank reported 1Q profits that exceeded analysts’ estimates, while consumer goods producer Unilever (UL $29) is also posting 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 is 0.8% higher, France’s CAC-40 Index is up 1.1%, and Germany’s DAX Index is advancing 0.7%. Meanwhile, Greece’s Athex Composite Index is surging 7.9%, Spain’s IBEX 35 Index is 2.6% higher, while Portugal’s PSI General Index is off 2.0%.

Asia falls in light trading

Stocks in Asia finished lower amid the growing debt fears in Europe, as Chinese markets paced the decline, with the Shanghai Composite Index falling 1.1% and Hong Kong’s Hang Seng Index declining 0.8%. However, action in the region was lighter than usual as markets in Japan were closed in observance of the Golden Week holiday. Australia’s S&P/ASX 200 Index fell 0.8% as the resource rich nation was pressured by concerns that increasing euro-zone debt problems could threaten the global economic recovery and dampen demand for commodities. Also, banking shares were lower to add to the decline after shares of Australia & New Zealand Banking Group (ANZBY $23) came under pressure after it reported first-half profits that missed the consensus forecast of analysts surveyed by Bloomberg. In economic news, the Australian Leading Index declined 0.3%, to add to the uneasy backdrop. Elsewhere in the region, New Zealand’s NZX 50 Index rose 0.1% after its central bank kept its benchmark interest rate unchanged at 2.5% and a separate report showed the nation’s trade surplus increased in March.

Rounding out the day, South Korea’s Kospi and Taiwan’s Taiex Indexes declined 0.3%, while India’s BSE Sensex 30 Index advanced 0.7%. Meanwhile, after the closing bell, the world’s largest lender by market value Industrial & Commercial Bank of China (IDCBY $37), reported 1Q profits that fell short of analysts’ expectations.