Morning Market Update

Jobless Claims Jump and Greeks Take to the Streets

Stocks are heading lower as continued concerns in Europe are being highlighted by yet another demonstration on the streets of Greece and the euro is lower, and as Japan’s finance minster said it was premature to call the recovery self-sustaining as the nation’s GDP fell short of estimates, and jobless claims in the US unexpectedly jumped by the largest amount in three months, driving Treasuries higher. In US equity news, semiconductor-equipment maker Applied Materials reported earnings above the Street’s estimates and gave a bullish industry outlook, design-software company Autodesk posted higher-than-expected profits, and Staples beat but gave inline guidance, while an M&A transaction was announced in the technology sector, with Symantec buying the security division of VeriSign. Later today will yield the US economic releases of the Leading Indicators and the Philly Fed Index. Overseas, European markets gave up an early gain and Asia closed down on the day.

As of 8:46 a.m. ET, the June S&P 500 Index Globex future is 18 points below fair value, the Nasdaq 100 Index is 30 points below fair value, and the DJIA is 127 points below fair value. Crude oil is down $2.48 at $70.00 per barrel, and the Bloomberg gold spot price is down $15.15 at $1,178.60 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.6% at 86.72.

Semiconductor-equipment maker Applied Materials (AMAT $13) announced 2Q EPS of $0.22, two cents above the Street estimate, on revenues of $2.3 billion versus the consensus forecast of $2.25 billion. New orders rose 22%, resulting in a backlog of $2.99 billion at quarter-end. The company said that "Global demand for computing and consumer electronics is giving our customers the confidence to make significant capacity additions, fueling what we believe will be a multiyear growth cycle," prompting the company to raise its estimate of industry capital spending to a range of $26-28 billion from its previous estimate of $21-23 billion. AMAT gave 3Q EPS guidance of $0.22-0.26 on revenue of $2.25-2.42 billion, ahead of the Street’s $0.20 EPS and $2.21 billion revenue estimates.

Security software company Symantec (SYMC $15) said it has reached an agreement to acquire the identity and authentication division of VeriSign (VRSN $28) for $1.28 billion, including a majority stake in VeriSign Japan. Symantec expects the transaction to be $0.09 dilutive to fiscal 2011 EPS. VeriSign said the deal allows the company to focus on its growing internet infrastructure services business.

Design-software company Autodesk (ADSK $31) reported 1Q EPS ex-items of $0.29, above the consensus estimate of $0.26, on revenue of $474.6 million, while the company’s forecast was for revenue of $420-440 million. The company, best known for its AutoCAD software, said that the results reflect continued improvement in the demand environment and robust growth in international geographies, particularly in Asia Pacific, and while it is optimistic about delivering margin expansion this year, it is tempered with “appropriate concern regarding the uncertainty of the European economy,” as Europe represented 42% of 1Q revenues.

Office-products retailer Staples (SPLS $21) announced adjusted 1Q earnings of $0.28, one cent above the estimate, on revenue of $188.8 million, and raised the lower-end of its full year earnings guidance to $0.18-0.20 while reiterating sales growth of low-single digits on a percentage basis.

Jobless claims jump, Philly Fed and Leading Indicators due up later today

Weekly initial jobless claims (chart) gained 25,000 to 471,000, versus last week's figure which was upwardly revised by 2,000 to 446,000, and compared to the consensus estimate of economists surveyed by Bloomberg, which called for claims to decline to 440,000. The four-week moving average, considered a smoother look at the trend in claims, added 3,000 to 453,500, and continuing claims fell by 40,000 to 4,625,000, compared to the decline to 4,605,000 that was anticipated. The jump in claims was the largest rise in three months, and a Labor Department spokesman said there were no special factors behind the advance, and Treasuries moved much higher on the news.

At 10 am Eastern, the Conference Board will release the Index of Leading Indicators, which economists expect to rise by 0.2% in April, after jumping 1.4% in March, which would mark the thirteenth-consecutive increase in the index, and the Philadelphia Fed’s Business Activity Index, will also be released, anticipated to increase to 21.3 from a previous monthly reading of 20.2.

Euro-area loses early gain, Greeks protest in the streets

Stocks in Europe and the euro erased early gains and are lower in mid-day trading, as continued government debt concerns are being highlighted by yet another protest in the streets of Greece, and after Germany imposed a ban on naked short selling yesterday—the selling of a security without owning or obtaining the approval to own the security—of 10 of the nation’s financial institutions and some derivative securities on euro-area government bonds. In the UK, the coalition government outlined measures aimed at spurring growth, saying that Royal Bank of Scotland Group Plc (RBS $13) and Lloyds Banking Group (LYG $3) would set net lending targets, and the government is pledging to simplify the tax system and deliver the “most competitive corporate tax regime” of any major economy by stripping away rules on exemptions and tax breaks while tackling avoidance so that the corporate rate could be lowered.

In economic news, UK retail sales rose 0.1% month-over-month, while the expectation was for a decline of 0.1%, German PPI gained more than forecast at 0.8% m/m, and Italian industrial orders gained 1.0%.

Individual equity movers include a decline in National Grid Plc (NGG $41), after the UK operator of power and gas networks said it planned to raise 3.2 billion pounds ($4.6 billion) in a rights offering, a fall in the shares of SABMiller Plc (SBMRY $29) after the brewer announced earnings that missed estimates, while Royal BAM Groep NV gained ground after the biggest Dutch builder according to Bloomberg posted a 19% jump in 1Q profits and Vienna Insurance Group (VNRGY $8) shares increased after reporting a 1Q profit that exceeded forecasts.

The UK FTSE 100 Index is 1.8% lower, France’s CAC-40 Index is declining 2.9%, Germany’s DAX Index is falling 2.2%, and Spain’s IBEX 25 Index is off 2.7%, while Greece’s Athex Composite is down 3.3%.

Asia loses ground as Japan grows less than anticipated

Markets in Asia were mostly lower after Japan’s finance minister warned about continuing deflation and amid continued concerns regarding the euro-area, exacerbated by continued pressure on the euro. The Nikkei 225 Index declined 1.5%, as real 1Q GDP growth came in lower than expected at 4.9% quarter-over-quarter annualized, below the 5.5% forecast. However growth was boosted by a 3.0% decline in the GDP deflator, resulting in nominal GDP growth of 1.9% annualized in 1Q. Japan GDP was primarily driven by export growth, while domestic consumption and business spending slowed, prompting the finance minster to say that he expects the Bank of Japan (BoJ) to support the economy with “flexible and appropriate” monetary policy and that officials must be “cautious” about calling the recovery self-sustaining. The BoJ begins their two-day policy meeting today, where economists are expecting the central bank to keep the benchmark rate at 0.1%.

Chinese shares slumped on property market concerns after the National Development and Reform Commission said that real estate prices had reached a plateau in some cities and that speculators are exiting, with transactions in some cities beginning to decrease in mid-April. The Shanghai Composite Index declined 1.2%, while the Hong Kong Hang Seng Index decreased 0.2%.

Elsewhere in Asia/Pacific, the Singapore Straits Times Index fell 0.8% and the Taiwan Taiex Index lost 1.8% despite strong economic growth reports in both nations, with Singapore reporting that GDP grew at an 38.6% annualized pace, while Taiwan grew 13.3%, the fastest pace in more than 30 years, as relations with mainland China boosted economic growth. India’s BSE Sensex 30 Index rose 0.7% after the government agreed to more than double the price of gas produced from fields awarded to state companies, boosting shares of Oil & Natural Gas Corp, and amid speculation of greater-than-expected proceeds from an auction of high-speed wireless permits, which could boost infrastructure spending. In other markets, the S&P/ASX 200 Index fell 1.6%, and Thailand’s market remained closed amid continued violence.