Morning Market Update

Earnings Data Keeps Bulls’ Legs Turning

The global equity markets are higher again, as a plethora of upbeat earnings reports in the US and across the pond are continuing to buoy sentiment, highlighted by Dow member DuPont’s much better-than-expected 2Q earnings report and increased outlook. Moreover, equity markets in Europe are higher, led by steep gains in the financial sector on strong profit reports from UBS AG and Deutsche Bank AG. Treasuries are lower in morning trading, following a report that showed housing prices rose more than forecasted in May, and ahead of the releases of the Consumer Confidence Index and the Richmond Fed Manufacturing Index. In other global earnings news, Cummins Inc topped analysts’ forecasts, SAP AG and Occidental Petroleum Corp both missed the Street’s profit projections, while BP Plc. matched expectations after excluding charges related to the Gulf of Mexico oil spill. Elsewhere overseas, Asian markets finished mixed in a lackluster session.

As of 8:51 a.m. ET, the September S&P 500 Index Globex future is 4 points above fair value, the Nasdaq 100 Index is 9 points above fair value, while the DJIA is 35 points above fair value. Crude oil is up $0.57 at $79.55 per barrel, and the Bloomberg gold spot price is flat at $1,183.55 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.2% at 81.90.

Dow member DuPont (DD $39) reported 2Q EPS ex-items of $1.17, well above the $0.94 Reuters estimate, with revenues jumping 26% year-over-year (y/y) to $8.6 billion, above the $8.3 billion consensus expectation of analysts. The company said it grew sales across every segment, with several businesses, including electronics and titanium dioxide, delivering results that “far exceeded pre-recession levels.” DD raised its full-year EPS guidance.

Cummins Inc. (CMI $78) announced fiscal 2Q earnings of $1.25 per share, much higher than the $0.89 that the Street was calling for, with revenues advancing 32% y/y to $3.21 billion, compared to the $2.8 billion that was anticipated. The engine maker raised its full-year 2010 outlook and it boosted its quarterly cash dividend by 50% to $0.2625 per share.

Occidental Petroleum Corp. (OXY $83) posted 2Q EPS of $1.31, which was two cents below that Street’s forecast, but revenues rose 29% y/y to $4.76 billion, above the $4.52 billion that was expected.

Home prices rise more than expected, consumer confidence is on deck

Just before the opening bell, the S&P/Case-Shiller Home Price Index was released showing an increase in home prices of 4.61% year-over-year (y/y) in May, above the increase of 3.85% that economists surveyed by Bloomberg had expected. Month-over-month (m/m), home prices were 0.47% higher, compared to forecasts, which called for a gain of 0.20%. Treasuries remained lower following the report, amid the upbeat data out of Europe and continued favorable US earnings reports.

Later this morning, the economic calendar will yield the release of the Consumer Confidence Index, forecasted to decline from 52.9 in June to 51.0 for July, as well as the release of the Richmond Fed Manufacturing Index, which is expected to drop from 23 in June to 12 in July.

Financials fuel solid gains in Europe

Stocks in Europe are nicely higher in afternoon action, led by a rally in the financial sector on a couple of favorable earnings reports out of the group and as the Basel Committee on Banking Supervision said it will temper some of the proposed capital and liquidity rules that firms will have to adhere to. Meanwhile, shares of UBS AG (UBS $15) are posting steep gains after Switzerland’s largest bank reported 2Q profits that exceeded analysts’ expectations, along with Deutsche Bank AG (DB $66), which is also nicely higher to contribute to the strength in the financial sector. However, SAP AG (SAP $49) is lower after the world’s largest maker of business-management software, according to Bloomberg, announced 2Q earnings that missed analysts’ forecasts. Elsewhere, BP Plc. (BP $39) is making multiple headlines after the company, which is dealing with the fallout from the Gulf of Mexico oil spill, posted a $17 billion 2Q loss on charges related to the oil spill containment and cleanup, while excluding the costs, BP posted an underlying profit that matched expectations. Additionally, BP confirmed that its CEO Tony Hayward will step down and be replaced by Robert Dudley, effective October 1st. Finally, BP announced that it plans to sell as much as $30 billion in assets to help it meet its Gulf oil leak costs. Shares of BP are modestly higher.

On the economic front across the pond, a reading of German consumer confidence increased to level exceeding economists’ forecasts, while a separate report showed German import prices rose more than forecasted. In other economic news in the region, Sweden’s producer prices rose much more than forecasted, and euro-zone money supply unexpectedly increased on a year-over-year basis.

The UK FTSE 100 Index is 0.9% higher, France’s CAC-40 Index is up 1.3%, Germany’s DAX Index is advancing 0.8%, Sweden’s OMX Stockholm 30 Index is rising 0.6%, and Switzerland’s Swiss Market Index is increasing 1.3%.

Asia mixed in a lackluster session

Stocks in Asia were mixed despite the strong day in the US on a surge in new home sales and more upbeat news from the corporate earnings front, as traders treaded with some caution in Japan as the nation’s earnings season is getting under way and there were plenty of economic reports in Asia for traders to digest. The Japanese Nikkei 225 Index dipped 0.1% even after a solid gain in shares of Sumitomo Mitsui Financial Group Inc. (SMFJY $3) after profits from the investment banking unit of the nation’s second-largest publicly traded bank, per Bloomberg, surged 24%. Financials were also supported by the announcement that the Basel Committee relaxed some of its proposed capital requirements that face the group. After the closing bell in Japan, Canon Inc. (CAJ $41) announced fiscal 3Q quarterly profits that topped analysts’ forecasts. Meanwhile, the Asian economic calendar had some reports that deserve a mention, with a gauge of South Korean consumer confidence remaining at the highest level since January, and Korea’s Kospi Index finished flat, while Australia’s S&P/ASX 200 Index rose 0.3% after a report showed the nation’s Leading Index rose in May. Elsewhere, stocks in China were mixed, with the Hong Kong Hang Seng Index rising 0.6% while the Shanghai Composite Index fell 0.5%, following separate reports that showed the Chinese Leading Index slipped slightly from May to June, and the Hong Kong trade deficit widened by a larger amount than expected. Rounding out the busy economic day in the region, Taiwan’s Leading Index fell in June after being flat in May, and the Taiex Index declined 0.5%, and India’s BSE Sensex 30 Index rose 0.3% after its central bank increased a key interest rate by a larger amount than forecasted.