Morning Market Update

Pressure Persists as Week Comes to a Close

Global equity markets are poised to close out the week on a sour note, with losses in Asia being met with declining stock markets in Europe and the US, extending yesterday’s steep descent that came courtesy of disappointing jobs and manufacturing data in the US, which dampened the outlook for the continued economic recovery. Treasuries are higher as the equity markets decline, and as there are no major economic reports set to be released today, and relatively light volume may be exacerbating the pressure on stocks. In equity news, Dow member Hewlett-Packard Co matched profits expectations and Dell Inc exceeded profit forecasts, while Intuit Inc posted a smaller-than-expected quarterly loss.

As of 8:52 a.m. ET, the September S&P 500 Index Globex future is 7 points below fair value, the Nasdaq 100 Index is 9 points below fair value, while the DJIA is 56 points below fair value. Crude oil is down $1.03 at $73.74 per barrel, and the Bloomberg gold spot price is down $7.35 at $1,224.80 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.8% at 83.10.

Dow member Hewlett-Packard Co. (HPQ $41) reported fiscal 3Q EPS ex-items of $1.08, inline with the Reuters estimate, as revenues rose 11.4% year-over-year (y/y) to $30.7 billion, above the $30.4 billion that the Street had expected. The company reaffirmed its 4Q and full-year guidance that it provided earlier this month.

Dell Inc. (DELL $12) posted 2Q EPS of $0.32, two cents above the consensus estimate of analysts, with revenues rising 22% y/y to $15.5 billion, topping the $15.2 billion that was anticipated. DELL said its commercial customer demand for its enterprise solutions increased “significantly” worldwide in 2Q, driving its revenue growth. DELL reaffirmed its full-year outlook.

Intuit Inc. (INTU $39) reported a fiscal 4Q loss ex-items of $0.05 per share, a narrower shortfall than the $0.10 loss that analysts were expecting, with revenues increasing 18% y/y to $537 million, exceeding that $500 million that was anticipated. The software firm said it is increasing its market share in the small business and consumer tax arenas. INTU issued full-year EPS guidance that topped expectations and announced a stock repurchase program.

Economic calendar quiet to end week that prompted mixed emotions

Treasuries are higher in morning action amid the disappointing start in the equity markets and as there are no major economic reports scheduled for release today. However, this week’s economic calendar played a major role in the movements seen in the global equity markets, with a much better-than-forecasted increase in industrial production and continued subdued pricing pressures seen in the Producer Price Index helping to limit the sting of a slew of disappointing jobs, housing, and manufacturing data. Weekly initial jobless claims unexpectedly rose, reaching the 500,000 mark, housing starts and building permits came in below expectations, and the NAHB’s homebuilder sentiment report surprisingly slipped, while regional manufacturing activity readings startled sentiment, headlined by an unexpected drop in the Philly Fed Manufacturing Index, which slipped to a level depicting contraction in Mid-Atlantic business activity for the first time since July 2009.

Europe lower on economic recovery uneasiness

Stocks in Europe are under pressure in afternoon action amid broad-based declines in the major market sectors, with industrials leading the way on exacerbated global economic recovery concerns on the heels of yesterday’s disappointing US jobs and manufacturing data-induced sell-off. The euro-zone economic docket is void of any major releases, but media reports out of France that suggested the government could reduce its economic growth outlook offered no support to sentiment across the pond. However, losses for oil & gas issues are being limited by an M&A announcement in the sector, with shares of Dana Petroleum Plc. (DNPXF $27) moving nicely higher after it received a hostile 1.9 billion pound ($2.9 billion) takeover offer from privately-held Korean National Oil Corp. But activity and major market moving news is relatively light, which could be exacerbating today’s decline.

The UK FTSE 100 Index is down 0.5%, France’s CAC-40 Index is trading 1.3% lower, and Germany’s DAX Index is declining 1.0%.

Asia lower as US data sparks some growth concerns

Stocks in Asia were broadly lower following the solid declines in the US equity markets yesterday on lackluster data, which flared up concerns about the global economic recovery. Stocks in Japan paced the decline, with the Nikkei 225 Index falling 2.0% on the soured recovery sentiment and as the yen was higher versus the dollar when the closing bell rung. The yen sits near a fifteen-year high versus the greenback and concerns about the recent surge in the Asian currency has dampened the outlook for the Japanese economy as the yen’s strength threatens the bottom lines of companies that rely heavily on sales in the US. The yen has fluctuated between gains and losses today as the support for the safe-haven currency has been met with some speculation that the Bank of Japan will intervene to tweak its monetary policy to help stem the rise in the Japanese currency. Meanwhile, the backdrop of global economic recovery uneasiness weighed on the equity markets in the resource-reliant nation of Australia as it tarnishes the outlook for demand for commodities, and the S&P/ASX 200 Index fell 1.1%. Also, the Australian national election over the weekend may have made traders tread with some caution to possibly amplify today’s decline as Reuters is reporting that polls are showing the ruling Labor Party is neck and neck with the conservative opposition, prompting concerns about a hung parliament, which could hamstring the nation’s ability to make critical policy decisions. The Australian equity front was mixed to offer little help to sentiment as a solid gain in shares of Australia & New Zealand Banking Group (ANZBY $20), following its surge in 3Q profits on lower provisions for bad loans, was met by a sharp drop in shares of surfwear retailer Billabong International (BLLAY $17) after it forecasted full-year earnings that came in short of analysts’ forecasts.

In economic news in Asia, Japan’s convenience store sales rose y/y in July, Hong Kong’s consumer prices unexpectedly declined on a y/y basis in July, the pace of Taiwan’s y/y export orders slowed more than expected in July, credit card spending in New Zealand declined month-over-month (m/m) in July, and growth in y/y department store sales in South Korea slowed, while the pace of gains in the nation’s discount store sales increased.

Stocks in China finished lower, with the Hong Kong Hang Seng Index declining 0.4% and the Shanghai Composite Index falling 1.7%, while South Korea’s Kospi Index dipped 0.2% and Taiwan’s Taiex Index finished flat. Rounding out the day, India’s BSE Sensex 30 Index was 0.3% lower and New Zealand’s NZX 50 Index dropped 1.0%.