Morning Market Update

Modest Gains to Start the Day

The US equity markets are slightly above the flatline in morning trading of the final session of the shortened week, as yesterday’s favorable US employment and trade data are helping soothe resurfacing concerns about the health of the banking sector across the pond. Treasuries are nearly unchanged in early trading as the economic calendar is relatively light with a read on wholesale inventories being the lone release scheduled for today’s US economic calendar. Meanwhile, equity news is focused on the tech sector as National Semiconductor beat the Street’s earnings expectations, but its revenues came in short of forecasts and it offered a cautious outlook, while Texas Instruments updated its 3Q guidance. Overseas, Asia moved mostly higher on a favorable revision to Japan’s 2Q GDP, while cautiousness ahead of data out of China limited the advance, and European markets are moving modestly lower amid the aforementioned banking concerns.

As of 8:50 a.m. ET, the December S&P 500 Index Globex future is 2 points above fair value, the Nasdaq 100 Index is 4 points above fair value, while the DJIA is 18 points above fair value. Crude oil is up $1.13 at $75.38 per barrel, and the Bloomberg gold spot price is down $3.30 at $1,240.35 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.1% at 82.74.

National Semiconductor Corp. (NSM $13) reported fiscal 1Q EPS of $0.36, two cents above the Reuters estimate, but revenues, which rose 31% year-over-year (y/y) to $412 million, came up short of the $415 million that analysts had expected. The company said its saw sequential sales growth due to demand for wireless handset and industrial markets—two of the largest markets served by NSM—but in the near term, slower growth in its end markets and distribution channel, along with some likely inventory reduction, will mute the seasonal growth that it would normally see during this time of year. NSM offered 2Q revenue guidance that came in below the Street’s estimates.

Texas Instruments Inc. (TXN $24) updated its 3Q outlook, announcing that EPS is expected to be in a range of $0.66-0.72, compared to a prior view of between $0.64-0.74, with revenues forecasted to come in a range of $3.62-3.78 billion, versus its previous outlook of between $3.55-3.85 billion. Analysts were forecasting the company to post 3Q EPS of $0.69, and revenues of $3.69 billion.

Economic docket weak to end the shortened week

Treasuries are nearly unchanged in morning trading as the economic calendar is relatively light to finish out the abbreviated week, with the lone release on today’s docket being a reading on wholesale inventories, forecasted to increase 0.4% in July, after inching 0.1% higher in June.

The US economic data was relatively light this week and painted a mixed picture with yesterday’s steeper-than-forecasted drop in weekly initial jobless claims and larger-than-anticipated narrowing of the trade deficit being met by the Federal Reserve’s Beige Book, a read on current economic conditions across the US, noting “widespread signs of a deceleration compared with the preceding periods.”

Europe modestly lower on festering euro-area banking fears

Stocks in Europe are slightly below the flatline in afternoon action, with financials slumping on concerns about the strength of euro-area banking sector balance sheets amid speculation that the group needs to bolter capital positions. The uneasiness stems from a Bloomberg report that Deutsche Bank—Germany’s largest bank—is considering a stock sale of as much as 9 billion euros ($11.4 billion), according to people familiar with the matter, but the company has not commented on the report. However, shares of Nokia Corp. (NOK $10) are nicely higher to limit declines in European trading, after the world’s largest maker of mobile phones named a Microsoft Corp. (MSFT $24) executive as its new CEO. Also, a solid advance in shares of Volkswagen (VLKAY $19) are helping stem the slide in stocks after Europe’s largest carmaker reported strong deliveries for August.

The European economic front is yielding a plethora of data, with some focus on industrial production, as output in France and Sweden both growing more than expected, while Italy’s production came up short of forecasts. Also, Inflation data is prevalent across the pond, with UK producer prices increasing at the slowest annual pace in August in six months, while consumer prices in Spain rose at a modest pace to match expectations. Finally, Italy’s 2Q GDP was revised to a larger than previously forecasted pace of expansion.

The UK FTSE 100 Index is flat, France’s CAC-40 Index is down 0.1%, Germany’s DAX Index and Italy’s FTSE MIB Index are decreasing 0.3%, Sweden’s OMX Stockholm 30 Index is unchanged, and Spain’s IBEX 35 Index is falling 0.4%.

Asia mostly higher as Japan economic output revised higher

Stocks in Asia were mostly higher on the heels of the favorable jobless claims and trade data out of the US and on an upbeat revision to Japan’s 2Q GDP. The Japanese Nikkei 225 Index rose 1.6% to lead the way in Asian trading after the final revision to the nation’s 2Q GDP was changed to show a 0.4% quarter-over-quarter (q/q) rate of expansion, compared to the previous 0.1% growth that was reported, and inline with economists’ expectations. On an annualized basis Japan’s GDP was revised to a 1.5% expansion, from the 0.4% that was previously projected, and also matching the forecast of economists. Additional support to the advance in Japan came as the yen weakened versus the US dollar and other major currencies, pausing from its recent surge, to help soothe concerns toward companies that rely on sales outside Japan, and shares of Canon Inc. (CAJ $43) moved solidly higher aided by the currency action and after the camera maker announced a share repurchase program. Also, the Japanese government unveiled a 920 billion yen ($11 billion) stimulus package today, which also helped ease the advance in the yen and add to the upbeat economic backdrop.

Meanwhile, Chinese data was also a main focus in today’s action as the nation is expected to release several pieces of key economic data after the close of trading for the global markets today. China will report producer and consumer prices, industrial production, and retail sales. However, the nation did report its trade data, which showed China’s trade surplus narrowed by a larger amount than expected, as imports grew much more than anticipated, while exports rose at a slightly smaller pace than forecasted. The strong import data suggests increasing domestic demand in the economy that has led the global recovery and higher imports can be an indicator of future exports, possibly indicating an improved outlook for global demand for Chinese goods. Stocks in China moved modestly higher amid some cautiousness ahead of the plethora of data set to be released late today, with the Hang Seng Index gaining 0.4% and the Shanghai Composite Index rising 0.3%.

Rounding out the day, South Korea’s Kospi Index increased 1.0%, and Taiwan’s Taiex Index gained 0.7%, while Australia’s S&P/ASX 200 Index declined 0.5%.