Morning Market Update

Stocks Stand Tall as Dollar Weakens and Jobless Claims Fall

The US equity markets are nicely higher in early action as the US dollar is reversing some of its gains seen in the past two trading sessions to support commodity prices, while sentiment was lifted by an unexpected drop in US weekly initial jobless claims. Also, earnings reports continue pour in, highlighted by better-than-expected results from Dow member Exxon Mobil Corp, along with Visa Inc and Motorola Inc. However, the enthusiasm is being limited by a large profit shortfall from Allstate Corp and lackluster guidance from Dow component 3M Co. Treasuries are mostly higher but did pare some gains following the jobs report. Overseas, Asia was mixed amid a slew of earnings reports and as traders digested the Bank of Japan’s monetary policy announcement, while better-than-forecasted profits are helping Europe advance despite some lackluster economic news across the pond.

As of 8:51 a.m. ET, the December S&P 500 Index Globex future is 7 points above fair value, the Nasdaq 100 Index is 10 points above fair value, while the DJIA is 53 points above fair value. Crude oil is up $0.53 at $82.47 per barrel, and the Bloomberg gold spot price is up $10.74 at $1,336.09 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.7% at 77.53.

Dow component 3M Co. (MMM $90) announced 3Q earnings ex-items of $1.53, two cents above the consensus estimate of analysts surveyed by Reuters, with revenues growing 11% year-over-year (y/y) to $6.9 billion, above the $6.8 billion that was expected on the Street. The company issued full-year EPS guidance that missed analysts’ forecasts.

Fellow Dow member Exxon Mobil Corp. (XOM $66) reported 3Q EPS of $1.44, versus the $1.39 that was anticipated by analysts, but revenues increased 15.8% y/y to $95.3 billion, compared to the $98.1 billion that the Street had forecasted.

Visa Inc. (V $80) announced fiscal 4Q EPS ex-items of $0.95, compared to the $0.94 that analysts were expecting, with revenues increasing 13% y/y to $2.1 billion, mostly matching the consensus estimate of the Street. The credit card transaction firm characterized the business environment as “very challenging,” but payments volume growth was 14% higher y/y and total processed transactions rose 16% y/y to 12.1 billion. The company also issued full-year 2011 revenue guidance that matched the Street’s expectations and it reiterated its 2011 EPS outlook. Moreover, the company announced a new $1 billion stock repurchase plan.

Allstate Corp. (ALL $32) reported 3Q EPS ex-items of $0.83, below the $0.99 that the Street had forecasted, with premiums written by the insurance firm dipping 0.6% y/y to $6.8 billion, roughly inline with the expectation on analysts. The company said its auto premiums written declined 0.5% y/y, while homeowner premiums written increased 2.4% y/y.

Motorola Inc. (MOT $8) achieved 3Q EPS ex-items of $0.12, one penny above the Street’s expectations. Meanwhile, total revenues rose 6% y/y to $5.8 billion, including $900 million in revenues from discontinued operations, versus the $5.6 billion that analysts had anticipated, but it was unclear if the analyst forecast included the discontinued revenues. The company said its mobile devices unit had sales growth of 20% y/y and reached profitability for the first time in over three years, with its Droid X device continuing to sell “extremely well.”

Weekly jobless claims fall

Weekly initial jobless claims fell by 21,000 to 434,000, versus last week's figure which was upwardly revised by 3,000 to 455,000, where the consensus estimate of economists surveyed by Bloomberg called for claims to come in at. The four-week moving average, considered a smoother look at the trend in claims, declined by 5,500 to 453,250, and continuing claims dropped by 122,000 to 4,356,000, compared to the 4,430,000 that was anticipated by economists. Treasuries are mostly higher, but did pare gains following the employment data.

Meanwhile, the US dollar is under some pressure after rising broadly for the past couple sessions as traders pared back bets against the US currency while grappling with the size, scope, and efficacy of any further stimulus efforts by the US Federal Reserve, which is highly-expected at the Federal Open Market Committee’s (FOMC) monetary policy meeting next week. The question of whether the Fed will act to deploy further stimulus efforts seems to be answered by recent market action, as the dollar has weakened to a fifteen-year low versus the yen and the Dollar Index sits near a ten-month low.

Earnings supporting advance in Europe

Stocks in Europe are higher in afternoon action, led by telecom and oil & gas issues amid favorable earnings reports out of the sector, which are highlighting a busy day on the earnings front in the region. Shares of France Telecom (FTE $23) are nicely higher after company’s earnings exceeded analysts’ forecasts and it raised its full-year revenue forecast. Meanwhile, Royal Dutch Shell (RDS/A $63) and Eni SpA (E $44) are both moving higher to help the energy group after the companies posted profits that topped analysts’ expectations.

The earnings front is overshadowing some disappointing data from the economic calendar across the pond, as UK home prices fell more than twice the expectation of economists in October, France’s producer prices came in hotter-than-expected for September, and Italian wages decelerated in September.

The UK FTSE 100 Index, France’s CAC-40 Index, and Germany’s DAX Index are advancing 0.6%, while Italy’s FTSE MIB Index is gaining 0.9%.

Asia mixed amid earnings and Bank of Japan meeting

Stocks in Asia were mixed, with traders digesting a slew of earnings reports and the conclusion of the Bank of Japan’s monetary policy meeting. The BoJ kept its benchmark interest rate range unchanged between 0-0.10%, but gave some details about its asset purchase program that was previously announced earlier this month when it unexpectedly reduced its interest outlook to the above mentioned range. The BoJ said it will buy 1.5 trillion yen ($18.4 billion) in long term government bonds and 2 trillion yen in short-term government securities, and 450 billion yen in exchange traded funds (ETFs) and 50 billion yen of real estate investment trusts (REITs). Also, the Japanese central bank moved up its next policy meeting from November 15-16 to November 4-5, and said it will buy corporate debt with lower credit ratings that it has previously purchased, per Bloomberg. The Nikkei 225 Index declined 0.2% following the announcement and a solid gain in shares of Canon Inc. (CAJ $46) after the world’s largest camera maker posted profits that exceeded expectations and raised its full-year earnings forecast, which helped limit losses.

Earnings reports also supported shares in Australia and Hong Kong, with the S&P/ASX 200 Index rising 0.8% on the heels of a solid gain in shares of Australia & New Zealand Banking Group (ANZBY $24) after its profit report topped forecasts, and the Hang Seng Index advancing 0.2% after Bank of China (BACHY $15) moved nicely higher after its favorable earnings release.

In other economic news, Japan’s retail trade fell much more than anticipated by economists in September, and Australia’s Leading Index gained modest ground. Rounding out the day, China’s Shanghai Composite Index declined 0.2% and South Korea’s Kospi Index dipped 0.1%, while Taiwan’s Taiex Index rose 0.8%.