Morning Market Update

Earnings and European Data Drive Upward Direction

The global equity markets are higher as a plethora of favorable earnings and economic reports around the globe are helping offset a mixed bag of economic data out of China to boost stocks. Dow members Caterpillar Inc, McDonald’s Corp, and Travelers Companies Inc all exceeded the Street’s profit projections, while fellow Dow component AT&T Inc posted stronger-than-forecasted revenues. Also, eBay Inc reported better-than-expected earnings, while Visa Inc boosted its dividend. Meanwhile, US weekly initial jobless claims came in below economists’ forecasts and Treasuries are nearly unchanged in morning action, ahead of reports on mid-Atlantic manufacturing activity and leading indicators. Overseas, Asia was mixed as traders digested divergent economic reports out of China, highlighted by a larger-than-forecast expansion in 3Q GDP. Elsewhere, European markets are gaining ground on upbeat manufacturing data out of Germany and the euro-zone, which are being complimented by a favorable profit report from Nokia Corp.

As of 8:53 a.m. ET, the December S&P 500 Index Globex future is 4 points above fair value, the Nasdaq 100 Index is 13 points above fair value, while the DJIA is 51 points above fair value. Crude oil is down $0.62 at $81.92 per barrel, and the Bloomberg gold spot price is down $6.88 at $1,339.38 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is flat at 77.14.

Dow component Caterpillar Inc. (CAT 80 ¹) reported 3Q earnings of $1.22 per share, easily exceeding the $1.09 estimate of analysts surveyed by Reuters, with revenues jumping 53% year-over-year (y/y) to $11.1 billion, also topping the forecasts of the Street, which expected revenues of $10.7 billion. The construction equipment maker said it aggressively managed costs, while continuing to ramp up production to meet customer demand. CAT added that continuing economic growth in the developing world has been “key” to improving sales. The company boosted its full-year outlook, while offering better-than-expected revenue guidance for 2011 as it expects developing economies to continue to grow. CAT also said it expects developed economies to grow as well in 2011, but at a slower pace than the developing world.

Dow member AT&T Inc. (T $29) posted 3Q EPS ex-items of $0.55, inline with the Street’s expectations, while revenues which increased 2.8% y/y to $31.6 billion, topped the $31.2 billion that was expected by analysts. The company said it had record wireless sales and its 2.6 million increase in total wireless subscribers was the highest 3Q net gain in the company’s history.

Dow component McDonald’s Corp. (MCD $77) achieved 3Q EPS of $1.29, four pennies above the consensus estimate of analysts, with revenues increasing 4% y/y to $6.3 billion, which exceeded the $6.2 billon that was forecasted. Global same-store sales—sales at store open at least thirteen months—rose 6.0%.

Dow member Travelers Companies Inc. (TRV $101) reported 3Q EPS ex-items of $1.81, well above the consensus estimate of $1.51, with revenues increasing 2% y/y to $5.5 billion, slightly above the $5.4 billion that the Street had forecasted. The insurance firm said its underwriting results “remained strong” across each of its business segments. TRV raised its full-year EPS guidance.

eBay Inc. (EBAY $26) announced 3Q EPS ex-items of $0.40, three cents above the Street’s estimate, as revenues grew 1% y/y to $2.2 billion, roughly inline with expectations. The global ecommerce and online payment firm said its PayPal business delivered “strong” 3Q performance and gained market share globally, while its results at eBay were “stable.” The company issued better-than-expected 4Q EPS and full-year guidance.

Outside of earnings, credit card transaction processor Visa Inc. (V $121) announced that its Board of Directors had declared a 20% increase in its quarterly dividend to $0.15 per share.

Weekly initial jobless claims decline, Philly Fed and leading indicators set to follow

Weekly initial jobless claims fell by 23,000 to 452,000, but last week's figure was upwardly revised by 13,000 to 475,000, and compared to the consensus estimate of economists surveyed by Bloomberg, which called for claims to come in at 455,000. The four-week moving average, considered a smoother look at the trend in claims, declined by 4,250 to 458,000, and continuing claims dropped by 9,000 to 4,441,000, compared to the 4,420,000 that was anticipated by economists. Treasuries are nearly unchanged, showing little reaction to the employment data.

Later today, the economic calendar will yield the releases of the Philly Fed Manufacturing Index, expected to move from -0.7 in September to 2.0 for October, with a reading above zero depicting expansion in activity, and the Conference Board’s Index of Leading Indicators for September, forecasted to rise 0.3%.

Europe gaining ground on mostly favorable earnings and economic data

Stocks in Europe are moving higher in afternoon action, led by strength in consumer goods and technology issues on some favorable earnings reports out of the sectors, while a plethora of upbeat manufacturing reports across the pond is aiding the backdrop and boosting the materials group. Nokia Corp. (NOK $11) is nicely higher after the world’s largest mobile phone maker, per Bloomberg, reported better-than-forecasted profit on higher prices for its devices. The company also announced that it will cut 1,800 jobs globally. Moreover, shares of Britvic Plc. (BTVCY $16) are solidly higher after the UK beverage maker announced favorable revenue results on higher volumes. However, shares of Credit Suisse Group (CS $45) are under some pressure after the company reported worse-than-forecasted 3Q earnings on soft trading activity.

The economic calendar in Europe is also contributing to the upward move in the region, highlighted by manufacturing PMI reports depicting stronger-than-forecasted activity in Germany—Europe’s largest economy—and the euro-zone. Additionally, the German government raised its forecast for economic growth for this year and 2011. The favorable data is overshadowing disappointing reports on UK retail sales, manufacturing activity in France, and smaller-than-expected expansion in euro-zone services. Later today, euro-zone consumer confidence will be reported.

The UK FTSE 100 Index is 0.8% higher, France’s CAC-40 Index is gaining 1.0%, and Germany’s DAX Index is advancing 0.9%.

Asia mixed amid Chinese data

Stocks in Asia finished mixed as traders grappled with a plethora of data out of China, which has led the global recovery, while a stronger yen thwarted early gains in Japan. The Nikkei 225 Index was down 0.1% and the Shanghai Composite Index declined 0.7%. China reported that its real 3Q GDP expanded at 9.6% y/y, a deceleration from the 10.3% growth in 2Q, but was slightly above the 9.5% increase that economists had expected. Other data out of China included: hotter-than-expected producer prices, inline consumer prices, and slightly stronger-than-forecasted y/y retail sales, while industrial production and fixed asset urban investment were modestly below forecasts on a y/y basis. The data fostered mixed reactions as speculation following China’s central bank’s surprising rate hike on Tuesday ramped up that today’s data would be stronger than what was reported, while the roughly inline data cooled expectations of further near-term tightening efforts in Asia’s largest economy. The Hong Kong Hang Seng Index finished 0.4% higher amid the heavy dose of Chinese data, which included a report that showed consumer prices in Hong Kong unexpectedly decelerated. The Hang Seng managed to gain ground despite a solid decline in shares of China Mobile Ltd. (CHL $53) after the world’s biggest mobile phone carrier by subscribers, per Dow Jones Newswires, posted 3Q profits that missed analysts’ forecasts. Other moves in the region were subdued, with Australia’s S&P/ASX 200 Index finishing nearly unchanged, South Korea’s Kospi Index rising 0.2%, and Taiwan’s Taiex Index inching 0.1% higher.