Evening Market Update

Cooler Euro-area Debt Fears, GM IPO Fuel Rise

US stocks are posting sizeable advances across the board as a successful IPO of General Motors and a much larger-than-anticipated increase in the Philly Fed Manufacturing Index are helping extend optimism from eased euro-area sovereign debt fears. European markets closed nicely higher after Ireland reported that it may ask for aid from the near $1 trillion euro-zone bailout fund. The US dollar is lower to help commodity prices while Treasury yields are rising on the improved sentiment in the euro-zone and amid the US data, which included a smaller-than-forecasted increase in weekly jobless claims and an advance in the US Index of Leading Economic Indicators. In other equity news, Limited Brands Inc topped the Street’s profit projections, while Cablevision Systems Corp announced that it has received approval by its Board to spin-off a unit.

The Dow Jones Industrial Average jumped 173 points (1.6%) to 11,181, the S&P 500 Index gained 18 points (1.5%) to 1,197, and the Nasdaq Composite was 38 points (1.6%) higher at 2,514. In moderate volume, 1.2 billion shares were traded on the NYSE and 1.9 billion shares were traded on the Nasdaq. Crude oil gained $1.38 to $82.42 per barrel, wholesale gasoline jumped $0.07 to $2.23 per gallon, and the Bloomberg gold spot price rose $16.60 to $1,352.60 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—was 0.5% lower at 78.66.

General Motors Co. (GM $34) was the company in focus today as the US automaker conducted its initial public offering, which was initially priced at $33 per share. The Wall Street Journal reported that the company raised about $20.1 billion in common and preferred stock and the US Treasury’s stake in the automaker was reduced to near 37%, from 66%. Shares finished slightly higher than the offering price.

In other corporate finance news, shares of Cablevision Systems Corp. (CVC $31) were sharply higher after the company announced that its Board of Directors has authorized the company to explore a potential leveraged spin-off of its Rainbow Media Holdings LLC unit. The transaction would be structured as a tax-free pro rata distribution to stockholders. The spinoff of Rainbow would create a company with national programming networks including AMC, IFC, and the Sundance Channel, as well as an independent film business, and a full service network programming origination and distribution company.

Limited Brands Inc. (LTD $33) reported 3Q EPS of $0.18, one penny above the consensus estimate of analysts surveyed by Reuters, with revenues increasing 11.5% year-over-year (y/y) to $2.0 billion, roughly inline with the Street’s forecasts. The retailer also increased its full-year EPS outlook, announced a $3 per share special dividend, and said it will repurchase $200 million of its shares. LTD finished higher.

In other earnings news, Sears Holdings Corp. (SHLD $64) reported a wider-than-expected fiscal 3Q loss of $1.71 per share ex-items, compared to the $1.08 shortfall expected by analysts polled by Reuters, as revenues for the quarter fell 5.5% to $9.68 billion, also below forecasts for $9.9 billion. Same-store sales—sales at stores open at least a year—declined 4.8%, with receipts at its Kmart locations down 0.7% and 8.2% lower at its namesake outlets. Interim CEO W. Bruce Johnson blamed the disappointing results on lower sales of appliances, as well as apparel which suffered from unusually warm weather. Shares of SHLD finished nearly 4% lower.

Jobless claims tick higher, Philly Fed jumps, while Leading Indicators move higher

Weekly initial jobless claims increased by 2,000 to 439,000, versus last week's figure which was upwardly revised by 2,000 to 437,000, and versus the consensus estimate of economists surveyed by Bloomberg, which called for claims to increase to 441,000. The four-week moving average, considered a smoother look at the trend in claims, declined by 4,000 to 443,000, and continuing claims fell by 48,000 to 4,295,000, matching the forecast of economists.

Additionally, the Philly Fed Manufacturing Index improved by a much larger amount than expected, jumping from 1.0 in October to 22.5 in November, compared to the forecast for an increase to 5.0. The report depicts expansion in business activity in the mid-Atlantic region accelerated—as a reading of zero is the demarcation point between expansion and contraction. New orders moved from -5.0 to 10.4, while shipments also jumped, gaining over 15 points. Also, the employment components of the index improved substantially, as the number of employees—which posted the highest reading since August 2007—and average workweek aspects of the report moved solidly into expansionary territory. Today’s report is in contrast to Monday’s release of the Empire Manufacturing Index, a measure of manufacturing in the New York region, which unexpectedly fell to a level depicting contraction in November to a level of -11.14, compared to the estimated decrease to 14.00, from October’s level of 15.73.

Meanwhile, the Conference Board released the  Index of Leading Economic Indicators (LEI) for October which increased by 0.5%, matching expectations, and September’s 0.3% rise was upwardly revised to a 0.5% increase. The gain was paced by positive contributions from the money supply, a favorable yield curve, and stock prices, while negative contributors were the pace of deliveries and orders for non-defense capital goods.

After moving lower following the surprisingly strong manufacturing report and spending most of the day lower, Treasuries pared losses and finished mixed on the day. The yield on the two-year note was 1 bp higher at 0.50%, the yield on the 10-year note gained 2 bps to 2.90%, while the 30-year bond yield lost 1 bp to 4.28%.

Euro-area debt anxiety lessens

Concerns regarding the health of sovereign debt in the euro-zone were eased by growing expectations that Ireland will receive some support for its troubled banking sector. Ireland, which has been at the heart of the recent flare up in euro-area debt fears, soothed sentiment after its central bank Governor Patrick Honohan said the nation may ask for “tens of billions” of euros to support its banking sector as the nation continues to meet with a team of European officials comprised of members from the European Central Bank (ECB), European Union (EU), and International Monetary Fund (IMF). Also, successful debt auctions of ten- and 30-year maturities in Spain, another euro-zone peripheral nation that is strapped with high debt, helped boost optimism.

The economic calendar across the pond was light but aided sentiment, with a report showing UK retail sales grew 0.5% month-over-month (m/m) in October, above economists’ expectations, offsetting a separate report that showed UK government borrowing increased more than anticipated.

The tempered concerns over the debt situation in Europe also lifted sentiment in the Asia/Pacific region, as well as a near seven-week low in the Japanese yen versus the US dollar, which boosted the outlook for export activity in that country. Moreover, South Korea’s department store sales jumped over 13% y/y in October, Australia’s average weekly wages grew by a smaller amount than anticipated in August, and Taiwan’s 3Q GDP expanded by a larger-than-forecasted amount.

Tomorrow’s US economic calendar is void of any major releases. However, Federal Reserve Chairman Ben Bernanke will give a keynote speech at the European Central Bank’s conference in Frankfurt, Germany on “Approaches to Monetary Policy Revisited—Lessons from the Crisis”, which will likely garner some attention. The international docket will provide some items of note, albeit light in nature, including industrial orders in Italy, wage data from France, and Japan’s All-Industry Index.