Morning Market Update

US Labor Figures Employ the Bulls

The US equity markets have overcome early losses and are higher in morning action following the US labor report, which showed far more jobs were added to nonfarm payrolls than economists expected. Treasuries moved decisively lower on the heels of the release, ahead of reports on pending home sales and consumer credit. In equity news, Dow member Kraft Foods Inc topped the Street’s earnings expectations but its revenues came in softer than forecasted, while Starbucks Corp posted better-than-expected earnings and increased its guidance. Overseas, Asia was nicely higher following the steep gains in the US and Europe yesterday, while the upbeat US employment data is helping European equities overcome early losses.

As of 8:49 a.m. ET, the December S&P 500 Index Globex future is 2 points above fair value, the Nasdaq 100 Index is 2 points above fair value, while the DJIA is 22 points above fair value. Crude oil is up $0.35 at $86.84 per barrel, and the Bloomberg gold spot price is down $12.00 at $1,380.50 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.9% at 76.59.

Dow member Kraft Foods Inc. (KFT $32) reported 3Q EPS ex-items of $0.47, one penny ahead of the consensus estimate of analysts surveyed by Reuters, with revenues rising 26.2% year-over-year (y/y) to $11.9 billion, just shy of the $12.0 billion that the Street had forecasted. The food company said the integration of its Cadbury acquisition is progressing well, helping its European unit profits jump 57%, and it had solid performance in every geography. KFT said its organic revenues—excluding acquisitions, divestitures, and foreign exchange—grew 2.5%, driven by pricing in response to higher input costs, partially offset by volume and product mix, which was unfavorably impacted by higher pricing and the continued weak consumer environment. The company reaffirmed its full-year guidance.

Starbucks Corp. (SBUX $30) announced fiscal 4Q earnings ex-items of $0.37 per share, above the $0.32 that was expected, with revenues increasing 17.2% y/y to $2.8 billion, roughly inline with the Street’s forecast. Same-store sales—sales at stores open at least a year—rose 8%, driven by a 5% rise in traffic and an increase in average purchases by customers. The company raised its 2011 guidance.

Nonfarm payrolls increase by more jobs than forecasted

Nonfarm payrolls rose by 151,000 jobs in October, above the consensus estimate of economists surveyed by Bloomberg, which forecasted a 60,000 increase. Additionally, excluding government hiring and firing, private sector payrolls increased by 159,000, versus the forecast of a gain of 80,000, after expanding by an upwardly revised 107,000—from an initially reported 64,000 gain—in September. The unemployment rate remained at 9.6%, matching expectations. Average hourly earnings were 0.2% higher month-over-month (m/m) inline with the Street's forecast, and average weekly hours inched higher to 34.3, compared to economists’ forecasts for an unchanged reading of 34.2. Government payrolls were “little changed” as Census employment fell by 5,000 temporary workers and state and local governments shed 14,000 jobs. Treasuries are lower after falling on the employment data.

Later this morning, the economic calendar will yield the release of pending home sales, and the gauge of the pipeline of existing home sales is anticipated to increase 3.0% m/m in September. Meanwhile, consumer credit will be released in the final hour of trading and is forecasted to fall by $3.0 billion.

US jobs data helps Europe overcome early weakness

The equity markets in Europe have erased early losses and are higher in afternoon action as the better-than-forecasted US employment data is helping stocks overcome some disappointing corporate and economic data, which prompted some profit taking from the recent advance in the region. Financials are under pressure as shares of Royal Bank of Scotland (RBS $15) are solidly lower after the part-government owned company warned about challenging market conditions in 4Q, per Reuters, following its announcement of an operating profit in 3Q. Also HSBC Holdings Plc. (HBC $57) is lower after the company sounded a cautious tone about its outlook, but it did say profits so far this year are “well ahead” of a year ago.

Meanwhile, the economic calendar across the pond was not kind to sentiment as euro-zone retail sales unexpectedly fell m/m in September, factory orders in Germany—Europe’s largest economy—surprisingly slumped, and producer prices in the UK came in hotter than anticipated.

The UK FTSE 100 Index and France’s CAC-40 Index are 0.2% higher, while Germany’s DAX Index is advancing 0.3%.

Asia follows US higher

Stocks in Asia were mostly higher on the heels of the solid advance in the US and Europe as traders digested the US Fed’s further stimulus action announcement on Wednesday. Japanese equities led the way, with the Nikkei 225 Index rising 2.9%, led by companies that rely heavily on business in the US as well as automakers, following a steep advance in shares of Nissan Motor Co. (NSANY $18) after its boosted its annual profit forecast. After the closing bell in Japan, Toyota Motor Corp. (TM $73) increased its full-year earnings outlook for a second time, but warned about the potential impact of the surging Japanese yen. In economic news, the Bank of Japan kept its benchmark interest rate unchanged near zero, and released details of its asset purchase program, pertaining to its purchases of exchange traded funds (ETFs) and Japanese real estate investment trusts (J-REITs). Elsewhere, the strong global upward moves in the global equity markets yesterday helped stocks in China, with the Hong Kong Hang Seng Index and the Shanghai Composite Index both gaining 1.4%. Meanwhile, Australia’s S&P/ASX 200 Index rose 1.2%, aided by strength in mining issues and following the release of the Reserve Bank of Australia’s quarterly monetary policy statement, in which it said the pace of the nation’s economic growth will increase next year.