Morning Market Update

Markets Stall Even as Jobless Claims Fall

After opening higher aided by a larger-than-anticipated drop in US weekly initial jobless claims and favorable reports out of Asia, US stocks are nearly unchanged in late-morning action. The US dollar has gained some steam since the opening bell and is applying pressure to commodity prices helping the markets pare gains. Also, Treasuries are higher, with yields moderating somewhat from their recent surge, despite the favorable read on US employment, showing little reaction to a rise in wholesale inventories. Meanwhile, the Dow Jones Industrials are being bogged down by a lackluster reaction to member DuPont reaffirming its full-year EPS outlook and guidance for 2011, In other equity news, Whole Foods Market Inc reinstated its quarterly dividend, while Freeport-McMoRan Copper & Gold Inc announced a special dividend and a two-for-one stock split. Overseas, Asia was mostly higher after Japan’s 3Q GDP was revised higher and Australia’s employment change exceeded expectations. Moreover, European markets are moving to the upside amid a plethora of data, which included the Bank of England keeping its monetary policy unchanged.

At 10:59 a.m. ET, the Dow Jones Industrial Average is down 0.3%, the S&P 500 Index is flat, and the Nasdaq Composite is declining 0.1%. Crude oil is down $0.36 at $87.92 per barrel, wholesale gasoline is unchanged at $2.31 per gallon, and the Bloomberg gold spot price is up by $2.79 at $1,384.87 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.4% at 80.31.

Dow member DuPont (DD $48) is under pressure after the diversified materials company reaffirmed its full-year 2010 EPS outlook of about $3.10, and raised its revenue forecast. Moreover, the company issued 2011 guidance that was roughly inline with analysts’ expectations. However, shares are under pressure as its full-year 2010 EPS was short of the $3.13 that analysts surveyed by Reuters had expected and the company said it anticipates a decline in pharmaceutical royalties, due to patent expirations.

Whole Foods Market Inc. (WFMI $49) announced that its Board of Directors has approved the reinstatement of the company’s quarterly cash dividend of $0.10 per share, with the first dividend being payable January 20, 2011. The natural and organic foods supermarket said its favorable financial position and long-term outlook give it confidence to reinstate its quarterly cash dividend. WFMI is trading lower.

In other corporate finance announcements, Freeport-McMoRan Copper & Gold Inc. (FCX $110) announced that its Board of Directors authorized a special common stock dividend of $1.00 per share, to be paid December 30, 2010. Also, the company’s Board declared a two-for-one split of its common stock, which will be carried out in the form of a stock dividend payable on February 1, 2011. Shares are trading to the upside.

Jobless claims decline, Treasuries’ slide takes a breather, wholesale inventories higher

Weekly initial jobless claims decreased by 17,000 to 421,000, versus last week's figure which was upwardly revised by 2,000 to 438,000, and versus the consensus estimate of economists surveyed by Bloomberg, which called for claims to decline to 425,000. The four-week moving average, considered a smoother look at the trend in claims, fell by 4,000 to 427,500, and continuing claims tumbled by 191,000 to 4,086,000, below the forecast of economists, which called for claims to come in at 4,237,000.

Treasuries are higher, maintaining gains following the report. Treasury yields have jumped recently and the ten-year rate has reached a level not seen since June, amid a string of favorable US data, which has prompted optimism regarding the health of the economy. Meanwhile, this week’s tentative agreement to extend the Bush-era tax cuts in Washington amplified US economic sentiment, applying further pressure on bonds.

In other economic news, wholesale inventories for October rose 1.9% month-over-month (m/m) compared to the 0.8% increase that economists had expected. Sales rose 2.2%, with farm product raw materials, petroleum, and nondurable goods sales leading the way. The inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—remained at 1.18.

Europe gains amid a plethora of data

The equity markets in Europe are mostly in the green in late-day action as traders are digesting a string of economic data, highlighted by the Bank of England keeping its benchmark interest rate unchanged at 0.5% and leaving its asset purchase program unchanged at 200 billion pounds, both moves were anticipated by economists. Other reports on the economic docket across the pond showed French 3Q nonfarm payrolls were unexpectedly revised to a lower rate of growth, and Germany’s Consumer Price Index was left unrevised as expected, while a gauge of UK home prices fell by a smaller amount than anticipated on a m/m basis. Meanwhile, Greece’s 3Q GDP was revised to a larger rate of contraction than originally reported.

The equity front is providing some mixed emotions for the European markets, with shares of  ASML Holding (ASML $35) rising nicely after the Dutch semiconductor-equipment maker offered a favorable outlook for orders in 4Q, due to increased demand for smartphones and tablet computers. But shares of automakers, led by Volkswagen AG (VLKAY $30), are finding some pressure after a Chinese official said in a briefing today that the nation may end tax incentives for buying passenger cars next year, per Bloomberg. Elsewhere, financials are the leading performers after the sector’s advance in the US yesterday and in Asia today is carrying over to European action, and as euro-area debt concerns are being relatively contained today despite a downgrade of Ireland’s credit rating by Fitch Ratings.

The UK FTSE 100 Index is 0.2% higher, France’s CAC-40 Index is gaining 0.5%, Ireland’s Irish Overall Index is advancing 0.9% and Greece’s Athex Composite Index is rising 1.2%, while Germany’s DAX Index is declining 0.3%.

Asia mostly higher on upbeat data out of Japan and Australia

Stocks in Asia finished mostly in positive territory with favorable economic reports out of Japan and Australia helping support sentiment. Japan’s Nikkei 225 Index rose 0.5%, remaining near a seven-month high following a report that showed the nation’s 3Q GDP was revised to a larger rate of expansion than economists had expected. Japan’s 3Q output was revised to an annualized rate of 4.5%, from a preliminary reading of 3.9%, and compared to the 4.1% growth that was anticipated. Also, on a quarter-over-quarter (q/q) basis, Japan’s economic expansion was 1.1%, upwardly revised from 0.9%, and above the 1.0% growth that was expected. Meanwhile, Australia’s S&P/ASX 200 Index advanced 0.9% on the heels of a report showing the country’s employment change rose more than double what economists expected, and South Korea’s Kospi Index gained 1.7% after the Bank of Korea kept its benchmark interest rate unchanged at 2.50% as expected.

However, stocks in China finished mixed, with the Shanghai Composite falling 1.3% amid growing expectations that the government will tighten monetary policy to try to prevent an overheating of the economy as key inflation data is set to be released after tomorrow’s close. The Hong Kong Hang Seng Index managed to eke out a gain of 0.3%. Elsewhere, India’s BSE Sensex 30 Index fell 2.3% after the nation’s central bank Governor said inflation remains above “tolerance level,” according to Bloomberg.