Evening Market Update

Earnings Help Soothe Omnipresent Global Concerns

US equities extended their recent run on Friday, with the Dow notching its sixth gain in seven sessions, with some upbeat profit reports being the elixir for today's positive mood, despite persistent concerns over euro-area debt, tensions in the Middle East, and the nuclear crisis in Japan. Oracle reported results that beat top- and bottom-line estimates, helping technology issues, while Accenture Plc also bested the Street's expectations and offered up a favorable outlook. However, Research in Motion disappointed investors with its guidance, which overshadowed the smartphone maker's better-than-expected profit report. A larger-than-forecasted downward revision to a read on consumer sentiment also tempered the enthusiasm, while investors mostly shrugged off an upward revision to US 4Q GDP. Treasuries finished lower amid the strength in stocks.

The Dow Jones Industrial Average rose 50 points (0.4%) to 12,221, the S&P 500 Index increased 4 points (0.3%) to 1,314, and the Nasdaq Composite gained 7 points (1.4%) to 2,743. In moderate volume, 823 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.20 to $105.40 per barrel, wholesale gasoline was flat at $3.05 per gallon, while the Bloomberg gold spot price decreased $2.60 to $1,428.05 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-was 0.7% higher at 76.24. For the week, including dividends, the DJIA gained 3.1%, the S&P 500 Index rose 2.7% and the Nasdaq Composite added 3.8%.

Oracle Corp. (ORCL $33) reported fiscal 3Q EPS ex-items of $0.54, four pennies above the consensus estimate of analysts surveyed by Reuters, as revenues grew 36% year-over-year (y/y) to $8.8 billion, exceeding the $8.7 billion that the Street had anticipated. Software sales drove the results and the company also announced an increase to its quarterly dividend of 20% to $0.06 per share. Shares were higher.

Moreover, Accenture Plc. (ACN $54) reported fiscal 2Q EPS of $0.75, above the $0.71 that analysts had anticipated, with revenues rising 17% y/y to $6.1 billion, compared to the $5.7 billion that the Street expected. The management consulting and technology services and outsourcing firm issued 3Q revenue guidance that exceeded forecasts, while it increased its full-year EPS outlook. Shares were higher.

However, Research in Motion Ltd. (RIMM $57) was sharply lower after the maker of the BlackBerry smartphone issued 1Q guidance that came up short of analysts' forecasts, which overshadowed its better-than-forecasted 4Q earnings results and full-year EPS outlook. RIMM posted 4Q EPS of $1.78, three cents above the Street's expectations, as revenues increased 36% y/y to $5.6 billion, roughly inline with forecasts.

Final read on 4Q GDP revised higher, consumer sentiment adjusted lower

The final look at 4Q Gross Domestic Product, the broadest measure of economic output, showed a larger-than-expected rate of expansion, as it rose at a 3.1% annualized rate of growth, compared to the 2.8% increase previously reported, and the 3.0% growth that was forecasted by a survey of economists by Bloomberg. Also, personal consumption rose 4.0%, down slightly from the 4.1% that was previously reported and expected to remain. The upward adjustment to growth mainly reflected upward revisions to private inventory investment and business investment in equipment and software that were partially offset by a downward revision to exports of goods and services.

The GDP Price Index rose 0.4%, unrevised from the preliminary reading and inline with what economists anticipated, and the core PCE Index, which excludes food and energy, increased 0.4%, a downwardly revised figure from the previously reported 0.5% increase, where it was expected to remain.

Output during the quarter accelerated from the 2.6% rate experienced in 3Q, due to a sharp downturn in imports, which are a subtraction from GDP, higher personal consumption, and an acceleration in exports. Real final sales, GDP minus change in inventories, increased 6.7% in 4Q, after rising 0.9% in 3Q.

Meanwhile, the  final University of Michigan Consumer Sentiment Index was revised lower than expected, adjusted to 67.5 from a 68.2 initial reading for March, and compared to the modest decline to 68.0 that economists forecasted. March’s level is down solidly from February’s 77.5 level, which was the highest level since January 2008. The deterioration in the index came as the economic outlook and current economic conditions components were both adjusted downward. On inflation, consumers left their outlooks unchanged for the one-year and five-year time frames at 4.6% and 3.2%, respectively, which were solid increases from February's 3.4% and 2.9% respective readings, illustrating the growing concerns among consumers regarding higher commodity and food prices.

Treasuries finished lower amid the advance in stocks, while showing little reaction to the GDP data. The yield on the 2-year note was 3 bps higher to 0.74%, the 10-year note was up 4 bps to 3.45%, and the 30-year bond yield increased 2 bps to 4.51%.

Debt crisis remains in focus overseas

Sentiment across the pond was tempered by continued concerns regarding the euro-area debt crisis, exacerbated by Standard & Poor's downgrading the sovereign credit rating of Portugal, joining Thursday's cut by Fitch Ratings. The downgrades came as the troubled nation grapples with Wednesday's Parliamentary rejection of proposed austerity measures-which led to the nation's prime minister's resignation-and rising expectations that Portugal will seek a bailout from the euro-zone's European Financial Stability Facility (EFSF). But the debt-laden nation continues to express opposition to a bailout, despite growing consensus of its inevitability and sharply higher costs for the country to raise capital in the open markets as rates on its benchmark 10-year bond reached a record high this week.

European policy makers continued their two-day summit today, which was aimed at discussing the euro-zone’s crisis. The summit was touted as the deadline for a final resolution on a comprehensive package to combat the debt crisis, but no final agreement was reached amid rising political uncertainty and the lack of agreement among the key policymakers. However, policymakers agreed that the lending capacity of its EFSF would be extended to its maximum amount by June.

Economic news in the region was mixed, as France's 4Q GDP was revised higher and the German Ifo Business Climate Index declined by a smaller-than-forecasted rate to help sentiment. But, import prices in Germany's rose more than expected, and Italian retail sales fell more than anticipated.

In Asia, despite continued concerns toward Middle East tensions, the euro-area debt crisis, and elevated worries regarding radiation leaks from the nuclear facility north of Tokyo that was damaged by the massive earthquake and tsunami that hit the region earlier this month, sentiment was mostly positive. Yesterday's report that showed Hong Kong's trade deficit increased by a smaller amount than expected, as exports jumped more than two times what economists forecasted, may have also aided the mood. In other economic news in the region, Japan's consumer prices declined roughly inline with forecasts, while South Korean consumer confidence deteriorated.

Markets shrug off lingering global concerns

The US equity markets posted solid gains for the week, with the Dow Jones Industrials moving into positive territory for the month, despite airstrikes on Libya, festering euro-area debt concerns, and elevated nuclear threat in the aftermath of the massive earthquake and tsunami in Japan. The focus relatively shifted to the equity front as earnings and M&A helped dissipate the fray from the global headwinds. Friday's upbeat report from Oracle Corp headlined a slew of releases from the technology sector, complimenting Dow member AT&T Inc's (T $29) $39 billion agreement to acquire T-Mobile USA from Deutsche Telekom AG (DTEGY $15), to help push the equity markets higher. The markets gained ground even amid some February home sales data that disappointed, with new home sales unexpectedly falling to a record low and existing home sales that tumbled much more than was forecasted, fueling concerns about a double-dip in the housing market.

Street looking for a follow through from the US labor report

Next week the economic calendar will bring a plethora of key reports that will help bridge the gap between now and the beginning of earnings season next month, with reads on housing, manufacturing, and employment. However, a look at the health of the consumer will kick off the docket on Monday, with the release of personal income and spending, as income is forecasted to rise 0.4% m/m in February, and spending is estimated to increase 0.5%. Spending will be eyed by traders as they attempt to gauge 1Q GDP, which will be out in late April, and if the recent increases in commodity and food prices are hampering consumers' propensity to spend.

Joining the consumer data, pending home sales will be released, and after this week's dismal new and existing home sales data, expectations are probably not too high for the gauge of the pipeline of existing home sales, which are expected to come in flat for February. Home price data will follow on Tuesday, with the release of the S&P/CaseShiller Home Price Index, forecasted to show a 0.45% decline m/m in January. Pricing data lags sales data by a month and prices are expected remain under pressure amid intense competition from the huge supply of homes on the market due to the flood of foreclosures and as tight credit conditions remain.

The end of the week will most likely garner the lion's share of attention, with Friday's ISM Manufacturing Index forecasted to tick lower from 61.4 in February to 61.0 in March, but remaining in expansion territory for the twentieth-straight month, the US expansion continues at a relatively healthy pace, with manufacturing leading the way.

However, the highlight of the week will come hours before the ISM's manufacturing report, in the form of the US Labor Report, forecasted to show 195,000 jobs were added to nonfarm payrolls in March, with private sector payrolls growing 222,000. The unemployment rate is expected to remain at 8.9%, after falling every month since reaching 9.8% in November. The more-comprehensive household survey (from which the unemployment rate is calculated and which captures more small businesses) showed the unemployment rate dipped to 8.9% last month and 2.3 million more people are employed versus the low of 14 months ago. The larger company-focused payroll report showed an increase of 192,000 jobs-still lower than we'd like to see, but well up from the recent trend. Netting out the loss of public-sector jobs, private-sector growth was a gain of 222,000 jobs.

Other reports on the US economic calendar due out next week include: the Dallas Fed Manufacturing Index, Consumer Confidence, MBA Mortgage Applications, the ADP Employment Change, weekly initial jobless claims, the Chicago Purchasing Manager's Index, factory orders, and construction spending. Other North American data will include: Canada's industrial production and January GDP. In South America, Brazil will release industrial production, trade balance, and PMI Manufacturing.

International news on next week's calendar includes: Japan's Tankan Survey, industrial production, and jobless rate, German retail sales, Consumer Price Index, unemployment change, and PMI Manufacturing, euro-zone consumer confidence, unemployment, UK home prices, PMI Manufacturing, Australian retail sales, and China's PMI Manufacturing and Leading Index.