Morning Market Update

Tech Earnings Help Extend Upward Move

The US equity markets are higher in morning action, as better-than-forecasted earnings from Oracle Corp and Accenture Plc are helping the markets extend the week’s gains, despite continued euro-area debt concerns, Middle East tensions, and the nuclear crisis in Japan. Meanwhile, stocks showed little reaction to an upward revision to US 4Q GDP, but Treasuries did pare early gains in the wake of the data, and ahead of a final revision to a gauge of consumer sentiment for March. In other equity news, Research in Motion Ltd issued disappointing guidance, which is more than offsetting the smartphone maker’s better-than-forecasted profit report. Overseas, Asia moved higher, aided by the upbeat reports out of the tech sector, which is also helping European markets move modestly higher despite lingering debt concerns.

As of 8:50 a.m. ET, the June S&P 500 Index Globex future is 5 points above fair value, the Nasdaq 100 Index is 7 points above fair value, and the DJIA is 37 points above fair value. WTI crude oil is $0.16 lower at $105.44 per barrel, and the Bloomberg gold spot price is up $3.23 at $1,433.89 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.3% at 75.90.

Oracle Corp. (ORCL $32) 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. The company said its performance was broad based with all geographies reporting revenue growth of 30% or higher. ORCL also said its software license revenues rose 29% y/y and its software license updates and product support revenues were up 13%. The company also announced an increase to its quarterly dividend of 20% to $0.06 per share.

Moreover, Accenture Plc. (ACN $52) 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 said demand for its services remains “strong,” with new bookings for the quarter coming in at $7.0 billion. ACN issued 3Q revenue guidance that exceeded forecasts, while it increased its full-year EPS outlook, and declared a semi-annual cash dividend of $0.45 per share.

However, Research in Motion Ltd. (RIMM $64) is under pressure after the maker of the BlackBerry smartphone issued 1Q guidance that came up short of analysts’ forecasts, which is overshadowing its better-than-forecasted 4Q earnings results and full-year EPS outlook. RIMM posted 4Q EPS $1.78, three cents above the Street’s expectations, as revenues increased 36% y/y to $5.6 billion, roughly inline with forecasts. RIMM said as it enters fiscal 2012, it is in “an excellent position” to benefit from the continuing convergence of the mobile communications and mobile computing markets.

Final read on 4Q GDP revised higher, consumer sentiment gauge set to take the stage

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. Output during the quarter accelerated from the 2.6% rate experienced in 3Q. Also, personal consumption rose 4.0%, down slightly from the 4.1% that was previously reported and expected to remain.

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.

Treasuries are mixed after paring gains on the GDP report, with the yield on the two-year note up 1 bp to 0.70%, the yield on the 10-year note flat at 3.40%, and the 30-year bond yield down 2 bps to 4.47%.

Later this morning, the US economic calendar will yield the release of the final University of Michigan Consumer Sentiment Index reading for March, expected to be revised modestly lower to 68.0 from the initial reading of 68.2, and relative to February’s 77.5 reading, which was the highest level since January 2008.

Europe modestly higher on upbeat earnings from US, but debt issues remain in focus

Stocks in Europe are modestly higher, with strength in technology issues lending support following yesterday’s upbeat earnings reports from the sector out of the US, highlighted by Oracle’s favorable results. Also, the German Ifo Business Climate Index declined by a smaller-than-forecasted rate to help sentiment, as the gauge of business confidence in Europe’s largest economy declined from 111.3 in February, to 111.1 in March, compared to the decline to 110.5 that economists had expected. However, gains across the pond are being tempered by continued concerns regarding the euro-area debt crisis, exacerbated by Standard & Poor’s downgrading the sovereign credit rating of Portugal, joining yesterday’s cut by Fitch Ratings. The downgrades come 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).

European policy makers are continuing their two-day summit today, which is 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 any final agreement is not likely amid rising political uncertainty and the lack of agreement among the key policymakers.

In other economic news in the region, France’s 4Q GDP was revised higher to a 0.4% quarter-over-quarter (q/q) rate of growth, compared to the unrevised 0.3% expansion that was expected by economists, while y/y, the nation’s output was left unchanged at a 1.5% growth rate. Moreover, Germany’s import prices rose more than expected, while Italian retail sales fell more than anticipated.

The UK FTSE 100 Index is 0.2% higher, France’s CAC-40 Index is gaining 0.1%, Germany’s DAX Index is up 0.2%, and Portugal’s PSI 20 Index is rising 0.1%, while Italy’s FTSE MIB Index is declining 0.2%.

Asia posts gains following gains in the US

The equity markets in Asia finished broadly higher on the heels of the continued upward momentum in the US yesterday as some better-than-forecasted earnings from the technology sector boosted economic optimism, helping overshadow continued concerns toward the Japanese tragedy, Middle East tensions, and the euro-area debt crisis. Japan’s Nikkei 225 Index rose 1.1%, despite 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. Shares of companies that may receive increased demand from the rebuilding efforts in Japan, such as construction-related issues, paced the advance.

Stocks in China were also some of the region’s best performers, with the Shanghai Composite Index and the Hong Kong Hang Seng Index both posting a 1.1% gain. A report late-yesterday 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 helped the upward move. Elsewhere, the recent rally in commodity prices helped Australian stocks move higher, with the S&P/ASX 200 Index rising 0.9%, while South Korean equities also contributed to the advance, as the Kospi Index also increased 0.9%, supported by strength in technology stocks. In other economic news in the region, Japan’s consumer prices declined roughly inline with forecasts, while South Korean consumer confidence deteriorated.