Morning Market Update

Slight Gains Following Some Favorable Data

The US equity markets are modestly higher as the global focus remains on the euro-area debt crisis, Middle East turmoil, and the tragedy in Japan, while traders are digesting some better-than-forecasted data. Personal spending rose more than expected, and both the previous months’ figures for spending and income were revised higher, while pending home sales unexpectedly increased in February, though the year-over-year rate of sales was down solidly. Treasuries are mostly lower following the data, which also included a surprising decline in the Dallas Fed Manufacturing Index. Equity news is light, with Eastman Kodak higher after the US International Trade Commission (ITC) decided that it will review a patent-infringement complaint by the company against Apple Inc and Research in Motion, while eBay Inc announced an agreement to acquire GSI Commerce for about $2.4 billion. Overseas, Asia finished mixed as Japan declined as nuclear radiation leaks hampered efforts to cool a damaged reactor north of Tokyo, while European markets are gaining ground amid strength in technology issues.

At 11:00 a.m. ET, the Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq Composite are all advancing 0.2%. WTI crude oil is down $0.81 at $104.59 per barrel, wholesale gasoline is flat at $3.05 per gallon, and the Bloomberg gold spot price is declining $13.62 to $1,416.13 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.2% at 76.08.

Eastman Kodak Co . (EK $3) is sharply higher after the US International Trade Commission (ITC) decided that it will review a patent-infringement complaint by the digital imaging and photofinishing firm against Apple Inc. (AAPL $354) and Research in Motion (RIMM $56) pertaining to technology to preview images. The announcement comes after an ITC judge ruled in January that APPL and RIMM did not infringe on EK’s patents. None of the companies involved have commented. AAPL is trading higher, while RIMM is lower.

In M&A news, eBay Inc. (EBAY $31) announced that it has agreed to acquire ecommerce company GSI Commerce (GSIC $29) for $29.25 per share, or about $2.4 billion. The deal will be financed with cash and debt and is expected to close in 3Q 2011. GSIC is sharply higher, while eBay is trading lower.

Personal income and spending rise, while pending home sales unexpectedly increase

Personal income rose 0.3% month-over-month (m/m) in February, just below the 0.4% gain that was expected by economists surveyed by Bloomberg, and January’s 1.0% increase was revised favorably to a 1.2% increase. Also, personal spending was 0.7% higher m/m in February, compared to expectations of a 0.5% advance, and January’s 0.2% rise was revised to a 0.3% increase. The savings rate moved lower to 5.8% in February, after an upwardly revised 6.1% for January.

Also, the PCE Price Index, which is released with the income and spending data, was up 1.6% year-over-year (y/y) in February, matching expectations, after January’s 1.2% increase was unrevised. The core PCE Price Index, which excludes food and energy, was up 0.2% m/m, inline with expectations, while y/y, core prices moved 0.9% higher, also matching the consensus estimate.

Meanwhile, pending home sales unexpectedly rose, gaining 2.1% m/m in February, compared to the unchanged reading that economists were anticipating. January’s 2.8% decline was unrevised. However, compared to last year, the gauge of the pipeline of existing home sales is down 9.3%, after falling an unrevised 4.4% in January. The increase in sales came courtesy of a 7.0% m/m gain in the West, a 4.0% rise in the Midwest, and a 2.7% advance in the South, which offset a 10.9% fall in the Northeast. The rise in the index may have been a bit of a surprise after last week’s larger-than-forecasted decline in February existing home sales and the unexpected drop to a record low in new home sales.

Also, the Dallas Fed Manufacturing Activity Index surprisingly fell, declining from an unrevised 17.5 in February to 11.5 in March, compared to the 18.4 level that economists forecasted. A reading above zero denotes expansion.

Treasuries remain mostly lower following the data, with the yield on the 2-year note 3 bps higher at 0.76% and the yield on the 10-year note up 2 bps to 3.46%, while the 30-year bond rate is unchanged at 4.50%.

Europe higher amid strength in tech

The equity markets in Europe are higher in late-day action as technology issues are gaining ground following an analyst upgrade in the sector, but the advance is being limited by the ongoing euro-debt uneasiness, unfolding Middle East turmoil, and lingering nuclear threat in Japan. According to the Dow Jones Newswires, the European Central Bank is working on a plan to provide support to the Irish banking sector, with a new facility aimed at providing medium-term loans, as the nation gets set to announce the results from a new round of stress tests of its banks. Meanwhile, oil & gas issues are being bogged down by lower oil prices, as NATO forces take the lead in the Middle East, with airstrikes continuing in the capital of Libya. Elsewhere, automakers are declining, led by shares of  Porsche (POAHY $8) after it announced that it will begin a 5 billion euro ($7 billion) share sale, as it prepares to merge with Volkswagen (VLKAY $30). However, shares of AstraZeneca Plc. (AZN $46) are higher after it increased its earnings forecast following an agreement to settle a tax dispute in the US. In political news across the pond, poll results showed German Chancellor Angela Merkel’s conservative party is poised to lose in a state election to the Greens party, which is an anti-nuclear group that has received support in the aftermath of the nuclear crisis in Japan. The election loss for Merkel could hamper her party’s ability to enforce policy in Europe’s largest economy.

The UK FTSE 100 Index and France’s CAC-40 Index are up 0.4%, Germany’s DAX Index is 0.3% higher, and Ireland’s Irish Overall Index is rising 0.9%.

Asia mixed as Japanese nuclear threat continues to dampen sentiment

Stocks in Asia finished mixed with Japan’s Nikkei 225 Index declining 0.6% as radiation leaks at a nuclear facility north of Tokyo, which was damaged by the massive earthquake and tsunami earlier this month, continued to weigh on sentiment. The radiation levels at the facility limited efforts to repair the cooling system used to bring the temperatures of reactors down and avoid a meltdown. However, South Korea’s Kospi Index eked out a 0.1% gain as strength in steelmakers and semiconductor issues helped offset weakness in shipbuilders, while banking issues helped China’s Shanghai Composite Index move 0.2% higher. Meanwhile, a solid decline in shares of China Construction Bank Corp. (CICHY $19) pressured the Hong Kong Hang Seng Index, which declined 0.4%, after the company posted profits that missed analysts’ forecasts. Elsewhere, Australia’s S&P/ASX 200 Index declined 0.2% with mining issues finding some pressure, and Taiwan’s Taiex Index decreased 0.7% following an unchanged reading in the nation’s Leading Index and a steep decline in shares of Acer Inc. (ACEIF $12) after the world’s second-largest computer maker, per Bloomberg, warned that 1Q sales may come up short of analysts’ projections, due to weaker demand in the US and Western Europe.