Morning Market Update

Global Concerns Keeping Equities Hamstrung

US stocks are nearly unchanged in early action as the nuclear threat in Japan in the aftermath of the massive earthquake and tsunami remains, and the health of the European financial sector is stymieing equities across the pond. Meanwhile, oil prices are lower as NATO forces continue to take action in the Middle East and North Africa, with progress being made to secure key oil-producing regions. Treasuries are lower following another decline in US home prices and ahead of a read on consumer confidence. In equity news, Halliburton Co warned that geopolitical issues in the Middle East and North Africa will affect 1Q results, Phillips-Van Heusen Corp easily beat the Street’s earnings expectations, and Dow member General Electric Co reached an agreement to acquire approximately 90% of Converteam for about $3.2 billion. Elsewhere overseas, Asian markets finished mixed, with Japan stocks finishing lower, while Australian and South Korean markets moved higher.

As of 8:55 a.m. ET, the June S&P 500 Index Globex future is 1 point below fair value, the Nasdaq 100 Index is 3 points below fair value, and the DJIA is 4 points above fair value. WTI crude oil is $0.86 lower at $103.12 per barrel, and the Bloomberg gold spot price is down $3.95 at $1,416.45 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.2% at 76.33.

Halliburton Co . (HAL $48) announced that the oilfield services company has experienced disruptions due to geopolitical issues in certain locations in the Middle East and North Africa that will “severely affect first quarter results,” in the range of $0.03-0.04 per share. Additionally, the company said it may incur additional charges such as asset impairments or allowances as a consequence of the events in the Middle East and North Africa, particularly due to the sanctions imposed on Libya. HAL will provide an update during its 1Q earnings release scheduled on April 18, 2011.

In earnings news, shares of Phillips-Van Heusen Corp. (PVH $60) are higher after the parent of Calvin Klein reported 4Q EPS ex-items of $0.93, ten cents above the consensus estimate of analysts surveyed by Reuters. Meanwhile, the company posted revenue growth of more than $780 million year-over-year (y/y) to $1.4 billion, roughly inline with the Street’s forecast, mostly attributed to revenue generated by its Tommy Hilfiger business. PVH also issued full-year 2011 guidance that exceeded expectations.

In M&A news, Dow member General Electric Co. (GE $20 ¹) announced that it has reached an agreement to acquire approximately 90% of electrification and automation equipment and systems company Converteam for about $3.2 billion.

Home prices slump again, consumer confidence report to follow

Just before the opening bell, the S&P/Case-Shiller Home Price Index was released showing a decline in home prices of 3.06% y/y in January, compared to the 3.20% drop that economists surveyed by Bloomberg had expected. Month-over-month (m/m), home prices were 0.22% lower, compared to forecasts, which called for a decline of 0.44%.

Treasuries remain lower following the home price data, with the yield on the 2-year note 1 bp higher at 0.79%, while the yields on the 10-year note and the 30-year bond are advancing 2 bps to 3.45% and 4.51%, respectively.

Later this morning, the economic calendar will yield the release of the Consumer Confidence Index, forecasted to decline from 70.4 in February to 65.0 in March.

Financials and energy issues weigh on Europe

Stocks in Europe are lower in afternoon action, despite some mostly better-than-forecasted economic data across the pond, with financials and oil & gas issues leading to the downside. Financials are being pressured by broad-based declines out of the banking sector in Italy, led by a sharp decline in shares of UBI Banca (BPPUF $11) after the company announced that it plans to sell 1 billion euros ($1.4 billion) of additional shares to boost capital. The announcement appeared to catch most by surprise and prompted speculation that more share offerings in the sector could follow as the industry will need to adhere to the new Basel III global capital rules later this year, and another round of stress tests loom on the horizon for the sector. Meanwhile, oil & gas issues are among the region’s worst performers as oil prices are lower amid the NATO led military action in the Middle East and North Africa, which has allowed key oil-producing territories to come under control. Also, shares of BP Plc. (BP $46) are lower to weigh on the group amid reports that the company could face manslaughter charges by Federal prosecutors for its role in the Gulf of Mexico oil spill last year, but no confirmation on any charges has been made.

The weakness in Europe comes despite some favorable reports from the economic front. Consumer Confidence in Germany—Europe’s largest economy—declined by a smaller amount than economists forecasted, complimented by stronger-than-anticipated consumer spending in France and an unexpected improvement in Italian business confidence. Moreover, UK 4Q GDP was revised to a modestly smaller contraction quarter-over-quarter (q/q) than initially reported, and UK mortgage approvals rose more than estimated.

The UK FTSE 100 Index is down 0.1%, France’s CAC-40 Index is 0.2% lower, Germany’s DAX Index is declining 0.5%, and Italy’s FTSE MIB Index is falling 1.2%.

Asia mixed as Japan nuclear worries continue

The equity markets in Asia finished mixed with Japanese stocks finding some pressure as worries about nuclear radiation leaks surrounding a nuclear facility that was damaged by the massive earthquake and tsunami earlier this month continued to weigh on sentiment. Japan continues to try to repair the cooling system of the reactors at the nuclear facility north of Tokyo to avoid a meltdown but efforts have been hampered by the detection of radiation in the area. Shares of Tokyo Electric Power Co. (TKECY $11)—the operator of the damaged nuclear facility—fell again amid the threat of a meltdown, exacerbated by a report that the subject of nationalizing the company has been broached within the Japanese government, per Kyodo news, though a spokesperson for the company said he was unaware of any plan. However, Japan’s Nikkei 225 Index showed some relative resilience, finishing well off of the worst levels of the day to post a modest decline of 0.2%. In economic news, Japan’s unemployment decreased and retail sales unexpectedly rose, but the data may have had little impact on the markets as the reports were for the month of February, before the tragedy struck the world’s third largest economy.

Elsewhere, stocks in China tilted to the downside, with the Shanghai Composite Index declining 0.9%, while the Hong Kong Hang Seng Index finished flat. However, Australia’s S&P/ASX 200 Index finished 0.5% higher amid some optimism regarding possible M&A activity in the mining sector, and South Korea’s Kospi Index rose 0.8%, supported by strength in automakers and refiners.