Morning Market Update

Modestly Lower Following String of Gains

The US equity markets are under slight pressure in early action after stocks have posted gains every session this week, as the US economic calendar is relatively light and attention continues to be paid to the festering eurozone debt crisis. Euro-area concerns have been eased somewhat as of late in the wake of reassuring comments from France and Germany regarding Greece’s stance as a eurozone member and yesterday’s globally-coordinated central bank action to boost US dollar liquidity to the world’s financial system. However, early trading may be more volatile than usual as today is quadruple witching day, where options and futures contracts simultaneously expire. Treasuries are modestly lower ahead of a read on September consumer sentiment after the opening bell. In equity news, Research In Motion posted disappointing 2Q results as shipments of its BlackBerry smartphones declined compared to last year, while Texas Instruments increased its dividend by 31%. Overseas, Asian equity markets finished broadly higher on the aforementioned global central bank action, while European stocks are gaining ground as a meeting between European finance ministers and US Treasury Secretary Geithner has begun.

As of 8:44 a.m. ET, the December S&P 500 Index Globex future is 3 points below fair value, the Nasdaq 100 Index is 3 points below fair value, and the DJIA is 20 points below fair value. WTI crude oil is $0.73 lower at $88.67 per barrel, and the Bloomberg gold spot price is up $1.37 at $1,790.09 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.6% to 76.70. 

Research In Motion Ltd. (RIMM $30) reported 2Q earnings of $0.80 per share, below the $0.88 consensus estimate of analysts surveyed by Reuters, with revenues dropping 10% year-over-year (y/y) to $4.2 billion, missing the $4.5 billion that the Street had forecasted. The company said it shipped 10.6 million BlackBerry smartphones, down from the 12.1 million it shipped in the same period last year and “slightly below our forecast,” due to lower-than-expected demand for older models. RIMM said it expects full-year EPS ex-items to be “towards the low end” of its previous guidance, while issuing a 3Q outlook that was roughly inline with expectations.

Texas Instruments Inc . (TXN $28) announced that it will raise its quarterly dividend by 31% to $0.17 per share, resulting in an annual dividend of $0.68 per share. TXN said the increase reflects the strategic shift of its product portfolio to a greater percentage of analog and embedded chip technologies, “which generate high returns on investment and strong cash flow.”

Read on September consumer sentiment set to finish out the week

Treasuries are modestly lower in morning action as there are no major economic releases due out before the opening bell, with the yield on the 2-year note unchanged at 0.19%, while the yields on the 10-year note and the 30-year bond are advancing 1 bp to 2.10% and 3.36%, respectively.

However, after the opening bell, the US economic calendar will yield the release of the University of Michigan Consumer Sentiment Index, expected to improve from 55.7 in August to 57.0 for September.

Europe higher as eurozone meeting begins

The European equity markets are higher in afternoon action, with financials leading the way on the heels of yesterday’s announcement that the European Central Bank (ECB) decided, in coordination with the US Federal Reserve, the Bank of England (BoE), the Bank of Japan and the Swiss National Bank to provide more US dollar liquidity to the region’s financial sector. Meanwhile, attention is being paid to the meeting between European finance ministers on the efficient use of the eurozone’s bailout facility, known as the European Financial Stability Facility (EFSF), which is also being attended by US Treasury Secretary Timothy Geithner.

In light economic news in the region, the eurozone trade deficit in July remained at 2.5 billion euros, following a solid downward revision to the prior month’s figure.

The UK FTSE 100 Index and France’s CAC-40 Index are rising 0.6%, and Germany’s DAX Index is advancing 0.8%, while Greece’s Athex Composite Index is nearly unchanged.

Asia gains ground on global central bank coordination

Stocks in Asia finished broadly higher amid eased concerns about the eurozone debt crisis following the announcement that the ECB and the US Federal Reserve, in coordination with other major world central banks, will offer operations to boost US dollar funding for the European financial sector. Japan’s Nikkei 225 Index gained 2.3%, South Korea’s Kospi Index rallied 3.7%, and Australia’s S&P/ASX 200 Index rose 1.9%, led by solid gains in the region’s financial stocks. Meanwhile, China’s Hong Kong Hang Seng Index gained 1.4% and the Shanghai Composite Index increased 0.1%. The respectable advance in Hong Kong came despite another sharp drop in shares of Esprit Holdings (ESPGY $4) after the apparel and accessory company reported a 98% drop in full-year profits yesterday, noting that its brand has “lost its soul,” prompting a plethora of analyst downgrades. The stock has fallen 33% in the last two trading sessions. Finally, India’s BSE Sensex 30 Index rose 0.3%, after the nation’s central bank expectedly increased interest rates for the twelfth time since March 2010, per Bloomberg, as the country tries to fight inflation amid rising food and fuel prices despite the recent slowdown in the global economy.