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Global Data Helping Navigate Dow to Uncharted Waters

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In the wake of some upbeat global economic data, the domestic equity markets are moving nicely higher in late-morning action, with the Dow trading at record high levels. The fuel for the solid advance in stocks comes courtesy of an unexpected acceleration in growth for US non-manufacturing activity, which complimented stronger-than-expected retail sales and some relatively favorable business activity reports out of the eurozone. Treasuries are moving lower following the data and subsequent gains for stocks. On the equity front, a large shareholder of J.C. Penney Co. Inc is reportedly looking to sell nearly half its stake in the retailer, while Qualcomm Inc boosted its dividend and announced a new share repurchase program. Moreover, Walgreen Co posted disappointing February same-store sales. Gold and crude oil prices are higher, while the US dollar is nearly unchanged. Overseas, Asian stocks finished higher, with Chinese stocks gaining ground as the nation targeted 7.5% GDP growth, while the favorable economic sentiment is helping lift European equity markets.

At 10:51 a.m. ET, the Dow Jones Industrial Average and the S&P 500 Index are gaining 1.1%, while the Nasdaq Composite is advancing 1.3%. WTI crude oil is increasing $0.34 to $90.46 per barrel and Brent crude oil is rising $0.62 at $110.71 per barrel, while wholesale gasoline is up $0.01 at $3.11 per gallon. The Bloomberg gold spot price is $2.56 higher at $1,576.40 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is nearly unchanged at 82.21.

J.C. Penney Co. Inc. (JCP $16) is seeing some pressure amid reports that Vornado Realty Trust (VNO $83)—the retailer’s second-largest shareholder per Bloomberg—is planning to sell 10 million shares, nearly half its stake, of the department store, according to people familiar with the matter. Deutsche Bank AG (DB $44) is being reported as the firm handling the offer, expected to be priced between $16.40-16.60 per share. None of the entities involved have commented on the report. JCP is trading solidly lower, while VNO and DB are gaining ground. .

Meanwhile, Qualcomm Inc. (QCOM $68) announced a 40% increase in the chipmaker’s quarterly cash dividend to $0.35 per share, as well as a new $5.0 billion stock repurchase program. The company said it business model continues to generate strong operating cash flows that enable it to invest in and execute on its strategic priorities, while also returning capital to stockholders. Shares are nicely higher.

Elsewhere, Walgreen Co. (WAG $40) is trading solidly lower after the pharmacy retailer reported a 0.6% decline in same-store sales—sales at stores open at least a year—for February, compared to the 1.3% rise that analysts surveyed by FactSet had anticipated. WAG said customer traffic fell 4.9%, more than offsetting a rise in “basket size.”

Non-manufacturing activity growth surprisingly accelerates

The Institute for Supply Management (ISM) Non-Manufacturing Index unexpectedly improved in February, rising to 56.0 from an unrevised 55.2 in January, while the consensus of economists surveyed by Bloomberg called for a slight decline to 55.0. A reading of 50 separates expansion from contraction. The report is generally considered a measure of economic strength in the service sector and is the companion to the ISM Manufacturing Index, which also surprisingly rose to 54.2 last month from 53.1. The upbeat report on non-manufacturing output came as new orders rose 3.8 points to 58.2, new export orders gained 5.0 points to 60.5, and inventories increased 7.0 points to 54.0, while employment dipped 0.3 points to 57.2. The ISM noted positive remarks from the real estate and construction industries suggesting business is picking up.

This was the 38th consecutive month of expansion for the non-manufacturing sector despite headwinds such as payroll tax hikes, the sequester, higher gas prices, as well as concerns flaring up in Europe and China, recent data continues to indicate modest economic growth, helping to maintain the potential sweet spot of keeping us out of recession, but not so strong as to push the Federal Reserve into tightening.

Treasuries are lower in late-morning action following the data, with the yield on the 2-year note rising 1 basis point (bp) to 0.24%, while the yields on the 10-year note and the 30-year bond are increasing 3 bps to 1.90% and 3.11%, respectively.

Europe gaining ground following some upbeat data

The European equity markets are moving higher in late-day action, aided by some favorable economic and earnings data in the region, which were complimented by the upbeat US non-manufacturing report. Shares of Standard Chartered Plc. (SCBFF $28) are moving nicely to the upside after the UK lender posted profits that topped analysts’ forecasts. Moreover, the eurozone Composite PMI Index—a gauge of business activity from the manufacturing and services sectors—was revised to 47.9 for last month, from an initial 47.3 reading, where economists had expected the index to remain, but a reading below 50 depicts contraction in output. The upbeat revision came as indexes out of France and Germany—the eurozone’s two largest economies—were upwardly revised, with the German index depicting a larger-than-originally reported expansion. Additionally, separate reports showed that January eurozone retail sales rose much more than economists had anticipated, and growth for UK services sector activity was stronger than projected for February.

The UK FTSE 100 Index is up 1.3%, France’s CAC-40 Index is advancing 1.9%, Germany’s DAX Index is increasing 2.1%, Italy’s FTSE MIB Index is gaining 2.3%, Spain’s IBEX 35 Index is moving 1.9% higher, and Switzerland’s Swiss Market Index is rising 1.7%.

Asia mostly higher as China offers growth forecast

Stocks in Asia finished mostly to the upside, with China’s Shanghai Composite Index gaining 2.3%, rebounding from yesterday’s sell-off that was fueled by the announcement that the government will deploy further measures to cool off the nation’s real estate markets. The advance in China came as the government laid out plans at the country’s annual National People’s Congress to achieve 7.5% GDP growth for the year. Meanwhile, Hong Kong’s Hang Seng Index rose 0.1%, and Australia’s S&P/ASX 200 Index advanced 1.3%, after the Reserve Bank of Australia (RBA) left its benchmark interest rate unchanged at 3.00%, as expected, while a report showed the nation’s retail sales rose more than expected in January. Elsewhere, South Korea’s Kospi Index increased 0.2% and India’s BSE Sensex 30 Index gained 1.4%. Finally, Japan’s Nikkei 225 Index rose 0.3% as some strength in the yen was more than offset by a solid gain in shares of Fast Retailing (FRCOY $27) after the retail company reported strong sales results at its Uniqlo stores.