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Midday Market Update

Stocks Higher After Data, Central Bank Moves

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U.S. Market    
Stocks were higher this morning after economic data and central bank action.

As expected, the European Central Bank and Bank of England left their monetary policy unchanged today. ECB head Mario Draghi said the bank now thinks the eurozone will contract by 0.5% this year instead of the previous estimate of 0.3%. He also said downplayed the impact of Italian elections, saying many of the reforms were already on autopilot.

Initial unemployment claims fell a larger-than-expected 7,000 to 340,000 last week. The less volatile four-week moving average dropped 7,000 to 348,750, the lowest level since March 2008.

The trade deficit grew nearly 17% to $44.45 billion in January from December levels as higher consumption of oil pushed overall imports up 1.8% in the month.  Exports fell 1.2%, although the U.S. did export more cars and capital goods.

Productivity fell 1.9% in the fourth-quarter, while unit labor costs rose 4.6%. Economists had expected productivity to drop 1.6% and for labor costs to rise 4.4%. Productivity was up 0.7% for all of 2012.

At midday the Dow and Nasdaq were each up 0.3% while the S&P 500 was 0.2% higher.

Stocks on the Move
Retailers posted moderate February same-store sales growth today as delayed tax refunds and the expiration of the payroll tax cut weighed.   Costco (COST) stood out with a 6% gain in sales, compared to the 4.8% gain expected by analysts.

 Colgate-Palmolive (CL) said today it has authorized a two-for-one stock split and that it will increase its dividend by 10% starting in the second-quarter.  Shares were up slightly at midday.

 Dell (DELL) said today that activist investor Carl Icahn is proposing the firm pay a $9 a share dividend and undergo a leveraged recapitalization instead of proceeding with plans to go private. Icahn, who owns 6% of the computer maker, thinks his plan will create more value for existing shareholders. Dell shares were down 0.5% at midday.

 Time Warner (TWX) announced Wednesday afternoon that it plans to spin off its Time, Inc., magazine business into a separate publicly traded company by the end of 2013. Our  initial take is that this does not come as a surprise given the reported talks between Time Warner and Meredith Corp. about a possible combination over the past few months. Meredith issued a brief release confirming the talks with Time Warner and its openness to continue discussions about how “the companies might work together on future opportunities.” Time Warner shares gained 1.2% on the report.

Foreign Markets
European shares were higher after central bank action. In late trading, the FTSE 100 and Germany’s DAX were each up 0.3% while the Paris CAC was 0.5% higher.

Asian markets were mixed on the day. The Nikkei 225 was up 0.3%, the Hang Seng was flat and the Shanghai Composite was down 1.0%.

Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.