Morning Update

Earning Squarely in Focus

In the latest sign that the economy is taking a toll on the high-tech industry, a slew of soft commentary and disappointing profits from Texas Instruments, SanDisk, and Logitech, and a profit and revenue warning from Sun Microsystems are leaning heavily on the Nasdaq Composite, suggesting that consumers and businesses are cutting back on spending amid uncertain conditions. DuPont cut guidance, but American Express, Pfizer, and 3M Company topped the Street's profit estimates and are limiting early losses. Treasuries are gaining ground, credit market conditions continue to ease, and world markets are mostly higher.

Credit logjam slowing breaking

There are no major economic reports scheduled for release today. Credit conditions continue to ease following the massive rescue plans crafted by major central banks and governments. Schwab Chief Investment Strategist Liz Ann Sonders noted late last week that the coordinated measures had pulled the financial system back from the edge of collapse. "We believe these are necessary steps for thawing the credit markets, but it will take time to restore investor confidence," Ms. Sonders said.

Europe gives up early gain

European stocks were up for the third-straight day and were catching inspiration from the broad-based advance in the US yesterday afternoon and easing credit conditions. But weakness in the US is pressuring shares in afternoon action, negating upbeat sentiment from France's 10.5 billion euro injection into six major banks. France's finance minister said the cash infusion will be in the form of interest-bearing subordinated debt, and it is not aimed at recapitalizing banks but is to assure financing for the economy.

Shares of Logitech International (LOGI $18) are under very pressure after the maker of computer mice posted fiscal 2Q profits of $0.39 per share, five cents under the Bloomberg estimate, and cut its full-year profit forecast. The company blamed the uncertain economic outlook.

Japan shares expand

Japan extended its winning streak to three, with the benchmark Nikkei 225 Index advancing 3.3%. New York's strong advance aided shares, and Fed Chief Ben Bernanke's support for a second fiscal stimulus package raised expectations that US government action to assist growth in the world's largest economy may create more favorable conditions for Japan's export-dependent economy. However, Elpida Memory (ELPDF $45), fell the limit for the fifth day and is down about 50% after recently reporting a loss on weaker DRAM prices - chips used in PCs - and announcing a convertible bond offering that may cause a significant dilution in shares. Meanwhile, Australia's main index jumped close to 4% amid strength in commodity and energy issues, but shares around Asia were mixed.