Morning Update

Clouds Lift

Yesterday's gloom is lifting and banking stocks and the broader market are pushing ahead after IBM reported better-than-expected profits and guidance. Northern Trust is also aiding the mood after easily beating the Street's profit estimate, while US Bancorp and Bank of New York Mellon ended the quarter in the black. Separately, United Technology posted mixed results and CSX matched reduced guidance. Treasuries are under pressure, and world markets are weaker.

As of 8:32 a.m. ET, the March S&P 500 Index Globex futures contract is 12 points above fair value, the Nasdaq 100 Index is 14 points above fair value, and the DJIA is 84 points above fair value. Crude oil is up $0.70 to $41.54 per barrel, and gold is down $5.60 at $849.60.

Dow member IBM (IBM $82) is higher after reporting 4Q EPS rose 17% to $3.28, well ahead of the Reuters forecast of $3.03. It also offered 2009 earnings guidance of at least $9.20 per share, up from $8.93 in 2008 and ahead of the Street's outlook of $8.77. Revenues fell 6% to $27.0 billion, including a negative 5 percentage points due to the stronger dollar. The leading consulting firm said migrating to more profitable segments, including software and services, and driving productivity through global integration continues to pay dividends in the difficult environment.

Northern Trust (NTRS $44) is much higher after reporting 4Q operating profits increased 43% to $1.39 per share, easily beating the Street's view of $0.92. The bank said it has a sound balance sheet and a prudent business model.

US Bancorp (USB $15) reported 4Q net earnings fell from $0.53 per share a year ago to $0.15, three cents below the Street's forecast. Results were aided by loan growth and deposits as well as an expanded net interest margin. But the bank's loan loss provision exceeded charge-offs by $0.25 per share, impacting earnings by a like amount. The bottom line was also hurt by market valuation losses totaling $0.09 per share.

Bank of New York Mellon (BK $19) reported 4Q net earnings of $0.05 per share, below the consensus of $0.70, as earnings included $0.65 per share in securities write-downs and $0.22 per share in restructuring and merger items. The bank said that as it enters 2009, it continues to maintain the capital strength needed in the uncertain market environment.

Dow member United Technologies Corp. (UTX $49) posted 4Q net earnings of $1.23, up 14% from a year ago and one penny above analysts' estimates, as revenues fell 1% to $14.5 billion. Earnings did include six cents per share in one-time gains, which are typically not included when comparing to the Street's forecast. Internally generated sales were up 3%, while the stronger dollar lowered revenues by 5 percentage points. UTX reiterated 2009 profit guidance but said it saw the impact of difficult economic conditions on order rates and expects tough comparisons during the first half of 2009.

CSX (CSX $28) reported 4Q profits ex-items of $0.90 per share, in line with recently reduced guidance, as revenues grew 4% to $2.7 billion. The railroad said gains were driven by higher yields and fuel recovery, which more than offset the impact of significantly lower volumes as the "intensifying global recession dramatically" impacted business.

A look at homebuilders

The NAHB Housing Market Index, which is a survey of homebuilders, will be released at 1 p.m. ET today. The index is expected to hold at a record low of 9.0. The excess supply of homes, a scarcity of buyers, still-tight credit standards, and poor consumer sentiment are expected to continue to overshadow the recent drop in mortgage rates to historic lows. Separately, Treasuries are extending recent losses.

Europe continues to falter

European stocks are sliding for the tenth day in eleven and are near the lows set on November 21 amid ongoing worries about the global economy. Losses among the financials are modest but banks in London are much lower and are weighing heavily on the UK's FTSE 100 Index. Shares of Barclays (BCS $4) are down close to 25% and Lloyds Banking Group (LYG $3) is much lower on concerns about future loan losses and the possibility of nationalization. Royal Bank of Scotland (RBS $3) continues to lose ground following massive losses on Monday and Tuesday. Meanwhile, Ericsson (ERIC $7) reported a 4Q operating profit of 6.2 billion kronor, missing the consensus forecast of 7.8 billion kronor, but sales grew 23% to 67.0 billion kronor and easily topped expectations. The largest maker of telecom equipment announced new layoffs but said margins have steadily improved and its financial position is strong. Shares are much higher.

Banks hound Asia

Banking woes in the UK and the disastrous performance by financials on Wall Street yesterday pushed Asian stocks much lower, with shares in Japan, South Korea, and Hong Kong losing 2-3%. Some observers also pointed to President Barack Obama's inauguration speech, which was short on specifics. Mitsubishi UFJ Financial Group (MTU $5), Japan's largest bank, slid almost 4% and number two Mizuho Financial Group (MFG $5) gave up nearly 5%. Bank of Yokohama (BKJAY $51), the largest regional bank in the country, lost more than 7% after the company said it may access government funds if the need arises but has no plans to do so at the current time.

Separately, the Financial Times reported that Sony (SNE $22) may be preparing to axe 16,000 jobs in an effort to slash costs. But the Times said potential restructuring plans are meeting resistance from executives in the traditional manufacturing business. Sony did not comment.