Morning Update

Overseas Slide Points to Bumpy Ride

Stocks are under pressure in early action as solid declines in Asia, on disappointing earnings, and weakness in Europe, after the UK slipped into a recession, are exacerbating economic concerns on the Street. Meanwhile, traders are sifting through an in line profit report from GE and comments that it is committed to maintaining its annual dividend. In other equity news, Pfizer is reported to be in talks to buy Wyeth, Google reported upbeat earnings, while Capital One reported a loss and Xerox missed profit projections. Treasuries are slightly lower as there are no major US economic reports out today.

As of 8:46 a.m. ET, the March S&P 500 Index Globex futures contract is 22 points below fair value, the Nasdaq 100 Index is 23 points below fair value, and the DJIA is 201 points below fair value. Crude oil is down $1.23 to $42.44 per barrel, and gold is up $17.90 at $876.40.

Dow member General Electric (GE $13 ¹) reported 4Q EPS from continuing operations, excluding a preferred dividend payment, of $0.37, in line with the Reuters estimate, as revenues of $46.2 billion came in shy of analysts' estimates. The company said revenues were impacted by a stronger dollar and business exits. Its infrastructure and media units grew by 3%, led by 11% profit growth in its energy segment on continued global demand, while its NBC Universal segment profits declined 6% as strong cable earnings were offset by declines in the local stations. The conglomerate said it expects 2009 to be "extremely difficult." GE added that it has significantly strengthened its liquidity position and it is committed to its plan for a $1.24 per share dividend for the year.

Google (GOOG $307) is higher in early action after it reported 4Q EPS ex-items of $5.10, topping the Street's estimate of $4.95, as revenues grew 18% versus last year to $5.7 billion. The internet search engine said it performed well in the quarter despite an increasingly difficult environment as search growth was strong, revenues were up in most areas, and it successfully contained costs. Additionally, the company said it is planning to offer employees a voluntary, one-for-one stock option exchange, intended to create more incentives for employees to remain at the company.

Citing people familiar with the matter, the Wall Street Journal reported that Dow component Pfizer (PFE $17) is in talks to buy fellow drug maker Wyeth (WYE $39), which could be worth more than $60 billion. Both parties involved have not commented.

Treasuries pare gains

Amid the lack of any key US economic reports, Treasuries, which were mixed, have relinquished gains and are under modest pressure as the Street sifts through a slew of major earnings reports and reacts to the disappointing data in the overseas markets.

UK enters a recession

Stocks in Europe are under pressure in afternoon action amid continued fears about the health of the global economy, exacerbated by the confirmation that the UK economy has entered a recession. After posting a 0.6% contraction in 3Q, the UK reported that 4Q advance GDP fell 1.5% on a quarter-over-quarter basis, which was the biggest drop since 1980, and larger than the 1.2% decline that was forecasted by economists surveyed by Bloomberg. The pound is under pressure again versus that dollar and Prime Minister Gordon Brown said the government is using "every weapon at our disposal" to fight the crisis. Financials are under pressure, leading European losers, while industrials are in the red as well amid the gloomy economic data, while tech shares are also weighing down trading, following yesterday's earnings miss from Microsoft (MSFT $17).

Asian adversity on battered bottom lines

Stocks in Asia were broadly lower as traders reacted to more gloom and doom on the earnings front. Worries about the economy also persisted and a dour outlook for demand for commodities amid the global recession weighed heavily on resource-rich nations such as Australia, which led decliners, posting a drop of more than 4%. Stocks in Japan did not fair much better as the Nikkei 225 Index fell 3.8% and the broader Topix Index lost 2.8%, led by profit worries. Traders had their first chance to react to Sony's (SNE $19) warning, that followed yesterday's closing bell, of a record 260 billion yen annual operating loss ($2.9 billion) due to the surging yen and falling worldwide demand. Shares of the second-largest maker of consumer electronics products in the world fell almost 7%. Adding to the pressure, Samsung (SSNLF $626), the world's largest maker of memory chips, LCDs, and televisions, according to Bloomberg, posted its first quarterly loss as economic weakness weighed on prices. Shares lost 4.1% after it announced a net loss of 22.2 billion won ($16 million), and excluding a tax credit, the loss doubled the Bloomberg estimate.