Morning Update

Equities Rise

Stocks are extending yesterday's modest advance as the flood of earnings paints a relatively mixed picture. Verizon Communications missed on the bottom line but posted generally favorable internal metrics, while Texas Instruments, US Steel, and American Express topped profit expectations. But DuPont and Corning missed on the bottom line and Amgen offered soft guidance. Treasuries are up, and world markets are mixed.

As of 8:31 a.m. ET, the March S&P 500 Index Globex futures contract is 6 points above fair value, the Nasdaq 100 Index is 1 point above fair value, and the DJIA is 43 points above fair value. Crude oil is down $1.18 to $44.55 per barrel, and gold is down $9.30 at $899.50.

Dow component Verizon Communications (VZ $31) reported 4Q adjusted EPS of $0.61, one penny under the Reuters estimate, as revenues increased 3.4% to $24.6 billion. The company said net organic wireless customers grew by 1.4 million, and it experienced record growth in the number of new customers of FiOS TV and FiOS internet.

Texas Instruments (TXN $15) said 4Q net income fell 85% to $0.08 per share, including restructuring charges. Ex-items, the company posted EPS of $0.21, well ahead of the consensus forecast of $0.12, as net sales dropped 30% to $2.5 billion, or the high end of its mid-quarter update. The largest maker of chips for cell phones said demand has continued to weaken and it became the latest in a long line of companies to announce job cuts. Texas Instruments said it plans to lay off 12% of its workforce as the global economy continues to weaken.

US Steel (X $30) posted 4Q profits ex-items of $2.00 per share, easily topping the Street's view of $0.69. But profits were down more than 50% from 3Q amid lower shipments of flat-rolled products and lower prices. US Steel said it expects an operating loss in 1Q as results continue to reflect the "extremely difficult global economic environment."

Dow member DuPont (DD $23) posted a 4Q adjusted loss of $0.28 per share, worse than the consensus view of a $0.24 per share loss and a year ago profit of $0.58 per share, and net sales fell 17% to $5.8 billion. The chemical maker blamed declines in construction, motor vehicle sales, and consumer spending, which was magnified by inventory destocking across most supply chains amid a steep decline in global industrial production. Weak industrial conditions are expected throughout the year, and DuPont lowered 2009 profit guidance.

In related industry news, Dow Chemical (DOW $13 ¹) is under pressure after the company's CEO told CNBC that the market is saying that Dow's dividend is too high, and it is up to the Board to make a decision on the dividend. His remarks came as he talked about the company's decision not to close its deal to buy Rohm & Hass (ROH $57). He expects the economy will be in for a terrible time this year and the chemical industry is not yet seeing the light of day. Previously, the CEO had said the dividend was safe.

Dow member American Express (AXP $15 ¹) reported 4Q net earnings fell 71% to $0.21 per share, topping the Street's view of $0.09, and net revenues dipped 3% to $6.5 billion. The company said 4Q reflected an operating environment that was "among the harshest" seen in decades. Business volumes compared favorably with other major competitors, AXP said. Overall cardmember spending fell 10% from a year ago, or 5% adjusted for foreign exchange rates, and loan delinquencies increased.

Home prices and consumer confidence on tap this morning

The S&P/CaseShiller Home Price Index will be released just prior to the opening bell and an 18.4% drop in home prices in November versus a year ago is anticipated. Prices fell 18.0% year-over-year in October. Consumer confidence will be reported for January at 10 a.m. ET and a 1.0 point rise to 39.0 is anticipated; however, the level remains depressed amid growing job losses and a quickly deteriorating economy. Against the backdrop of the severe recession engulfing the US and global economies, the Federal Open Market Committee begins its two-day meeting today. The Committee is likely to telegraph to the market that it will keep its benchmark rate near zero through much of the year. Traders will be looking for more details on how it will stabilize the economy by using its ability to create money, buy securities, and boost its balance sheet. Treasuries are modestly higher following recent declines as the recent jump in yields attracts buyers.

Europe fades after decent start

Early gains in Europe that were inspired by a big advance in Tokyo evaporated after the first hour of trading amid renewed weakness in banking, mining and steel companies. Sentiment received an early boost after Siemens (SI $54) posted a fiscal 1Q net profit of 1.2 billion euros, ahead of the estimate per Dow Jones Newswires of 1.1 billion euros, and revenues gained 7% to 19.6 billion euros. The Germany-based company said it got off to a "good start" in fiscal 2009, and it has had better order intake than most rivals. But the industrial conglomerate was quick to point out that it will not get any easier this year or next year.

Sentiment also received modest, early support from an unexpected gain in German business confidence. The IFO Business Climate Index unexpectedly rose from 82.7 in December to 83.0 in January, beating the Bloomberg forecast of 81.0. The rate cut by the European Central Bank and additional stimulus measures provided a ray of hope that the economy may stabilize in the medium term. January's increase was the first gain since May.

Tokyo jumps

Much of Asia remained closed for a holiday but traders in Japan pushed the Nikkei 225 Index up by 4.9% amid a big improvement yesterday in European financials. The government said it is looking at providing public funding for companies hurt by the credit crisis, which also helped the mood. Separately, corporate service prices in Japan fell 2.5% year-over-year in December, accelerating from November's pace of -2.0%. Falling demand around the world and slumping commodity prices are providing a fertile ground for deflation to take hold in Japan as it did earlier in the decade.