Morning Update

Bank Optimism Offsets Labor Pains

Stocks are reacting relatively well to another round of more than 500,000 jobs being shed from nonfarm payrolls as the larger-than-expected decline reported by the Labor Department seems to be promoting optimism the gloomy data will prompt the quick passing of a plan to provide relief to the struggling financial industry. Treasuries, for the most part, moved lower following the labor report. On the equity front, Hartford Financial cut its dividend and posted a loss, Biogen Idec topped analysts' expectations, and Verisign matched profit projections. Overseas, markets are higher on optimism toward the impact the aggressive actions from global governments will have on stemming the global recession.

As of 8:46 a.m. ET, the March S&P 500 Index Globex futures contract is 1 point below fair value, the Nasdaq 100 Index is 2 points above fair value, and the DJIA is 12 points below fair value. Crude oil is down $1.55 to $39.62 per barrel, and gold is up $3.40 at $917.00.

Hartford Financial (HIG $15 ¹) is under pressure after it said it intends to cut its quarterly dividend to $0.05, as capital preservation and risk mitigation are key focuses for 2009. The company also reported a 4Q loss in core operations of $0.72 per share, versus the Reuters estimate of a $1.30 per share gain. The company said this was the most challenging year in the firm's nearly 200-year history as the capital markets proved to be especially challenging during the latter half of 2008. The company issued full-year EPS guidance below analysts' estimates.

Biogen Idec (BIIB $53) reported 4Q EPS ex-items of $0.93, one penny above the Reuters estimate, as revenues grew 20% to $1.1 billion. The drugmaker said it saw continued growth of its MS drug Avonex, and a 20% increase in sales of its non-Hodgkin's lymphoma treatment Rituxan, which it co-promotes with Genentech (DNA $82). BIIB said it expects full-year EPS ex-items to be above $4.00, versus the Street's forecast of $3.97.

Verisign (VRSN $20) announced 4Q EPS ex-items of $0.28, inline with analysts' expectations, and revenues grew 16% to $245 million. The firm said its growth and performance in the "extremely difficult" environment reflect its success at divesting non-core business and focusing on its core infrastructure and identity services business.

Nonfarm payrolls fall again

Nonfarm payrolls fell 598,000 in January, versus the Bloomberg estimate of a 540,000 decline. December was revised from -524,000 to -577,000, and November was revised from -584,000 to -597,000. The unemployment rate rose from 7.2% to 7.6%, more than the forecast of 7.5%. Average hourly earnings rose 0.3%, above the 0.2% forecast. Treasuries are mostly lower after losing ground following the report.

Europe rises on hopes US bank relief is around the corner

Stocks in Europe are higher as banks are gaining ground, boosted by optimism toward the group following Bloomberg's report that US Treasury officials said that Treasury Secretary Timothy Geithner will make a speech on Monday, February 9th to unveil the administration's financial recovery plan to shore up the nation's banks. Automakers are in the spotlight but are giving off a mixed reflection as Volvo (VOLVY $) is sharply higher after the world's second-largest truckmaker said it will increase cost reductions but it expects to pay a dividend, while Volkswagen (VLKAY $68), Europe's largest carmaker, is under pressure after it said deliveries tumbled 20% as the tight credit conditions and the impacts of the recession stymied demand. Elsewhere, British Airways (BAIRY $19), is up solidly even after announcing a net loss in the nine months ended in December, as it widened its job cuts and said it will examine all business areas to reduce spending. The upbeat sentiment across the pond is also offsetting a larger-than-expected drop in UK manufacturing, which fell for a tenth-consecutive month and the worst streak of contraction in almost three decades, according to Bloomberg. Also, German industrial production fell more than expected, and the most in at least 18 years, on slow demand for plant and machinery.

Asia advances despite auto earnings adversity

Stocks in Asia posted advances across the board, led by a 4% gain in China's Shanghai Index and Hong Kong's Hang Seng Index gaining 3.6% on optimism the aggressive efforts by governments around the world may be close to helping stem the recession. Stocks in Japan managed to shrug off profit pessimism for the nation's leading automaker Toyota Motor Corp. (TM $69). TM gained 1.6% in the face of its top credit rating being slashed by Moody's and S&P, and the automaker warned that it may post an operating loss that could be three times its earlier forecast. The automaker blamed the recent strength in the yen and dismal vehicle sales in the US and Japan for its projected operating loss for the year of about 450 billion yen ($4.95 billion), after it announced a 3Q operating loss today. This would be the company's first annual operating loss since 1950. Yesterday's sharp decline in the yen may have helped soothe the sting of the dismal report, supporting the Nikkei 225 Index's 1.6% advance today. Elsewhere, Australian shares also gained ground after the country's central bank reduced its inflation forecast, amplifying hopes that it may cut interest rates at its next meeting.