Morning Update

Wall Street Waits

Stocks have come of the worst levels of the day, but remain lower in early action as traders wait to dissect the details of US Treasury Secretary Timothy Geithner's plan to try to return normalcy to the financial markets. Also, the Street is looking forward to Fed Chief Ben Bernanke's testimony on Capitol Hill, and the Senate's vote on President Barack Obama's $800 billion economic stimulus plan. In equity news, the Kuwait Investment Authority is reported to be considering offering more support for the merger battle between Dow Chemical and Rohm and Haas, and Qwest Communications offered 4Q EPS that topped the Street's forecast. Treasuries are higher and Overseas, markets are mostly lower in subdued action ahead of today's announcements.

As of 8:45 a.m. ET, the March S&P 500 Index Globex futures contract is 8 points below fair value, the Nasdaq 100 Index is 9 points below fair value, and the DJIA is 48 points below fair value. Crude oil is up $1.50 to $41.06 per barrel, and gold is up $17.30 at $909.70.

The Financial times is reporting that the Kuwait Investment Authority (KIA) would consider increasing its support for Dow Chemical's (DOW $11 1) merger battle with rival Rohm and Haas (ROH $56) if terms of the deal were changed to account for the downturn, according to people familiar with the matter. None of the parties involved have commented.

Qwest Communications (Q $3) reported 4Q EPS ex-items of $0.12, two cents ahead of the Reuters estimate, as revenues declined 3% to $3.3 billion. The company said it had strong demand for its lineup of strategic products including enterprise IP services, its mass markets reported net broadband gains of 54,000, and each of its three business units reported strong improvements in operating margins both sequentially and year over year. Q issued a full-year earnings outlook in line with analysts' expectations.

Waiting the bank rescue plan, Senate vote, and Bernanke's testimony

Treasuries are higher in early action as traders are waiting for US Treasury Secretary Timothy Geithner to reveal his rescue plan for the dysfunctional financial markets. Secretary Geithner is expected to announce the plan at 11 am ET and traders will be looking for details on how effective the plan will be at returning normalcy to the credit markets. President Barack Obama said in his news conference last night that unlocking the credit markets-the lifeblood of the economy-is a major priority and the plan is expected to promote opening up new lending and providing a way to rid the bad assets off of banks balance sheets.

Due to additional massive losses, banks are facing renewed pressures and with interest rates at historic lows, the traditional monetary policy gas pedal is to the floor. The Federal Reserve has resorted to some unconventional means to get credit flowing again, but with only tentative signs of success, and President Obama's Administration is looking at a new approach-a "bad bank"-to tackle the heart of the problem.

Also, President Barack Obama's $800 billion economic stimulus package passed the procedural vote in the Senate yesterday and is expected to come to a final vote today and the passing would lead to negotiations between the House and Senate over a final compromised plan that will make its way to President Obama's desk for approval.

Meanwhile, Federal Reserve Chairman Ben Bernanke will give his testimony on the Central Bank's lending programs at the House Financial Services Committee today at 1 pm ET.

Elsewhere, the economic calendar will yield wholesale inventories, at 10 am ET, and a 0.7% decline in December is expected and after the unwanted rise in inventories, which led to the relatively better-than-expected drop in 4Q GDP, traders will be looking at the report to help gauge the accuracy of the preliminary 4Q output reading.

Subdued sentiment in Europe as traders await banking plan

Stocks in Europe are under pressure in lackluster afternoon action as traders lack conviction ahead of the US Treasury's announcement of the plan to provide relief to the US banking system. Materials issues are leading the decline as worries about the global recession weigh on the outlook for demand. However, UBS (UBS $11) is gaining ground despite announcing the largest loss in Swiss corporate history after it said it expects to be profitable in 2009. Switzerland's largest bank said it will eliminate an additional 2,000 jobs, and it will continue to "strengthen its financial position through reductions in risk positions, risk-weighted assets, total assets and operating costs." UBS reported an increase in its tier-1 capital ratio, a key measure of a bank's strength, and said its wealth and asset management businesses recorded net increases in client investments in January.

Asian markets mixed ahead of US bank fix

Stocks in Asia finished mixed as traders were relatively subdued ahead of the announcement of the US bank rescue plan, and some optimism that the plan will help financials recover was somewhat offset by some disappointing news on the corporate front. Kobe Steel (KBSTY $7) fell almost 13% after the company said its president will step down after it announced that it may have made improper political contributions. Shares of Orix Corp. (IX $20) came under heavy pressure after the company cut its full-year profit forecast by 86% on declines in property revenue, writedowns on its stocks holdings, and increasing loan loss provisions. Stocks in Japan finished modestly lower, also pressured by strength in the yen, while stocks in China posted solid gains. The Shanghai Composite rose 1.8% after a couple of softer reports on consumer and producer inflation as traders increased expectations that the government may have room to cut rates further to help the economy recover.