Morning Update

Nearly Unchanged as Street Mulls Economic Plans

Stocks are poised for a modest open as traders grapple with continued uncertainty regarding how long the global recession will last and if the recent stimulus efforts will be enough to begin to put the economy on the mend. Treasuries are losing ground after a larger-than-expected rise in wholesale inflation, and despite jobless claims remaining at elevated levels. Earnings reports continue to flow in, as Dow member Hewlett-Packard matched expectations but offered disappointing guidance, while CVS Caremark and Sprint Nextel topped expectations. Overseas, markets are mostly higher.

As of 8:51 a.m. ET, the March S&P 500 Index Globex futures contract is 3 points above fair value, the Nasdaq 100 Index is 3 points above fair value, and the DJIA is 26 points above fair value. Crude oil is up $0.99 to $35.61 per barrel, and gold is up $4.90 at $982.60.

Dow member Hewlett-Packard (HPQ $34) posted an 8% gain in fiscal 1Q EPS ex-items to $0.93, in line with expectations, as revenues came in at $28.8 billion, shy of analysts' expectations. Sales at the company's personal systems unit fell 19% to $8.8 billion, with unit shipments down 4%, led by declines in notebook and desktop sales of 13% and 25%, respectively. Its imaging and printing group also dropped 19% to $6.0 billion, but its services revenue jumped 116% to $8.7 billion, due mainly to its acquisition of EDS. Shares are under pressure as the company issued 2Q guidance below the Street's expectation and a full-year revenue forecast that fell short of expectations.

CVS Caremark (CVS $27) reported adjusted 4Q EPS grew 19.8% to $0.70, versus analysts' expectations of $0.65, as revenues rose 10% to $24.1 billion. Revenues at its pharmacy services unit increased 1.5%, while sales in its retail drugstore segment increased 18.8%, with a 3.65% increase in same-store sales. Shares are higher.

Sprint Nextel (S $3) posted a 4Q loss of $0.01 per share, narrower than the Street's view of a $0.03 per share loss, as net operating revenues were $8.4 billion. The company said in the tough economic times, it is generating substantial cash and reducing costs to ensure it remains financially sound.

Wholesale inflation jumps, jobless claims flat

The Producer Price Index rose 0.8% in January, above an expected increase of 0.3%, according to Bloomberg. The core rate, which removes food and energy, increased 0.4%, well above the estimate of a 0.1% rise. Year-over-year (y/y), the headline rate is down 1.0%, and the core rate edged down from 4.3% y/y to 4.2%. Treasuries extended losses following the higher-than-expected increase in inflation at the wholesale level.

Weekly initial jobless claims remained at 627,000 after last week's figure was upwardly revised by 4,000, the Bloomberg consensus called for claims to fall to 620,000. The four-week moving average rose 10,500 to 619,000, and continuing claims jumped 170,000 from an upwardly revised 4,817,000 to 4,987,000. Although new jobless claims were unchanged, the large number of high-profile layoffs announced recently continues to show up in the numbers, as each of the claims figures sits at severely elevated levels.

At 10 a.m. ET, the Philly Fed's Business Activity Index for February will be released and a slight drop from -24.3 to -25.0 is forecast. Also, look for the Leading Index today, which is expected to come in unchanged for January.

Europe up as equity news grabs the headlines

Stocks in Europe are mostly higher as traders digest news on the corporate front and grapple with lingering fears about the impact on Western economies that have exposure to the struggles in Eastern Europe. The equity news has a financial bias as UBS (UBS $10), Switzerland's largest bank, is gaining ground after it announced it will pay a $780 million fine and disclose names of some account holders to avoid US prosecution that it helped thousands of Americans evade taxes. UBS said it sincerely regrets the compliance failures, and client confidentiality was never designed to protect fraudulent acts. Elsewhere, France's largest financial firms BNP Paribas (BNPQY $15) and AXA (AXA $14) both announced losses and cut their dividends. BNP posted a 1.37 billion euro ($1.72 billion) 4Q loss but shares are higher after it said its securities division had a "very good performance" in January, while AXA is down about 9% after it reported a 1.24 billion euro loss in the second half of the year. Outside of the financial sector, Nestle (NSRGY $31) is up almost 5% after the company offered an upbeat sales forecast. The world's largest food company, according to Bloomberg, said it expects sales growth, excluding certain items, to "at least approach" 5%. Analysts surveyed by Bloomberg were calling for a 3.7% gain in revenues.

Stimulus soothes sentiment in Asia

Stocks in Asia were mostly higher as the announcement of stimulus efforts from the Bank of Japan helped support sentiment. The BoJ said that it will extend its asset-purchase program, to try to help unlock the credit markets and stem the recession in Japan. The central bank announced that it will purchase, for the first time, as much as 1 trillion yen ($10.7 billion) of corporate bonds rated A or better from March 4 to Sept. 30. Meanwhile the BoJ kept its key lending rate at 0.1% in a unanimous vote. Yesterday's slide in the yen also helped support the advance in the region. Elsewhere, Asia's advance was helped after China's cabinet said it will seek to boost domestic demand through the extension of stimulus benefits to the technology sector by increasing financial input for the industry and maintaining a level of export tax rebates for electronic products.