Morning Update

Looking to Follow Up on Yesterday's Financial Run Up

Stocks are poised to open higher to follow yesterday's rally on the sharp advance in the financial sector, fueled by Citigroup's upbeat comments about profitability for the first two months of the year. Equity news is fairly light this morning as Staples missed profit projections and National Semiconductor unexpectedly reported a 3Q profit. There was some relative upbeat news on the economic front after the MBA Mortgage Application Index rose, led by an advance in the Refinance Index. Treasuries are higher after yesterday's rise in yields, and overseas, markets were mostly supported by yesterday's rally in financials.

As of 8:41 a.m. ET, the March S&P 500 Index Globex futures contract is 5 points above fair value, the Nasdaq 100 Index is 9 points above fair value, and the DJIA is 20 points above fair value. Crude oil is down $0.60 to $45.11 per barrel, and gold is up $4.10 at $900.00.

Office supply and equipment firm Staples (SPLS $16) reported 4Q EPS ex-items of $0.36, short of the Reuters estimate of $0.42, as revenues fell 14% to $4.6 billion, excluding the impact of its acquisition of Corporate Express. The company called 2008 the most challenging year in its history as sales for the quarter declined 14% in the US, and same-store sales declined 13%, reflecting declines in average order size and customer traffic, as well as weakness in durable office equipment and furniture. Due to limited near term visibility, the company is not providing sales or EPS guidance.

National Semiconductor (NSM $12) reported fiscal 3Q EPS of $0.09, versus the Street's estimate that called for a loss of $0.04 per share, as revenues declined 36% from last year to $292 million. The company said 3Q bookings decreased by 25% versus 2Q, primarily driven by lower order rates. The semiconductor firm said the worldwide recession has impacted its business as demand has fallen considerably. The company offered 4Q revenue guidance below the Street's view as its distribution channel continues to be negatively impacted by the weak economy. NSM will also eliminate 850 jobs.

Mortgage applications rise

The US MBA Mortgage Application Index rose 11.3% to 723.4 for the week ending March 6, after the previous week's 12.6% decrease. The Refinance Index advanced 13.3% to 3470.7, and the Purchase Index also rose, gaining 7.1% to 253.3. The Mortgage Bankers Association said 30-year fixed-rate mortgages, excluding fees, averaged 4.96%, the second lowest rate since the weekly MBA survey began in 1990-the record low was 4.89% for the week ending January 9, 2009. The increase was the first rise in three weeks and although one week does not make a trend, the report may be welcome news to some on the Street.

However, even though the Obama administration announced its $75 billion foreclosure mitigation plan to help try to stabilize the housing markets, the market and consumers have been hoping for a "quick fix" to housing, which is probably not possible. Stabilization in the housing market, like the broader economy, will likely need time to work through. Treasuries are higher in early action after yesterday's solid declines, which boosted yields.

Europe gains steam as enthusiasm in banks continues to sweeten sentiment

Stocks in Europe are higher in afternoon action as yesterday's enthusiasm-courtesy of Citigroup's upbeat profitability comments-in financials continue to boost sentiment across the pond. Basic materials stocks are also posting a solid advance to help support Europe's gains as the relatively upbeat mood is prompting some possible bargain hunting in the group that has taken a severe blow amid the uncertainty regarding the depth and duration of the global economic contraction. The strength in financials is soothing the sting from a larger-than-expected loss from UBS (UBS $8). Switzerland's largest bank reported its previously announced full-year net loss widened by 1.2 billion to 20.9 billion Swiss francs ($18 billion), due to costs to settle a US tax probe and additional writedowns on securities. Nonetheless, shares of UBS are gaining ground.

Financials' rally helps Asia post a positive tally

Stocks in Asia were broadly higher as the enthusiasm in the financial sector boosted sentiment in the region. Stocks in Japan led the way with the Nikkei 225 Index jumping 4.6%, as a sharp advance in technology issues also helped markets see green. On the equity front, Toshiba (TOSBF $2) rose almost 10% after the Nikkei newspaper reported that the company may post an operating profit next fiscal year, aided by lower costs and strength in its infrastructure business, helping it return to a profit as it is expected to report a loss this fiscal year, according to the Financial Times. Toshiba did not comment. Elsewhere, Hong Kong's Hang Seng Index gained 2.0% and the Korean Kospi Index advanced 3.2%, while China's Shanghai Index fell 0.9% after a key trade report soured sentiment. Chinese exports fell 25.7% versus last year, much larger than the 1.0% decline economists surveyed by Bloomberg had expected, and imports fell a larger-than-expected 24.1%. The Chinese trade balance narrowed from $39.11 billion to $4.84 billion as a result, and the negative sentiment that followed the report offset a separate report from the government that China's investment spending surged 26.5%, versus the expectation for spending growth to slow to 21.5%.