Morning Update

Looking for Four Straight as Financial Pessimism Abates

Stocks are mostly higher in early action, looking for the fourth-straight session in the green, as the sentiment toward the financial sector continues to improve, supported by Citigroup's comments about its capital needs-adding to several upbeat reports in the group this week. Treasuries are under pressure amid the improved mood on the Street, while the trade deficit narrowed and imports prices fell slightly. In other equity news, American Axle & Manufacturing received a warning from its auditors and may fail to be in compliance with financial covenants. Overseas, markets are mostly higher, following the relative optimism on Wall Street.

As of 8:50 a.m. ET, the June S&P 500 Index Globex futures contract is 5 points above fair value, the Nasdaq 100 Index is 1 point below fair value, and the DJIA is 28 points above fair value. Crude oil is up $0.40 to $47.43 per barrel, and gold is up $11.90 at $935.90.

Continuing the string of relatively optimistic comments, Dow member Citigroup's (C $2) Chairman Richard Parsons told Reuters late yesterday that the company does not need any more government capital. Parsons also said, after being asked about the possible nationalization of the firm, "I don't think the administration is heading in that direction....But I have a lot of confidence in the future viability and strength of a privately held Citi."

American Axle & Manufacturing (AXL $0.75) said its auditors have issued a warning that the company may not be able to operate as a going concern, due to pressure on its main customers General Motors (GM $2) and privately-held Chrysler. AXL said in a regulatory filing that as a result of the current automotive industry environment, it is uncertain whether it will be in compliance with financial covenants throughout 2009, which, if it should fail to be in compliance, "we may be unable to continue as a going concern."

Trade deficit narrows, import prices dip

The trade deficit narrowed from $39.9 billion in December to $36.0 billion in January, smaller than the Bloomberg estimate of $38.0 billion. Exports fell 5.7% to $124.9 billion and imports dropped 6.7% to $160.9 billion.

Led by a 3.2% drop in food, feed, and drink prices and a 0.6% decline in non-petroleum prices, the Import Price Index fell slightly by 0.2% in February, less than an expected decline of 0.7%. Petroleum prices jumped 3.9% to limit the drop in import prices. Treasuries remain under pressure following the trade data as sentiment on the Street continues to be relatively optimistic.

Later today, the economic calendar will yield preliminary University of Michigan consumer sentiment, expected to decline from 56.3 in February to 55.0 in March. Consumer sentiment continues to decline as mounting job losses, falling home prices, and continued weakness in equities contribute to the plethora of pressure consumers are facing.

Financials friendly toward Europe

Stocks in Europe are moving solidly higher in afternoon action as financial firms are leading the way, following Citigroup's comments, which added to Bank of America (BAC $6 ¹) CEO Ken Lewis' upbeat comments yesterday that the company was profitable in the first two months of the year and that he doesn't expect the firm will need more government capital. The recent advance in crude oil and commodity prices amid the relative optimism is helping oil and gas and basic materials issues trade among the best performers across the pond. In equity news, shares of Alcatel-Lucent (ALU $1) are up about 13% after the communications company's chief financial officer said the firm aims to be profitable in the second half of 2010. ALU has been struggling mightily since Alcatel and Lucent merged and last month posted its eighth-straight quarterly loss.

Japan jumps

Stocks in Asia were mostly higher led by a sharp advance in Japanese stocks as the continued rally on Wall Street carried over to stimulate sentiment. The Nikkei 225 Index rose 5.2%, while the broader Topix Index gained 3.3% as technology issues were the best performers, while the relatively recent pick up in optimism in the financial sector also helped aid the advance. Yesterday's weakness in the yen also helped lift companies that rely heavily on sales outside of Japan. The equity front also helped lift Japanese shares as Canon (CAJ $24) gained 8.6% after the business equipment and camera maker said it expects 2010 net income to increase from this year's estimated 98 billion yen profit to 150 billion yen, per Bloomberg. Also, Sony (SNE $19) jumped 9.1%, aided by the softer yen, and the announcement that it will team up with Seiko Epson (SEKEY $6) to purchase equipment for manufacturing LCDs for flat-screen TVs. Helping overall sentiment, Japan's finance minister said the government will inject more capital into a couple of Japanese banks and said Prime Minister Taro Aso may be ready to announce a stimulus package at he G-20 meeting in April.

Elsewhere, shares in China were lower, with the Shanghai Index declining 0.2%, despite the Chinese Premier saying it can add "at any time" to its 4 trillion yuan ($585 billion) stimulus efforts after reaffirming the country's 8% economic growth target for 2009. Additionally, he said he is "worried" about the country's holdings of American government debt and wants assurances that the investment is safe. The Korean Kospi Index also finished lower.