Morning Update

Financials Pull Back and a Tech Deal is Under Attack

Stocks have given up early gains and have turned lower in early action as banking shares are under pressure and tech stocks are in the red after reports that IBM's $7 billion takeover deal for Sun Microsystems may be shelved. Treasuries are mixed amid a light economic week as traders gear up for Alcoa's profit report tomorrow, which marks the unofficial start to 1Q earnings season. Overseas, the weaker yen helped Japan gain ground, while HSBC's warmly received rights offering in Europe is being offset by the negative action in the US. In other equity news, Bristol Myers Squibb received an extension on its schizophrenia drug.

As of 8:47 a.m. ET, the June S&P 500 Index Globex futures contract is 8 points below fair value, the Nasdaq 100 Index is 17 points below fair value, and the DJIA is 64 points below fair value. Crude oil is down $0.98 to $51.53 per barrel, and gold is down $16.90 at $878.70 per ounce.

Shares of Sun Microsystems (SUN $8) are under sharp pressure after Dow member IBM's (IBM $102) $7 billion acquisition offer to purchase the firm appears to be in jeopardy. JAVA was unhappy with IBM's more than $9 per share offer, according to people familiar with the matter and IBM is reported to have withdrawn its takeover offer and ended its status as JAVA's exclusive negotiating partner. It has not been determined whether talks are continuing between the two firms. Neither firm commented on the matter.

Bristol Myers Squibb (BMY $20) said it won an extension to sell its Abilify schizophrenia drug about 29 months longer than expected, which will help it soothe the sting to its bottom line when its blood clot prevention drug Plavix faces generic competition in 2012. Abilify, had global sales of $2.15 billion last year, according to Reuters, and was set to loose its patent protection in November 2012, which will now not happen until April 2015.

All likely quiet on the economic front, but earnings season could make some noise

Treasuries are mixed as there are no major economic reports on today's economic calendar, which will be light in a shortened week of trading. Releases on the docket include wholesale inventories and weekly MBA Mortgage Applications on Wednesday, while weekly initial jobless claims, the Import Price Index, and trade balance will finish the week out on Thursday. Markets will be closed on Friday in observance of Good Friday. Traders will likely be more focused on 1Q earnings season, which unofficially begins with Dow component Alcoa (AA $8) after the close on Tuesday. The aluminum firm is expected to swing from a $0.44 per share profit in 1Q last year to a loss of $0.52 per share this year, as the deepened global recession over the past year took a toll on commodity prices including industrial metals.

Expectations have been ratcheted down and visibility has been poor, and as corporations, suffering from falling revenue and profits, have been forced to cut expenditures and jobs. Also, in response to falling demand and excess capacity, businesses have slashed prices in an effort to stimulate sales. Traders will keep a close eye on the corporate earnings front in search for any signs that suggest the worst of the global economic contraction may be behind us-complimenting or contradicting the recent signs of "green shoots" we have seen on the economic front.

Europe's advance on HSBC offering offset by US sentiment

Stocks in Europe were solidly higher in afternoon action, led by more strength in basic materials issues and technology shares as sentiment toward a stabilizing global economy continues to improve. However, stocks have moved lower as banks in the US are weighing on sentiment in the US. Losses in financials are being limited by a respectable advance in shares of HSBC Holdings (HBC $33). Europe's largest bank reported that investors bought 97% of stock in its 12.85 billion pound ($19.1 billion) rights offer, which was the UK's largest rights offering. According to people familiar with matter, HSBC sold the remaining shares to new investors for 448 pence apiece, but the bank has not commented on this report. Elsewhere, Russian Prime Minister Vladimir Putin said the government is planning 3 trillion rubles ($90 billion) of stimulus efforts this year, saying "We managed to avoid the worst scenario.....At the same time, 2009 will be very hard for us." According to Bloomberg, 1.4 trillion rubles of emergency spending will be included in this year's budget, with the rest coming from tax breaks and central bank lending.

Weakness in yen and strength in banks help Asia advance

Stocks in Asia were higher to start the week, led by export issues in Japan amid more weakness for the yen versus the dollar, which helped boost optimism for profits for companies that rely heavily on sales in the US. Japan's Nikkei 225 Index rose 1.2%, while the upbeat capital raising efforts at HSBC helped financials lead Hong Kong's Hang Seng Index up over 3%. Markets in China, Vietnam, the Philippines, and Thailand were closed for a holiday. South Korea's Kospi Index managed to gain about 1%, despite North Korea's missile launch, and Australia's S&P/ASX 200 Index managed to gain 0.6% even as mining firm Rio Tinto (RTP $149) fell over 2% after the Financial Times reported that it was ready to go ahead with a $10 billion rights issue, if its agreed $19.5 billion fund raising efforts with privately held Aluminum Corp. of China, or Chinalco falls through. Meanwhile, Japan's Prime Minister Taro Aso ordered his new economic stimulus package spending to exceed 2% of GDP or 10 trillion yen ($100 billion), according to the country's Finance Minister, who added that the government plans to outline measures by April 10.