Morning Update

Pressure Ahead of Flood of Economic and Earnings Measures

Stocks are lower in early action as traders are cautiously getting back to business after a long weekend and ahead of a plethora of data set to be released on the economic and corporate fronts. Trading is lighter than usual as markets in Europe remain closed and some Asian markets took the day off. However, stocks in the Asia/Pacific region managed to post gains amid upbeat lending and money supply data, as well as encouraging government commentary in China. Treasuries are higher ahead of the aforementioned flood of data. In calm equity news, ahead of the earnings storm, Express Scripts announced that it will purchase WellPoint's prescription drug business for over $4 billion.

As of 8:50 a.m. ET, the June S&P 500 Index Globex futures contract is 6 points below fair value, the Nasdaq 100 Index is 10 points below fair value, and the DJIA is 75 points below fair value. Crude oil is down $0.54 to $51.70 per barrel, and gold is up $12.80 at $895.00 per ounce.

Express Scripts (ESRX $49) announced that it will purchase WellPoint's (WLP $40) NextRx prescription business for $4.68 billion in a combination of cash and stock. The deal includes a 10-year contract for ESRX to provide services to WLP, and ESRX said the deal is expected to be neutral to slightly accretive for the company in 2009.

Big Bank reports a reason to tune in to the week's installment of earnings season

Although 1Q earnings season is relatively in the early stages, there are a plethora of reports on this week's earnings calendar that could go a long way in determining if the equity markets will finish in the green for the sixth-straight week. Financials will likely garner the lion's share of attention as key reports from the sector will be released, starting with Goldman Sachs (GS $124) on Tuesday, followed by Dow members JPMorgan Chase (JPM $33) and Citigroup (C $3), on Thursday and Friday, respectively. The Street will likely be looking for details on the sector's financial strength in the form of tier 1 capital ratios and tangible common equity-that have been at the heart of the government's stress testing of the major banks. Also, traders may be looking for commentary on lending activity, both from the firms' standpoint as well as borrowing demand from consumers, which is vital to economic growth. Techs will also be well represented as Dow component Intel (INTC $16) will also report tomorrow, and Google (GOOG $373) will release its results on Thursday. Other notable reports that will likely help gauge the health of the economy include a pair of Dow members, with Johnson & Johnson (JNJ $51) reporting profits tomorrow and General Electric (GE $11 ¹) on Friday.

From a June 2007 peak of $91 per share, it's now expected that S&P 500 earnings will be $63 in 2009. The lowest Wall Street estimate is $40, which would mean a fall of more than 55% from 2007's peak.

It would be the third-worst fall in the past 100 years, surpassed only by the roughly 80% earnings collapses during World War I and the Great Depression. The fourth quarter of 2008 was the sixth consecutive down quarter for earnings, and 2008 the second straight down year. It's been a brutal tempest for earnings, with feeble demand, weak pricing and margin pressure all contributing to the carnage.

Plenty of potential sentiment shapers on this week's economic calendar

Treasuries are higher in early action as today is void of any major economic releases-which may be the calm before the economic storm for the week.

As if the flood of key earnings reports out this week were not enough, traders will have a full slate of economic data to contend with in deciphering whether the current global recession has seen its darkest days. Advance retail sales will be released on Tuesday, and are expected to show a rise of 0.3% in March, following two months of better-than-expected results, with February falling a scant 0.1% and January showing a rise of 1.8%. After recovering from a state of paralysis during which consumers locked down, some pent-up demand built up. Consumers are also benefitting from refinancing from lower mortgage rates, a decrease in gas prices versus a year ago, and higher tax refund receipts to-date in 2009. Consumers are saving more to reduce debt, and private-sector deleveraging has only just begun.

The trend in prices will be measured by the Producer Price Index, which will also be released on Tuesday, and the headline rate is expected to be 0.0% in March. The core rate, which excludes food and energy, is expected to rise 0.1%. Year-over-year, the headline rate is expected to fall 2.2%, and the core is expected to rise 4.0%. Following the release of pricing at the wholesale level the Consumer Price Index (CPI) will be released on Wednesday, and it is expected that prices rose 0.1% in March, and ex-food and energy also increased 0.1%. Year-over-year, the CPI is expected to be -0.1% and the core rate is expected to show a rise of 1.7%. As the Fed noted in the minutes from the last Federal Open Market Committee meeting, for now, an environment of falling prices is the current concern. While the Fed has pumped massive amounts of liquidity into the system and the monetary base has increased, the money multiplier has plunged.

Rounding out the busy economic calendar, business inventories will join the retail and inflation reports on Tuesday, while Wednesday may prove to be the busiest day on the economic docket, with industrial production and capacity utilization, MBA mortgage applications, the Empire Manufacturing Index, NAHB Housing Market Index, and the Fed's Beige Book all expected to hit the Street. However, the rest of the week will remain chock full of data as housing starts and building permits, weekly initial jobless claims, and the Philly Fed Index will come out on Thursday, and the preliminary University of Michigan Consumer Sentiment Index for April will conclude the heavy week on Friday.

Fed Chief Ben Bernanke will also add to the heavy economic backdrop as he is expected to speak twice during the week, beginning with Tuesday's Executive Lecture at Morehouse College on "Four Questions about the Financial Crisis," which will include a Q&A session. Friday, the head of the Fed will speak to the Fed's community-affairs conference on "Challenges Presented by Innovations in Financial Services for the Underserved," which will not feature a Q&A session.

Chinese data helps lift Asia

Although European markets are closed today, stocks in Asia were mostly higher, led by a 2.8% advance in China's Shanghai Index-to almost an eighth-month high-amid some upbeat economic data. Over the weekend, the People's Bank of China said new loans by banks jumped more than sixfold, meeting the majority of the government's new loan target of 5 trillion yuan ($732 billion) for the year. Also, the country's M2-the broadest measure of money supply-increased over 25% and its central bank pledged ample liquidity to "ensure money supply and loan growth meet economic development needs." Sentiment also received an additional boost after the Premier Wen Jiabao told the media that China's economy showed "positive signs" as 1Q showed signs of recovery, due to rising investment in fixed assets and consumer demand. Meanwhile, choppy trading ensued in Japan as stocks finished mixed, with the Nikkei 225 Index declining 0.4% and the broader Topix Index gaining 0.4%. Elsewhere, South Korea's Kospi Index rose 0.2%, while markets in Hong Kong, Australia, and New Zealand were closed.