Morning Update

Sluggish Start to Session

Stocks are near the unchanged mark in morning action, sitting slightly below the flatline, following yesterday's solid advance in major merger and acquisition news, as traders are trying to gauge whether the momentum in the financial market will continue to the upside. Treasuries are lower after extending losses following a smaller-than-expected decline in the S&P/Case-Shiller Home Price Index, and ahead of the Consumer Confidence Index. In equity news, Walgreen Co. topped analysts' earnings expectations, while Standard & Poor's cut the credit rating of insurance firm MBIA Inc. Overseas, Asia was mostly higher as the yen stabilized to help Japanese exporters, while Europe is flat.

As of 8:48 a.m. ET, the December S&P 500 Index Globex future is at fair value, the DJIA is 9 points below fair value, and the Nasdaq 100 Index is 7 points below fair value. Crude oil is lower by $0.76 at $66.08 per barrel, and the Bloomberg gold spot price is down $3.10 at $987.95 per ounce.

Walgreen Co. (WAG $34) reported fiscal 4Q EPS of $0.44, five cents above the consensus estimate of Wall Street analysts, as revenues rose 7.6% to $15.7 billion, matching the Street's forecast. Prescription sales-accounting for 66.5% of sales in the quarter-advanced 9% as the company filled 9.1% more total prescriptions during the quarter versus last year. WAG said it "relentlessly" reduced costs and focused on productivity gains while navigating through the "most severe economic downturn in decades."

Insurance firm MBIA Inc. (MBI $8) is under solid pressure after Standard & Poor's cut its counterparty credit rating one notch to BB- from BB. S&P said macroeconomic conditions continue to contribute to losses on the group's structured finance products and sizeable exposures to certain asset classes within the insured portfolio could create significant losses and balance-sheet volatility. S&P also cut MBIA's structured finance insurance arm two notches to BB+-one level below investment grade-from BBB.

Home prices fall less than expected, consumer confidence on deck

The S&P/Case-Shiller Home Price Index was released this morning and showed a decline in home prices of 13.3% year-over-year (y/y) in July - less than the 14.2% fall that had been expected. Treasuries extended losses after the report.

Europe near the flatline on conflicting corporate reports

Stocks in Europe are nearly unchanged in afternoon action as traders grapple with some mixed signals coming from the corporate front. Shares of BNP Paribas (BNPQY $41) are higher to help financials trade as the region's best performers after France's largest bank said it will raise 4.3 billion euros in a rights offering aimed at paying back the French government aid it received during the financial crisis. However, shares of Siemens (SI $96) are lower after Europe's largest engineering firm's chief financial officer said fiscal 2009 was a "tough" year, while Germany's second-largest steelmaker, Salzgitter (SZGPY $9) is also lower after it announced a 300 million euro convertible bond sale. Meanwhile, Airbus, which is owned by European Aeronautic, Defense and Space Company (EADSY $22), and is the world's largest maker of commercial planes per Bloomberg, cut its 2009 delivery target for its A380 double-decker plane by one aircraft to 13 planes after Singapore Airlines (SINGY $19) moved the purchase of one jet into next year. Airbus did maintain its delivery forecast for 2010.

In economic news in Europe, a report showed eurozone economic confidence came in slightly above expectations, with improvements in consumer and industrial confidence indicators. Additionally, the final reading of 2Q UK GDP came in at a contraction of 5.5% year-over-year, slightly larger than the 5.4% decline that economists surveyed by Bloomberg had anticipated.

Asia rebounds as yen stabilizes

Stocks in Asia were mostly higher, with markets in Japan overcoming deflation concerns after a report showed prices at the consumer level fell 2.4% in August. Japan's Nikkei 225 Index rose 0.9% as the yen came off of the eight-month low it reached yesterday versus the dollar, soothing some concerns about the impact of the recent strength of the Japanese currency on companies that rely heavily on sales in the US and outside of Japan. Helping the yen stabilize a bit today, the nation's Finance Minister tried to scale back expectations that he supported a stronger yen, saying "If the currency market moves abnormally, we may take necessary steps in the national interest." Exporters led Japanese markets higher on the modest gains in the yen, while the solid gains in the US yesterday on merger and acquisition news also helped improve sentiment. The favorable corporate actions in the US helped boost optimism about the recovery in the economy, increasing the outlook for demand for commodities, supporting the resource-rich nation of Australia, which its S&P/ASX 200 Index rose 1.6%. Elsewhere, Hong Kong's Hang Seng Index gained 2.1%, South Korea's Kospi Index rose 0.9%, while China's Shanghai Composite Index dipped 0.3% on lingering concerns about the increasing supply of new shares hitting the market amid the recent jump in initial public offerings.