Morning Update

Under Pressure as Economic Concerns Fester

Stocks are lower in morning action as economic recovery concerns are resurfacing on the heels of Federal Reserve Chairman Ben Bernanke's cautious tone in a speech yesterday, reiterating that extremely low fed funds rates will likely be in place for an "extended period." Dow member 3M Company's disappointing 2009 EPS guidance and the second-consecutive monthly drop in same-store sales by fellow Dow component McDonald's are exacerbating the economic concerns and also weighing on sentiment. Treasuries are higher as the Street awaits a speech by President Barack Obama on combating the weak job market and as there are no major economic reports scheduled for today. In other equity news, Procter & Gamble announced its chairman will retire, while FedEx raised its 2Q EPS forecast. Overseas, markets are lower, even after the Japanese government announced another trillion yen stimulus package, and after German manufacturing data disappointed.

As of 8:51 a.m. ET, the December S&P 500 Index Globex future is 9 points below fair value, the DJIA is 83 points below fair value, while the Nasdaq 100 Index is 17 points below fair value. Crude oil is lower by $0.84 at $73.09 per barrel, and the Bloomberg gold spot price is down $10.33 at $1,147.78 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is up 0.3% at 75.99.

3M Company (MMM $78) is under pressure after the Dow member issued full-year 2009 earnings guidance that came in short of analysts' expectations. The company said it expects 2009 earnings ex-items to be in a range of $4.50-4.55 per share, short of the $4.57 that the Street had expected. Additionally, MMM said it expects sales in 2010 to be between $24.5-25.5 billion and earnings for next year to be in a range of $4.85-5.00 per share. Analysts are expecting the company to post 2010 EPS of $4.94 and sales of $24.5 billion.

Fellow Dow component McDonald's Corp. (MCD $62) is also lower after the world's largest fast-food chain reported US same-store sales-sales at established restaurants-fell 0.6%, in November, which was the second-straight monthly decline. MCD's total same-store sales rose 0.7% in November, aided by a 2.5% increase in sales in Europe, which helped offset the soft US sales and a 1% decline in sales at restaurants out of Asia Pacific, Middle East and Africa.

In other Dow member news, Procter & Gamble (PG $62) announced that its chairman of the board, A.G. Lafley, will retire from the company, effective February 2010. PG said that Robert McDonald-the company's current president and chief executive officer-has been elected as chairman of the board, effective January 1, 2010.

FedEx Corp. (FDX $88) is higher after it raised its 2Q EPS guidance from a range of $0.65-0.95 to an expectation of earnings to be $1.10 per share, compared to the analyst forecast of $0.85. The package delivery firm said the increased outlook is primarily due to better-than-expected growth in international priority and ground volumes, coupled with benefits from its continuing cost control programs.

No major economic reports set to be released, but Obama's speech on jobs is on deck

Treasuries are higher as the equity markets are under some pressure in morning action, and as there are no major reports scheduled for release on the economic calendar. However, a speech by President Barack Obama, scheduled for about 11:15 a.m. ET, on policy proposals aimed at jumpstarting the weak employment market will likely command the attention of the Street. Obama is expected to lay out plans including increased aid to states, pushing banks to make more loans to small businesses, infrastructure spending, incentives to homeowners to make their houses more energy efficient and possibly tax cuts for companies that add more workers, according to Reuters, citing US officials.

Europe under pressure after German data

Stocks in Europe are under pressure in afternoon action, led by weakness in basic materials on resurfacing concerns about the global economic recovery, exacerbated by Federal Reserve Chairman Ben Bernanke's speech yesterday, in which he noted that, "The economy confronts some formidable headwinds that seem likely to keep the pace of expansion moderate." The increased economic uneasiness also came courtesy of an unexpected drop in industrial production in Germany-Europe's largest economy. German industrial production fell for the first time in three months in October, dropping 1.8% month-over-month, compared to the 1.0% advance that economists surveyed by Bloomberg. Additionally, a separate report showed October industrial production in the UK came in unexpectedly flat, versus the expectation of a 0.5% increase. In other economic news, a report showed UK retail same-store sales-sales at stores open at least a year-increased at a slower pace, after rising at a 1.8% year-over-year rate in November, compared to the 3.8% gain that was seen in October. The deceleration in retail sales is conspiring with a disappointing 3Q sales report from Tesco (TSCDY $21), the world's third-largest retailer, to weigh on sentiment across the pond.

Asia declines on Bernanke's cautious tone

Stocks in Asia were also lower amid the uncertainty regarding the economic recovery on the heels of yesterday's cautious economic tone from Fed Chief Bernanke. Japan's Nikkei 225 Index declined 0.3% as the yen strengthened after the government announced a 7.2 trillion yen ($81 billion) stimulus package, aimed at strengthening regional economies, employment, and environmental projects. Elsewhere, Hong Kong's Hang Seng and China's Shanghai Composite indexes both fell over 1% on weakness in the financial sector on lingering worries about exposure to debt from Dubai and amid capital concerns among Chinese banks. Meanwhile, South Korea's Kospi Index declined by 0.3%, while Australia's S&P/ASX 200 Index dipped by 0.1% as the aforementioned economic uneasiness offset a report that showed business confidence climbed to a level not seen in over seven years.