Morning Update

Under Pressure in Early Action on Mixed Profits

After the bulls were able to overcome disappointing retail sales yesterday, sentiment is lower in early action and stocks are under pressure. Concerns in the financial sector are leading the decline as yesterday's proposed tax on the group by the Obama Administration is being exacerbated by a disappointing profit report from JPMorgan Chase, which missed analysts' revenue target and added $1.9 billion to its loan loss reserves. In other earnings news, fellow Dow component Intel posted better-than-expected top and bottom line results for 4Q. Treasuries are higher as equities slip in morning trading, maintaining gains following another benign consumer inflation report and a larger rise in New York manufacturing activity than was anticipated. Overseas, Asian markets were mostly higher, while Europe is lower after giving up early gains following the disappointing earnings report from JPMorgan Chase.

As of 8:53 a.m. ET, the March S&P 500 Index Globex future is 5 points below fair value, the Nasdaq 100 Index is 2 points below fair value, and the DJIA is 26 points below fair value. Crude oil is down $0.66 at $78.73 per barrel, and the Bloomberg gold spot price is lower by $9.95 at $1,132.90 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is up 0.6% at 77.21.

Dow component JPMorgan Chase (JPM $45) reported 4Q EPS of $0.74, compared to the estimate of Wall Street analysts, which called for the company to post EPS of $0.61, while net revenues were $25.2 billion, which missed the Street's forecast of $26.8 billion. JPM said it benefitted from the diversity of its leading franchises, as it had continued earnings strength in its investment bank, commercial banking, asset management, and its retail banking franchises. JPM also added $1.9 billion to its loan loss reserves.

Fellow Dow member Intel (INTC $21) reported 4Q EPS of $0.40, ten cents above the Street's forecast, with revenues jumping 28% versus last year to $10.6 billion, also besting forecasts of analysts, which called for the company to post $10.1 billion in revenues. Compared to 3Q, INTC's PC client group revenues rose 10%, while its data center group sales grew by 21%. The company added that its Atom microprocessor and chipset revenues were up 6% versus last quarter. The company said it expects 1Q revenue of $9.7 billion, versus analysts' estimates of $9.3 billion.

Consumer inflation remains subdued, New York manufacturing expands above forecasts

The Consumer Price Index showed prices at the consumer level rose 0.1% in December, below the forecast of economists surveyed by Bloomberg, which called for the index to rise 0.2%. The core rate, which strips out food and energy, also increased by 0.1% for December, inline with what the Street had expected. While food and energy is the smallest component in the CPI basket, it tends to be the most volatile and often explains a majority of changes in the index at the headline level. On a year-over-year basis, consumer prices were up 2.7% in December, compared to the forecast of 2.8%, and the core CPI was 1.8% higher year-over-year, matching expectations.

In other economic news, the Empire Manufacturing Index, a measure of manufacturing in the New York region, rose in January to a level of 15.92, and remains above the level of zero that suggests conditions are neither contracting nor expanding. Economists surveyed by Bloomberg expected an improvement to 12.00, following the previous month's upwardly revised level of 4.50. The report is the first major piece of data looking at manufacturing conditions in January, and next week, the Philly Fed Manufacturing Index will be released, expected to decrease from 20.4 in December to 18.0 in the current month, providing further insight into the health of the sector. Treasuries remain higher following the inflation and manufacturing reports.

Later this morning will be the release of industrial production and capacity utilization, forecast to rise 0.6% and improve to 71.8%, respectively, for the month of December, after posting a better-than-expected increase of 0.8% in November, to a 71.3% utilization rate. Also, the preliminary University of Michigan Consumer Sentiment report is anticipated after the opening bell, expected to show an improvement in January to 74.0 from 72.5.

Europe relinquishes early gains

Stocks in Europe have turned lower in afternoon action, giving up an early gain following the disappointing revenue from US Dow member JPMorgan Chase, which is offsetting an upbeat earnings report from the region's largest retailer sector. Shares of Carrefour (CRERF $50) are moving higher after the French-based retailer posted profits that exceeded analysts' estimates as higher revenues in Brazil and China helped boost earnings and offset lower sales in Europe, the company reported. In other equity news, Bloomberg is reporting that US-based chocolate maker Hershey (HSY $37) is preparing a standalone bid for UK confectioner Cadbury (CBY $52), citing people familiar with the matter. None of the companies commented on the report. Additionally, shares of hedge fund Man Group (MNGPY $5) are solidly lower after it reported that assets under management fell by 4%. In economic news, Germany's wholesale prices rose by a smaller-than-expected amount month-over-month (m/m) in December, Eurozone consumer prices rose m/m in December, in line with the forecast of economists surveyed by Bloomberg, while the trade balance in the Euro area fell to 4.8 billion euros in November, compared to the estimate, which called for the trade balance to come in at 7.0 billion euros. The UK's FTSE 100 Index is down 0.1%, France's CAC-40 Index is 0.5% lower, and Germany's DAX Index is off 0.9%.

Asia moves higher amid M&A and China data

Stocks in Asia were mostly higher following the relative resiliency in the US amid disappointing retail sales, with Japan's Nikkei 225 Index increasing 0.7%, despite a gain in the yen versus the dollar, which dampened some sentiment toward the outlook for profits of export companies. M&A was in focus in Japan, as Shiseido Co, (SSDOY $21) the nation's largest cosmetics maker, per Bloomberg, agreed to acquire California-based Bare Escentuals (BARE $13) for about $1.7 billion in cash. Meanwhile, there were some key economic data out of China that garnered some attention, with new yuan loans increasing from 294.8 billion yuan in November to 379.8 billion yuan, above the consensus estimate of economists surveyed by Bloomberg, which called for an increase to 310.0 billion yuan. Also, China's foreign exchange reserves rose to $2.4 trillion, just shy of estimates, while foreign direct investment rose more than 100% compared to last year to $12.1 billion. However, stocks in China were mixed as the data raised concerns about how the Chinese government will react to the increase in liquidity, an area that the nation's central bank has vowed to control to try to avoid asset bubbles. Hong Kong's Hang Seng Index decreased 0.3%, while the Shanghai Composite Index rose 0.3%. Elsewhere in Asia, South Korea's Kospi Index increased 1.0%, Australia's S&P/ASX 200 Index was nearly unchanged, Taiwan's Taiex Index gained 0.8%, while India's BSE Sensex 30 Index dipped 0.2%.