Morning Market Update

Apple, Citi Dampen Stocks

Stocks are mixed in early action as traders return from the long weekend. Technology shares are weaker following the weekend announcement that Apple’s CEO and co-founder Steve Jobs will be taking another leave of absence due to health reasons, while banking shares are lower after Citigroup reported 4Q results that were short of analysts’ forecasts. Treasuries are higher amid the early weakness in stocks, and after a read of manufacturing in the New York region came in below economists’ expectations. Overseas, a promise by European finance officials to look at ways of improving its $1 trillion bailout fund helped European equities, while stocks in Asia were mixed.

As of 8:52 a.m. ET, the March S&P 500 Index Globex future is 2 points below fair value, the Nasdaq 100 Index is 20 points below fair value, while the DJIA is 7 points above fair value. Crude oil is $0.14 higher at $91.54 per barrel, and the Bloomberg gold spot price is up $13.10 at $1,375.75 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.6% at 78.91.

Apple (AAPL $349) CEO and co-founder Steve Jobs informed employees in a Monday e-mail that he will be taking another unexpected leave of absence from the company in order to focus on his health. The leave is the third time that Jobs has had to take time away from his role at the company as a result of health issues. No timeframe of his return was given.

Citigroup (C $5) swung to a profit, reporting 4Q earnings of $0.03 per share, but short of the $0.07 forecasted by analysts, as the third-largest US bank posted $1.1 billion in charges related to a tightening in its credit spreads. Revenues more than doubled to $18.37 billion, but the figure was also below analysts’ expectations, which called for revenues of $20.4 billion.

Manufacturing remains in expansion mode

The Empire Manufacturing Index, a measure of manufacturing in the New York region, rose in January to a level of 11.92, compared to the estimates of economists, which expected an increase to 12.50, from the previous month’s level of 10.57. The index remained in expansionary territory by posting a reading above zero, the demarcation point between contraction and expansion. The report is the first major piece of data looking at manufacturing conditions in January, while on Thursday, the Philly Fed Manufacturing Index will be released, expected to decrease from 20.8 in December to 20.5 in the current month, providing further insight into the health of the sector.

Shortly after the opening bell, the NAHB Housing Market Index will be released. Economists, as polled by Bloomberg, expect the gauge of homebuilder sentiment to modestly increase from 16 in December to 17 for January. Any reading below a level of 50 indicates more respondents feel conditions are poor.

Treasuries are lower in morning action following the manufacturing data, with the yield on the two-year note declining 2 bps to 0.56%, the yield on the 10-year note is 4 bps lower at 3.29%, and the 30-year bond yield is down 4 bps to 4.49%.

While the US economic calendar starts the holiday-shortened week on the light side, traders will get several other readings, particularly on the health of the housing market, starting with tomorrow’s housing starts, which remain subdued, expected to fall 0.9% m/m in December to an annual rate of 550,000 units, while building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, are forecasted to gain 2.0% m/m to 555,000 units.

Additionally, Thursday brings the December reading on existing home sales, which reflect closings from contracts entered one to two months earlier and are forecasted to rise 4.5% m/m to an annual rate of 4.89 million units after gaining a lower than expected 5.6% in November.

Other releases on this week’s US economic calendar include, MBA Mortgage Applications, initial jobless claims, and the Conference Board’s Index of Leading Indicators.

European rescue pledge outshines divergent economic news

Finance officials met in Brussels yesterday to discuss ways the near $1 trillion bailout could become more flexible in providing aid to struggling nations, and while not completely ruling out the notion of expanding the size of the rescue fund, the idea was shelved for now. After the gathering, European Union Economic and Monetary Affairs Commissioner Rehn said, “We shall improve our current existing financial backstops so that the so-called market forces cannot have even the slightest doubt about our capacity to act even in the most stressed scenarios.”

The pledge overshadowed some mixed economic news in the region, as consumer prices in the UK rose to an eight-month high and above economist expectations on an increase in food and fuel prices, while retail prices in the nation also increased compared to the prior month but matched expectations. Elsewhere, the German Zew survey of economic conditions moved modestly higher from 82.6 in December to 82.8 in January, but it was short of the 83.7 expected by economists. In equity news in the region, shares of SABMiller (SBMRF $34), the world’s second-largest brewer according to Bloomberg, are gaining ground after it reported better-than-expected volume, while Taylor Wimpey Plc (TWODF $1) is seeing strength after the UK’s second-largest homebuilder, according to Bloomberg, said profits beat its expectations last year.

The UK FTSE 100 Index is up 1.4%, France’s CAC-40 Index is rising 1.0%, and Germany’s DAX Index is up 1.0%.

Asia mixed amid divergent news

Stocks in Asia were mixed with technology companies posting broad-based gains on speculation that DRAM prices will rise, while steelmakers suffered amid concerns of a shortfall in earnings. The Japanese Nikkei 225 Index posted a 0.2% increase after a shares of Elpida Memory (ELPHF $11) moved higher after the Nikkei newspaper said the memory chip maker plans to raise prices. However, the Nikkei also reported that some steel companies may miss earnings expectations, sapping shares of Nippon Steel (NISTY $36) and JFE Holdings Inc. (JFEEF $24), two of Japan’s largest steelmakers. None of the companies commented on the reports. Japan offered a plethora of economic news for traders to digest as both industrial production and capacity utilization rose, department store sales deteriorated, and machine tool orders increase. Meanwhile, Chinese equity markets were mixed, as Hong Kong’s Hang Seng Index was flat, while the Shanghai Composite Index gained 2.3%. Rounding out the day, India’s BSE Sensex 30 Index was up 1.1%, Australia’s S&P/ASX 200 Index was 1.0% higher, while South Korea’s Kospi Index was flat.