Morning Update

Labor Data Shows Mixed Signals

After yesterday’s sharp declines in the equity markets on sovereign debt concerns in Europe and uneasiness toward the employment picture, stocks are slightly higher, paring early losses in morning action as traders are dissecting the labor report, which showed the unemployment rate dipped below 10%, while payrolls unexpectedly fell in January. Treasuries briefly moved higher following the labor data, but have moved back into negative territory. The focus on jobs is overshadowing some light equity news, which showed Aetna missing the Street’s profit projections, while Tyson Foods easily topped analysts’ forecasts. Overseas, Asian markets tumbled in response to yesterday’s global slide on the aforementioned employment and sovereign debt concerns, and Europe is extending losses.

As of 8:51 a.m. ET, the March S&P 500 Index Globex future is 1 point above fair value, the Nasdaq 100 Index is 10 points above fair value, and the DJIA is 4 points below fair value. Crude oil is up $0.15 at $73.29 per barrel, and the Bloomberg gold spot price is lower by $1.63 at $1,062.08 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.2% at 80.11.

Aetna (AET $29) reported 4Q EPS ex-items of $0.40, two cents shy of the consensus estimate of Wall Street analysts, with revenues rising 9% year-over-year (y/y) to $8.7 billion, compared to the Street’s forecast of $8.6 billion. AET said it saw a lower commercial underwriting margin, due to a significant increase in commercial medical costs, partially offset by an increase in health care premiums. The company added that entering 2010, a weak economy and high unemployment levels remain challenging.

Tyson Foods (TSN $14) reported fiscal 1Q EPS of $0.42, compared to the $0.18 that analysts were expecting, with revenues increasing 1.5% to $6.6 billion, inline with the Street’s forecast. The meat producer said all operating segments were profitable, with its beef, pork, and prepared foods continuing to execute well, while its chicken unit is beginning to show the improvement it has been working toward.

Labor report mixed

Nonfarm payrolls fell by 20,000 jobs in January, compared to the Bloomberg estimate, which called for a 15,000 increase in jobs. Also, December was revised from -85,000 to -150,000 but November’s 4,000 gain—the first since December 2007—was upwardly revised to 64,000. The unemployment rate fell below 10%, declining to 9.7%, versus the consensus forecast for it to remain at 10.0%. Average hourly earnings rose 0.3%, slightly above the Street's forecast of a 0.2% increase, and average weekly hours rose to 33.3, compared to the forecast calling for it to remain at 33.2. Treasuries initially moved higher after the report, but have fallen back below the flatline.

Later today, consumer credit, will be reported in the final hour of trading, expected to have fallen by $10.0 billion in December.

Europe continues to fall as debt concerns stand tall

Stocks in Europe are under solid pressure in afternoon action, with weakness in industrials and basic materials helping pace the decline amid continues fears about the sovereign debt in Greece, Portugal, and Spain, and the impact they could have on the rest of the Eurozone economy and the global economic recovery. Financials are under solid pressure to lead the broad-based decline in Europe amid the aforementioned sovereign debt concerns and amid a 17% drop in shares of ICAP (IAPLY $12) after the bank transactions broker slashed its full-year profit outlook on slower-than-anticipated profitability of its new business. In economic news, a report showed UK producer prices rose more than expected month-over-month (m/m) in January and industrial production in Germany—Europe’s largest economy—unexpectedly fell, dropping 2.6% m/m in December, compared to the 0.6% gain that was anticipated. Elsewhere in Spain, industrial output fell 1.5% y/y in December, and the Spanish central bank said the nation’s GDP in the final quarter of 2009 will probably decrease 0.1%, contracting for the seventh-straight quarter. Britain’s FTSE 100 Index is 1.3% lower, France’s CAC-40 Index is down 2.2%, Germany’s DAX Index is off 0.9%, Spain’s IBEX 35 Index is declining 0.8%, Portugal’s PSI 20 Index is 2.3% lower, and Greece’s Athex Composite is tumbling 3.7%.

Asia solidly lower on global uneasiness

Stocks in Asia were broadly lower across the board amid growing sovereign debt concerns in the Eurozone and some uneasiness ahead of the key labor report out of the US. Taiwan’s Taiex Index fell 4.3% to lead the way, followed by Hong Kong’s Hang Seng and South Korea’s Kospi Indexes, which both posted declines over 3.0%. Financial firms and commodity related issues were the worst performers, while shares in Hong Kong were also pressured by a 10% tumble in shares of China’s largest PC maker Lenovo Group (LNVGY $14) even after it posted better-than-expected profits late yesterday, as it warned that high component costs could erode profits in the company’s current quarter. Meanwhile, Japan’s Nikkei 225 Index fell 2.9% as the solid advances in the yen versus the dollar and other major currencies exacerbated the aforementioned uneasiness toward the global economy, due to the negative implications of a stronger Japanese currency on revenues of companies that rely heavily on sales in the US and other global economies outside the Asian nation. However, shares of Toyota Motor Corp. (TM $72) managed to gain ground, stemming the recent tumble on recall concerns, even amid reports that the company will announce a recall of its Prius Hybrid cars. The company held a press conference today and apologized for the recall issues and said it is still considering measures regarding its Prius vehicles. Also, shares of Sony Corp. (SNE $34) eked out a gain in reaction to the company’s report late yesterday where it posted its first profit in five quarters and lifted its annual outlook. After today’s closing bell in Japan, Panasonic Corp. (PC $16) reported a quarterly profit jump and raised its annual operating profit and sales forecast. In economic news in Japan, the country’s preliminary release of the Leading Index rose more than expected in December.

Australia’s S&P/ASX 200 Index fell 2.3% as the weakness in commodities weighed on the resource-heavy nation, overshadowing the Reserve Bank of Australia’s quarterly monetary policy statement, in which it said the economy will grow at an annual pace of 3.25%, while factoring in a 75 basis point increase in its benchmark lending rate. Also, the RBA’s statement said it is likely that borrowing costs will be increased further over time to ensure that inflation stays within the central bank’s target range of 2-3%. Rounding out the dismal day in Asia, China’s Shanghai Composite Index fell 1.9% and India’s BSE Sensex 30 Index fell 2.7%.