Evening Update

Bulls’ Conviction Wanes

After slowly gaining steam throughout the day, the bulls were unable to preserve any solid upward momentum as stocks finished only marginally higher amid the absence of any major news or economic reports to catalyze sentiment. On the equity front, Dow member Cisco Systems unveiled its newest routing system, Texas Instruments narrowed its 1Q guidance, H&R Block Inc posted inline earnings but revenues came up short, and Dick’s Sporting Goods topped the Street’s profit expectations. Elsewhere, UAL Corp. announced that unit revenue jumped in February, Kroger Co. reported profits that exceeded analysts’ forecasts, Chevron announced job cuts as part of its restructuring plan, and Burger King reported disappointing comparable stores sales. Treasuries ended the day higher.

The Dow Jones Industrial Average rose 12 points (0.1%) to close at 10,564, the S&P 500 Index edged 2 points (0.2%) higher at 1,140, while the Nasdaq Composite gained 8 points (0.4%) to 2,341. In modest volume, 1.1 billion shares were traded on the NYSE and 2.5 billion shares were traded on the Nasdaq. Crude oil was $0.38 lower at $81.49 per barrel, wholesale gasoline lost $0.03 to $2.26 per gallon, and the Bloomberg gold spot price fell $3.25 to $1,120.30 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—was up 0.2% to 80.59.

Dow member Cisco Systems Inc. (CSCO $26) announced its CRS-3 carrier routing system, which it says is designed to serve as the foundation of the next-generation internet and set the pace for the growth of video transmission, mobile devices and new online services. CSCO said its routing system has more than 12 times the traffic capacity of the nearest competing system, with up to 322 terabits per second. Shares were unchanged.

Texas Instruments (TXN $24) narrowed its 1Q earnings and revenue outlooks, announcing that it now expects EPS to be in a range of $0.48-0.52, compared to the previous outlook of between $0.44-0.52, and the company said it is revising its revenue forecast to a range of $3.07-3.19 billion, versus the prior range of $2.95-3.19 billion. Analysts are expecting the company to report 1Q EPS of $0.49 and revenue of $3.09 billion. Shares ended the day lower.

Dick’s Sporting Goods (DKS $25) reported adjusted 4Q EPS of $0.56, one penny ahead of the Street’s forecast, as revenues rose by 10.7% year-over-year (y/y) to $1.3 billion, matching the expectations of analysts, with same-store sales—sales at stores open at least a year—increasing 2.5%. DKS issued 1Q and full-year EPS guidance that matched analysts’ estimates. Shares were lower.

H&R Block Inc. (HRB $17) reported fiscal 3Q EPS of $0.16, matching the consensus estimate of analysts, with revenues declining 5.9% y/y to $934.9 million, compared to the $950 million that the Street had expected. The company said it is disappointed with its early results this tax season as its revenues were driven by fewer tax returns prepared. Shares overcame early losses and finished higher.

UAL Corp. (UAUA $18) was higher after the parent of United Airlines reported that passenger revenue per available seat mile (RASM) rose 17-19% y/y in February, with passenger miles increasing 2.1% during the month as it decreased available seats by 5.3%, resulting in a passenger load factor of 78.7%, which was up 5.7 points compared to last year. UAUA noted that its corporate customer revenues continued to increased 13% y/y and it estimates that weather-related cancellations in February from the severe storms that affected the East coast reduced its revenue for the month by about $40 million.

Kroger Co. (KR $22) reported 4Q EPS of $0.39, five cents above what analysts were anticipating, with revenues including fuel sales increasing 7.2% y/y to $18.6 billion, compared to the $17.7 billion that analysts forecasted. The supermarket operator said excluding fuel sales, revenues would have increased 2% y/y, and its gross margin fell 214 basis points y/y, but excluding fuel sales the gross margin decreased by 112 basis points. The company said its full-year 2010 EPS are expected to be between $1.60-1.80, compared to the $1.79 that the Street is expecting. Shares were under pressure after the company said inflation or deflation in product and operating costs, the competitive environment, fluctuating fuel margins, and the pace of the economic recovery are uncertain and cause it to be cautious about its 2010 forecast.

Chevron Corp. (CVX $74) announced it will reduce its workforce by 2,000 positions as part of its previously-announced restructuring plan to become what the oil giant’s CEO John Watson said was, “..an integrated oil company going forward.” CVX also said it is set to perform further cuts in its refining and marketing divisions in 2011, and it is planning on looking for interest in selling assets, including its Pembroke Refinery located in the UK. Shares finished the day lower.

Burger King Holdings (BKC $19) said severe weather, especially in the eastern and central parts of the US where 75% of its locations reside, negatively impacted comparable store sales for January and February. The fast-food company said comparable store sales in the US and Canada fell 8.2% during the two-month period, compared to a 3.1% gain in the same period a year ago, citing the inclement weather for a 3 percentage point effect in the figure. As a result, BKC warned that fiscal 3Q revenues and earnings will be lower than the prior year. Despite the news, shares were higher.

Another light day on the economic front

Treasuries moved higher late in the day and finished in the green after the equity markets pared gains and as there were no major reports on today’s US economic calendar. The yield on the 2-year note was 3 bps lower at 0.86%, the yield on the 10-year note fell 3 bps to 3.70%, and the 30-year bond yield was 2 bps lower at 4.67%..

Ratings agencies exhibit concern over UK deficit

Fitch Ratings said the UK’s fiscal adjustment is taking place “too slow” and it needs to accelerate cuts in order to bring its deficit to 3% of its GDP by 2014-2015, which sits at more than 12% of GDP, per Bloomberg. Also, Moody’s Investors Service warned that banks that have not improved their funding position may have their ratings cut. Economic news in the nation offered little help to sentiment, after a report showed a smaller amount of people surveyed said home prices rose than economists expected, while a separate report showed the UK trade deficit widened in January to its broadest level in 17 months of 8 billion pounds ($12 billion), compared to economists’ estimates for the gap to narrow to 7 billion pounds.

Outside of the UK, France’s trade deficit narrowed to 3.7 billion euros in January from a revised 4.2 billion euro gap, less than the -4.0 billion euros expected by economists. Elsewhere, prices at the consumer level in Switzerland rose 0.1% month-over-month (m/m) in February, slightly less than the 0.2% anticipated.

In the Asia/Pacific region, Japan’s coincident index, a composite of 11 indicators that is the country’s broadest measure of economic wellness, rose for the tenth-straight month to 99.9 in January from 97.4 in the prior month, above the 99.6 forecast by economists polled by Bloomberg. As well, machine tool orders in February increased 217.3% y/y. In China, a central bank deputy governor said there is no need for new measures to cool the property market, giving a boost to property stocks in the region. And, in Australia, separate reports showed business confidence and conditions improved for February and job advertisements rose 19.1% m/m in February, after declining by 8.1% in January.

Tomorrow’s US economic calendar will only yield wholesale inventories, forecast to rise 0.2% in January after falling 0.8% in December, and the MBA Mortgage Application Index.

Unlike the US, there will be a plethora of international economic reports, including CPI and trade balance from Germany, industrial production figures from France, Italy and the UK, as well as the final revision to Italy’s GDP. Further east, Japan will report its first revision to GDP, Australia will provide employment numbers, and China will release CPI, PPI and retail sales.