Morning Update

Below the Flatline Waiting for More Signs

The major equity markets are under some pressure in morning action as traders continue to be cautious amid the lack of any major catalysts that could help determine what the next leg for stocks will entail. Treasuries are higher in early trading as the US economic calendar remains dormant, which could lead to another lackluster session. In equity news, Texas Instruments narrowed its 1Q guidance, H&R Block Inc posted inline earnings but revenues came up short, and Dick’s Sporting Goods missed the Street’s profit expectations. Overseas, Asia finished mixed in a subdued session, while disappointing data out of the UK is stymieing sentiment and weighing on European trading.

As of 8:50 a.m. ET, the March S&P 500 Index Globex future is 5 points below fair value, the Nasdaq 100 Index is 7 points below fair value, and the DJIA is 26 points below fair value. Crude oil is down $1.46 at $80.41 per barrel, and the Bloomberg gold spot price is down $11.94 at $1,111.61 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.5% to 80.83.

Texas Instruments (TXN $25) 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.

Dick’s Sporting Goods (DKS $26) reported 4Q EPS ex-items of $0.54, one penny short 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.

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.

Another light day on the economic front

Treasuries are higher in morning action as there are no major reports scheduled for release on today’s US economic calendar. With the lack of major economic data, traders are treading with some trepidation, awaiting signals that may point to some clarity on when the Fed will begin to further its tightening of its monetary policy in the form of a hike in the fed funds rate.

Europe sees red as financials come under pressure

Stocks in Europe are lower in afternoon action, led by a decline in financials amid some brokerage downgrades of banking firms in Greece and on concerns about the deficit and health of the banking sector in the UK following comments from a couple of credit rating agencies. Fitch Ratings said the UK’s fiscal adjustment is taking place “too slow” and it needs to cut 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. The UK economic front is offering little help, 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 by a larger amount than expected in January. In economic news outside the UK, France’s trade deficit came in narrower than forecast in January and Switzerland’s consumer prices rose month-over-month (m/m) in February at a slightly smaller rate than anticipated.

On the equity front, shares of European Aeronautic Defence and Space Co. (EADSY $22) are under pressure after the maker of Airbus aircraft posted a wider-than-expected full-year loss, offered disappointing guidance for earnings this year, and announced that it will scrap its dividend. Elsewhere, Sanofi-Aventis (SNY $38) announced that it has reached an agreement with Dow member Merck & Co. (MRK $37), creating a joint venture in the animal health industry.

Britain’s FTSE 100 Index is off 0.7%, France’s CAC-40 Index is down 0.6%, Germany’s DAX Index is declining 0.5%, Switzerland’s Swiss Market Index is 0.2% lower, and Greece’s Athex Composite Index is 1.5% in the red.

Asia mixed as uncertainty drains conviction

Stocks in Asia were mixed in a lackluster session as uncertainty regarding the continuation of the global economic recovery stymied sentiment and the lack of any major data did little to prompt conviction among traders. Japan’s Nikkei 225 Index declined 0.2% despite a larger-than-expected increase in the nation’s Leading Index for January and a y/y jump in machine tool orders in February, which showed a 217.3% increase. Meanwhile, stocks in China were modestly higher, with Hong Kong’s Hang Seng Index increasing 0.1% and the Shanghai Composite Index rose 0.5%, helped by strength in property stocks after a central bank deputy governor said there is no need for new measures to cool the property market, according to Bloomberg. Also, shares of China Life Insurance (LFC $68) moved solidly higher after it said its full-year profits may surge more than 200% y/y, up from its previous more than 50% y/y growth forecast, due mainly to accounting rule changes.

Australian stocks were also higher amid some upbeat economic data, but gains were limited by weakness in metals issues. Australia’s S&P/ASX 200 Index rose 0.3% after 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. Elsewhere, South Korea’s Kospi Index ticked 0.1% higher following a report that showed the pace of producer price growth slowed to 2.4% y/y in February from a 2.8% increase in January. Rounding out the day, Taiwan’s Taiex Index rose 0.1%, while India’s BSE Sensex 30 Index decreased 0.3%.