EARLY TRADE

A slight rekindling of inflation, an earnings disappointment and a market priced for perfection have investors attempting to move down the road less traveled. As of 10:30 ET, the NASDAQ Composite ($COMPQ) and S&P500 ($SPX) are trading fractionally lower by -.12% to -.25% on moderate and mixed levels of investor satisfaction.

A worse-than-expected bump up in consumer inflation put the broader averages under pressure in Thursday's top story. On the heels of friendly and surprisingly dovish Fed Head chatter from the likes Bernanke & Bies and a market obviously aligned in belief, a rise of .3% in the core CPI and .1% above Wall Street expectations is pressuring the major indices in early trade. The increase puts the core year-over-year level at 2.7% and one-tenth above November and December's readings.

For investors anticipating a rate cut in the second half of 2007, the news doesn't offer any confirmation of easier monetary policy. That being said, nor does it suggest a move to higher rates at this time either. In fact, the situation appears to be more a case of recent overly confident hopes being somewhat dashed, but not wholly incorrect. Judging by the orderly and very modest profit-taking in the major indices and anemic rise in the yield on the 10-Year [currently 4.69%], that point seems to be well taken by Wall Street.

Elsewhere on the economic front, an intraday release of the Leading Indicators Index is helping put bulls on their heels as well. The reading of .1% fell short of expectations calling for .2% and below December's .3% level. The disappointing economic growth inferred from the data, coupled with investors less confident interest rate picture is likely to bring some bears growling to take Goldilocks "just right" meal right from underneath her.

On the corporate side, another two-pronged attack is hurting technology shares. The day's top headliner, Hewlett Packard (HPQ) is succumbing to a bout of profit-taking and pressuring the broader averages. The computer peripheral giant is off -1.75 points at 41.38 and registering its largest one day decline in five months after falling short of investors' expectations. The company announced a 26% profit increase to 55 cents a share, which bested views by three cents.

Today's ‘short fall' by Hewlett appears tied to somewhat disappointing guidance from the veritable tech leader. On that note, management's outlook barely exceeded the high standards investors have come to expect from Hewlett. Some analysts are also citing that the company's ability to sustain both strategic and dynamic profit growth is coming under more pressure due to an ever-demanding and changing technology market and one where the likelihood of dropping the proverbial ball is increased. Elsewhere, cautious words on Intel (INTC) from Prudential, a cut to "equal weight" from "over weight" on Motorola (MOT) and a downgrade of Qualcomm (QCOM) are impacting the broader indices and offering individual investors some reason to schnitzel from the latest top.

GROWTH & MOVERS COVERAGE

EARNINGS CALENDAR

Select reports scheduled after the market close and in the premarket:

REPORT CALENDAR

Economic releases on tap:

INDICES & MARKET MOOD

Investor angst over disappointing earnings and economic wobbles worthy of turning over that "just right" stuff being served of late is being quickly forgotten once more. In yet another noon balloon or lunchtime nosh, investors are performing the almost ritualistic act of bargain hunting from profit-taking barely worthy of its praises. The FOMC Minutes will be out shortly after this bit of commentary hits the presses. Personally, I'm not quite certain what could possibly be culled from its contents to press the markets higher. However, things like an apparent willingness for shorts to find a top [not that I blame them], might for starters. Throw in some bull fuel from names like Google (GOOG), Apple (AAPL) and Microsoft (MSFT) and early chatter over weakness in oil, which really never was, and a now apparent embrace of leadership in the ‘profit-engine' of the energy complex (XLE, OIH) and we have at least two other good reasons for the bull at large to still be standing.   

Chris Tyler
Staff Writer & Options Strategist
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The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual. 

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