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HP beats on bottom line, but top line disappoints

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Traders are looking at a lower open for stocks as a slow drift lower in overnight trading has S&P futures (sp03h) 835.60 -0.48% lower by 4.1 points after Dow component Hewlett Packard (NYSE:HPQ) $18.18 traded down $1.18 or 6.4% over the New York ECNs.

Last night, Hewlett Packard (HPQ) said it earned $0.29 per share in its recently completed first quarter, which beat analyst's estimates by a penny. However, the company said revenues rose 57% year-over-year to $17.88 billion, which was well-shy of the $18.50 billion consensus estimates. The company said revenue shortfalls were largely confined to the U.S. market, as weak commercial spending continued. In a morning call, Goldman Sachs downgraded the stock to "in line" from "outperform," saying the company's recent quarter was "far from clean." Goldman cited items including the restatement of segment revenue/earnings, a significant top-line shortfall, and notably weak cash flow from operations. Goldman reduced its calendar year earnings estimates to $1.29 from $1.34 and revenue estimates to $73.7 billion from $75.5 billion. Goldman added that it sees little that will get new investors excited about the stock at this point.

While not a NASDAQ-100 component, the news from Hewlett-Packard brings modest selling in the pre-market trade in technology stocks with NASDAQ futures (nd03h) falling 6-points to 992. Dow futures (dj03h) currently trade down 50-points at 7,870.

Fair value for the S&P 500 today is $-0.18. That price will not change during the session. HL Camp & Company has their computers set for program buying at $0.56 and set for program selling at $-1.88. Fair value for the NASDAQ-100 today is $3.43.

The bond market has a slight bid coming in to the major maturities with the 10-year March futures contract (ty03h) gaining 3/32 at $115'315. The benchmark bond's YIELD ($TNX.X) is slipping lower at 3.795%. According to money-rates.com, the national average mortgage rate for a 30-year mortgage is 5.9%, with 0.19% total points. A 15-year fixed rate is at 5.26%, with 0.19% total points.

The Times of London has just reported that UN and independent missile experts believe Iraq's al-Samoud 2 missile may be part of a secret project to develop a longer-range missile that could reach as far as Tehran or Tel Aviv. This has Hans Blix demanding that Iraq should begin destroying the missiles by Saturday, and UN sourses say that Mr. Blix is ready to call an emergency meeting of the Security Council this weekend if Iraq fails to do so. Yesterday, Britain's Prime Minister said that Iraq would destroy the missile at the last minute in an effort to prolong any U.S./British-lead military intervention.

Jeff Bailey

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