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Japan, China worries to pressure stocks

6:17 AM
Japan, China worries to pressure stocks

Several Chinese banks start restricting new loans. DuPont and Travelers top expectations. Verizon posts a loss, but the number of subscribers jumps.

Global jitters about Japan and China will likely weigh on U.S. stocks this morning after Standard & Poor's Ratings Services warned that it may downgrade Japan's sovereign credit ratings and that Chinese banks have suspended new lending in Shanghai and other parts of China.

The credit tightening comes after Chinese regulators last week said they would require banks to rein in lending after last year's credit surge and bank stimulus programs.

China's central bank has also required China's biggest banks to raise their reserve ratios for excessive lending, according to published reports, as lenders face pressure to raise money after the credit surge last year weakened their capital reserves. The requirement in turn shrinks the amount banks can lend.

On Monday, the Dow Jones Industrial Average ($INDU) closed up 24 points to 10,197. The Nasdaq Composite Index ($COMPX) added 6 points to close at 2,211, and the Standard & Poor's 500 ($INX) gained 5 points to close at 1,097.

Worries have arisen that China might take even more aggressive action to tighten bank credit that sparked its 8.7% growth last year, which in turn could slow a global economic recovery.

Meanwhile, Standard & Poor's said it has placed a negative outlook on Japan's AA sovereign long-term credit rating, saying it could issue a downgrade to AA- "if economic data remain weak and measures to boost medium-term growth are not forthcoming, given the country's high government debt burden and its weak demographic profile."

Crude oil was down 67 cents to $74.59 a barrel. Gold rose $6 to $1,097 an ounce.

The Federal Reserve kicks off its two-day policy meeting today. The central bank is expected to keep rates unchanged at record-low levels near zero Wednesday afternoon, when it announces its decision.

Uncertainty over a second term for Chairman Ben Bernanke continued to add to the worrisome mood today.

Earnings parade continues

Several Dow components are reporting quarterly results today. DuPont (DD) earned $441 million, or 48 cents per share, in the fourth quarter, up from a loss of $629 million, or 70 cents per share, in the year-ago period. Analysts expected quarterly earnings of 41 cents a share.

The company boosted its full-year 2010 earnings guidance to between $2.15 and $2.45 per share, up from previous guidance of $2.10 to $2.40. Wall Street's estimate is $2.28.

Travelers (TRV) posted fourth-quarter earnings of $1.29 billion, or $2.36 per share, up from $801 million, or $1.35 per share, in the year-earlier period. Revenue rose 11% to $6.46 billion. Analysts had expected earnings of $1.47 per share on revenue of $5.8 billion

Verizon (VZ) reported a fourth-quarter net loss of $653 million, or 23 cents per share, a drop from net income of $1.24 billion, or 43 cents per share, in the year-ago quarter. Verizon incurred a one-time charge for work force reductions, but the company gained a net 2.2 million wireless subscribers in the fourth quarter to bring it to a total of 91.2 million.

Johnson & Johnson (JNJ) earned $1.02 per share, a nickel better than Wall Street's expectations. Sales rose 9% in the fourth quarter to $16.6 billion.

Yahoo (YHOO) will report after the close, and analysts are looking for fourth-quarter results of 11 cents per share.

Posted by Elizabeth Strott and Charley Blaine

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