Market Talk

Asian markets overnight felt the reverberations of S&P’s outlook cut on US government debt, with stocks marking substantial declines.

European markets currently engaged in a moderate bounce from sharp selling yesterday, and euro’s recovering. Stage set for modest rebound for US stocks after yesterday’s sell-off

Oil continues to slide, recently at $106.43/barrel, and gold’s up a little after another fresh Comex settlement high yesterday at $1492.30.

Goldman Sachs, J&J earnings headlines hitting the tape now. Both stocks rising in premarket trading. Intel, IBM after the close. March housing starts due at 8:30 a.m. ET.

S&P futures up 1.80, DJ futures up 27. Ten-year note lower, yield at 3.39%.

Meanwhile, last night Texas Instruments reported a weak first quarter and warned the Japanese disaster would cut into its second quarter. Kevin Kingsbury adds some perspective:

Citigroup calls the impact on Texas Instruments (TXN) in the wake of Japan’s disaster largely as expected. It lowers guidance amid TXN’s cut and moves price target to $40 from $42. But the investment bank does call TXN’s underlying business “good” and “order strength is contributing to an optimistic” 2H view. Susquehanna concurs, adding, “Outside of baseband/Japan, demand commentary sounds good.” FBR says, “We remain constructive on TXN as the firm has meaningful barriers, growing scale and a low 12x P/E multiple,” which should send shares higher. “That said, many TXN comparables are also inexpensive.” Auriga keeps its sell rating, contending it is “somewhat pessimistic” about a 2H rebound. TXN down 2.3% premarket at $34.

Earnings season is starting to produce some high-profile disappointments, like IBM and Goldman Sachs, which is what we’re discussing today on the Markets Hub. (By the way, I have no idea why I said “International Business Machines” at the top instead of just IBM. Who doesn’t know IBM? Weird.)

Of course, we’re also taking a look at Apple, which will disappoint absolutely no one. Those guys are masters at playing the expectations game.

You saw it out of IBM and Texas Instruments. You saw it this morning with Goldman Sachs. Revenue, it’s down. So, what’s keeping earnings up? Margins. That’s the focus of today’s Upshot column:

More than two years after the recession put corporate America on a cost-cutting binge, companies are still finding ways to squeeze more profit out of smaller operations.

Second-quarter margins are looking great for companies reporting thus far, and the higher margins are keeping the three-quarter-long rebound in profitability running.

Toy maker Hasbro Inc. on Monday posted a surprising 11% jump in earnings, even as revenue fell 7%. The Pawtucket, R.I., company’s operating margin, or profit from ongoing operations, increased to 10.8% from 9.2% a year ago as royalty payments including for its Transformers and GI Joe toys were down 32% and advertising costs fell 12%.

The only problem with this, is that right now magins are running ahead of historic norms, and history suggests they will eventually come back down to those levels. If sales don’t rise over the next couple of quarters, margins will come under pressure. It’s amazing, actually, that companies can still find places to trim, more than two years after the recession started. That, of course, doesn’t say much for prospects in the jobs market, incidentally.