Stocks look set to drop this morning as the latest earnings warnings start to bite into hope for profit recovery this year. In the U.S., Tellabs Inc., Teradyne Inc. and Jabil Circuit Inc. have all issued earnings or sales warnings since the close, last night.

Already, European stocks are headed down based on an earnings warning from chipmaker Infineon Technologies AG. All these tech warnings are echoing throughout the techs and telecoms. At midday, in Europe, the FTSE in London is down 49 points to 5631. The Paris CAC 40 has dropped 68 points to 5131. The German DAX is down hardest, losing 90 points to 5832.

The economic data isn’t providing much to cheer about either. Wholesale trade data for April is in. It’s down 0.9% to $31.9 billion. The drop follows a 1.8% rise in March. The slide was diverse, with eight of the 11 trade groups reporting declines. The big losers were farm machinery, equipment and supplies, beverages, drugs and tobacco products; industrial and other machinery, equipment and supplies, motor vehicles, parts and accessories, and metals, hardware, plumbing and heating equipment and supplies. The only
bright spots were apparel and dry goods, food products, and “other” products.

The Composite Index showed no change in May, its sixth straight month without an increase. The weakness in the stock market and in manufacturing in recent months spread to services in May, with employment in this sector stalled for the first time since October 1999. The drop was particularly
sharp for professional services in Ontario, where the decrease was by far the largest since records were first compiled in 1987.

Overnight in Asia, stocks were mixed once again. The Nikkei gained 100 points to 12675. The Hang Seng however lost 215 points to 12918.

In M&A news, tire-maker Continental AG is reportedly close to a deal to sell most of its ContiTech unit to Carlyle Group Inc. for US$854 million.

In other corporate news, Montreal’s Mindready Solutions Inc. has announced a restructuring program aimed at rationalizing some of its operations, with cost reduction measures, including cutting about 15% of its staff. “This slowdown will account for a significant decrease in the company’s revenues and earnings in the second quarter, compared with last quarter’s results,” it says.

Also, venerable old Potash Corporation of Saskatchewan Inc. says its earnings in the second quarter will be approximately 15% lower than its previous quarterly earnings guidance which was in the range of $1.00 per share. It blames the weakness on a stronger Canadian dollar, combined with lower nitrogen and phosphate fertilizer prices.