Stocks are set to open flat today as investors react to a disappointing earnings report from tech bellwether Intel and President Bush’s defiant remarks on Iraq.

After markets closed Tuesday, Intel missed analysts’ per-share expectations for the quarter by a penny despite an 89% increase in net profit. The bellwether chip maker’s revenue grew by just 20% in the quarter ended March 27, and the company predicted slightly lower sales for the current quarter than some analysts forecast.

In this morning’s economic news, U.S. core inflation rose in March to its highest level since November of 2001 as prices for clothing and hotel rooms soared.

The Consumer Price Index rose 0.5% in March, up from a 0.3% increase in February, the Labor Department said this morning.

The closely watched core index, which excludes food and energy items, rose 0.4%, its biggest increase since November 2001. The core index rose 0.2% in February. In annual terms, the core rate rose to 1.6% for the 12 months that ended March, up from 1.2% for the 12 months ended in February.

The news may further fan fears that the Federal Reserve will raise interest rates later this year. Economists had called for 0.3% gain in the overall index and a 0.2% increase in the core index.

There was better news on the trade front. A broad-based increase in exports helped trim the U.S. trade deficit to $42.09 billion in February the Commerce Department said.

There is good news regarding international trade from Canada, too. Statistics Canada reported today that Canada’s merchandise trade surplus jumped by more than $600 million in February to $5.7 billion as both exports and imports rebounded sharply. “Exporters sent $34.1 billion worldwide in February, up 7.0 per cent from January, which was the lowest level in almost five years,” StatsCan said.

In earnings news, Bank of America Corp. said its first-quarter earnings grew nearly 11%, fuelled by strong gains in consumer loans, fees, investment and brokerage services, and credit cards. The third-largest U.S. bank said its net income rose to US$2.68 billion, or US$1.83 per share, in the quarter. That’s up from US$2.42 billion, or US$1.59 per share, in the year-ago period.

European markets are lower at midday. In London, the FTSE 100 Index is off 48.3 points to 4,467.5. France’s CAC 40 is down 49.06 points, and Germany’s Xetra Dax is off 66.44 points.

Overnight, Asian markets closed lower taking their clue from yesterday’s slump. Tokyo’s Nikkei fell 29.64 points to 12,098.18.

In Hong Kong, the blue-chip Hang Seng Index fell 361.95 points, or 2.8%, to 12,669.86.

On Tuesday, a report of stronger than expected U.S. retail sales overshadowed a Bank of Canada rate cut, and sent markets tumbling.

In Toronto, the S&P/TSX composite index fell 135.19 points, or 1.52%, to 8,763.58 on volume of 256.6 million shares worth $3.66 billion.

After the markets closed Tuesday, Nortel Networks said the Ontario Securities Commission is the latest regulator to launch a formal investigation into restatements of the company’s financial reports.

In New York, stocks were also hard hit by the adverse impact of the positive retail sales report. The report raised fears the U.S. Federal Reserve may increase interest rates sooner than expected.

The Dow Jones industrial average fell 133.64 points, or 1.27%, to 10,381.92 while the Nasdaq Composite Index lost 35.40 points, or 1.71%, to 2,030.08. The Standard & Poor’s 500 Index dipped 15.78 points, or 1.38%, to 1,129.42.