U.S. MARKET AVERAGES

Stocks fell slightly Wednesday as strong data from the manufacturing sector raised investors' fears that the Fed Reserve would raise short-term interest rates higher than anticipated.

The transportation sector rallied to a new high on Tuesday due to a sharp advance of the airline sector. However, in the early stages of Wednesday's trading, the group suffered some light profit taking sending the Dow Jones Transportation Average down 1%. Technology stocks were also weak in the early going, including modest losses in the semiconductor and networking spaces.

There were few sectors which showed considerable moves to the upside in the early going. The bank group was slightly higher. The energy group posted some strength as oil prices attempted to stabilize after their more than 2-week downtrend.

In the first hour of trading, the Dow Jones industrial average fell 8.24, or 0.08% after rising 136 points Tuesday. The Standard & Poor's 500 index fell 1.21, or 0.09%, and the Nasdaq composite index fell 4.42, or 0.2%.

Bonds rose, with the yield on the 10-year Treasury note falling to 4.60% from 4.61% late Tuesday.

MOVERS AND SHAKERS

Itron Inc (ITRI: chart), energy and water delivery technology company, posted Q4 net income was $16.9 million, or 65 cents a share vs. a net loss of $7.01 million or 33 cents a share, beating estimates of 48 cents a share. The company reported quarterly revenue of $160 million, compared with $131.4 million last year, above expectations of $145 million. Looking forward, Itron expects 2006 revenue of $605 million to $615 million, with per-share income of $2.07 to $2.13 on a pro forma basis. The stock rose 14.3%.

BlackRock (BLK: chart) agreed to merge with Merrill Lynch’s investment management business in a deal that will create a firm with nearly $1 trillion in assets under management. Merrill will hold a 49.8% stake and a 45% voting interest in the combined company, which will operate under the BlackRock name. Merrill Lynch expects to record a gain of roughly $1.1 billion on the deal. The company’s shares rose 8.7%.

Credit Suisse Group (CSR: chart) reported a 15% increase in Q4 net profit and planned to lift its 2005 dividend payment by 33% to SFr2 a share. Credit Suisse's net reached SFr1.1 billion ($843 million), with the company's announcement of a SFr421 million compensation-related charge on Monday weighing on the bottom line. Its institutional securities division reported a 25% profit climb from a year ago but a 45% decline from the third quarter on declining trading revenue. The stock dropped 8.3%.

Abercrombie & Fitch (ANF: chart) posted 58% profit jump in Q4 on 40% sales growth. The retailer posted net income of $1.80 per share, beating expectations of $1.78 a share. The casual-wear retailer warned investors that it expects a slowdown in same-store sales. The stock fell 4%.

ECONOMIC NEWS

Crude oil inventories advanced sharply in the latest week, according to government statistics released Wednesday. The rise followed a slight dip in the previous period. Meanwhile, stocks of gasoline recorded yet another advance.

The Department of Energy's Energy Information Administration revealed that crude oil inventories rose by 4.9 million barrels for the week ended February 10, climbing to 325.6 million barrels from the prior week's level of 320.7 million barrels. This followed a decline of 300,000 barrels in the previous week. Oil inventories were 10.9% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week increase of 2.2 million barrels, the government said, adding to a recent string of gains that included the previous week's build of 4.3 million barrels. Gasoline stocks were 1.8% above their levels of last year. Inventories of distillate fuel oil advanced by 900,000 barrels in the most recent week.

Industrial production unexpectedly fell in the month of January, according to a report from the Federal Reserve, with a sharp drop in output from utilities contributing to the decrease. The report also showed that capacity utilization came in line with economist estimates.

The Federal Reserve said that industrial production fell 0.2 percent in January following an upwardly revised increase of 0.9 percent in December. The drop marked the first decrease since September and came as a surprise to economists, who had expected a 0.3 percent increase.

As mentioned above, the decrease in industrial production was largely due to a sharp drop in output from utilities, which fell 10.1 percent in January after rising by 2.8 percent in December. The Fed said that the drop in output was the result of the unseasonably warm temperatures.

The sharp drop in output from utilities offset increases in mining output and manufacturing production, which rose 1.7 percent and 0.7 percent respectively.

The Fed noted that the decrease in utilities output also contributed to a drop in the capacity utilization rate, which fell to 80.9 percent in January from 81.2 percent in December. Economists had expected the capacity utilization rate to come in at 80.9 percent.