U.S. MARKET AVERAGES

Stocks declined Friday morning as lower-than-expected earnings outlook from Dow component Pfizer raised concerns about lower overall corporate profits for 2006 and the Department of Commerce released a new record for the U.S. trade deficit.

The Commerce Department said that trade deficit widened to $65.7 billion in December from an upwardly revised $64.7 billion in November and reached a record $725.8 billion in 2005 It's the fourth straight record annual deficit, and with rising energy prices worldwide, investors worried that higher import prices could spark domestic inflation.

Pfizer projected flat sales for 2006 due to a loss of patent protection on some of its top-selling drugs. The company forecast full-year earnings of $2 per share, below analysts' estimates of $2.03 per share.

In corporate news, Oracle Corp. (ORCL: chart), business software company, revealed that it had closed its $5.9 billion acquisition of Siebel Systems and will cut 2,000 jobs. Oracle also gave a profit outlook for the remainder of the year roughly in line with estimates. The company said it expects Q3 earnings of 13-14 cents per share, up from 10 cents a share last year with revenues higher by 17-19%. Excluding one-time items, Oracle said it will earn 18 cents per share in the quarter, vs. expectations of 19 cents per share on revenues of $3.45 billion. For Q4, Oracle expects earnings of 21-23 cents per share on revenue growth of 13%-17%.

The gold sector moved to a two-week low, declining about 4.8%. The disk drive and semiconductor sectors were other standouts moving to the downside, with losses of 1.9% and 1.8%, respectively.

Insurance stocks were among the very few sectors posting strength with Aon (AOC: chart) being the main inspiration for this advance, climbing about 8% on earnings news.

Allied Waste (AW: chart) moved to a new 52-week high on higher Q4 earnings. Competitor Waste Management (WMI: chart) also hit a fresh peak. BellSouth (BLS: chart) ticked above a week-long trading range to reach a new high.

Only a few significant stocks moved to new 52-week lows on Friday, including Audible (ADBL: chart) and Inspire Pharmaceuticals (ISPH: chart).

In midday trading, the Dow sank 22.89, or 0.21%. The Standard & Poor's 500 index slid 3.39, or 0.27%, and the Nasdaq composite index dropped 11.20, or 0.5%.

Bonds moved higher as investors hedged against economic uncertainty, with the yield on the 10-year Treasury note falling to 4.54% from 4.55% late Thursday. The 2-year Treasury yield was down slightly at 4.66%, but the inversion of the yield curve signaled a lack of short-term confidence and fed worries about an economic downturn.

MOVERS AND SHAKERS

Pfizer Inc (PFE: chart), drug company, projected earnings of $1.52 to $1.56 a share for 2006, and adjusted earnings, excluding special items of about $2 a share. The Dow component anticipates revenue for 2006 will be comparable to its 2005 total of $51.3 billion. The current average estimate of analysts is for a profit of $2.04 a share for 2006 on revenue of $51.58 billion. The company’s shares fell 3.3%.

Atari Inc (ATAR: chart), video game company, reported Q3 net loss of $4.76 million, or 4 cents a share vs. net earnings of $19.6 million, or 16 cents a share a year ago, missing estimates of 17 cents a share. Revenue fell 36% to $100.8 million from $156.4 million last year. The stock dropped 19%.

Phelps Dodge (PD: chart) dropped 5% after it was downgraded at Prudential Equity Group to neutral weight from overweight.

Cisco Systems (CSCO: chart), networking company, plans to sell $5.5 billion of senior unsecured notes, the proceeds of which the company will use to fund its proposed acquisition of Scientific-Atlanta and other general corporate purposes. Cisco’s share gained 1%.

Aon Corp (AON: chart), insurance company, posted Q4 net income of $224 million, or 65 cents a share, compared with $81 million, or 24 cents a share last year. Quarterly revenue was $2.53 billion, compared with $2.6 billion last year, missing expectations of $2.61 billion. The company expects cumulative pretax charges of $262 million in connection with its previously announced 3-year restructuring plan. The stock rose 7.3%.

ECONOMIC NEWS

Friday morning, the Department of Commerce released its report on the U.S. trade deficit in the month of December. The report showed that the trade deficit widened more than economists had been expecting and reached a record high for the full year.

The Commerce Dept. said that the trade deficit widened to $65.7 billion in December from an upwardly revised $64.7 billion in November. Economists had been expecting the deficit to widen to $65.0 billion from the $64.2 billion originally reported for the previous month.