Stocks look for direction

NEW YORK (CNNMoney.com) -- Investors were once again looking for direction Wednesday after tumbling into correction the previous session, as investors prepared for the start of earnings season.

At 7:30 a.m. ET, Nasdaq and S&P futures were little changed, pointing to a flat start for stocks, as investors balanced higher oil prices and recession fears with positive outlook from Dow component DuPont.

A late-day sell off on Tuesday pushed stocks to more than 10 percent below highs hit in November - the technical definition of a market correction.

In addition to economic worries and concerns about the housing market, AT&T (T, Fortune 500) said Tuesday it was seeing a pull back in consumer spending.

But futures got a lift Wednesday when chemical maker DuPont (DD, Fortune 500), a Dow component, increased its 2007 full-year earnings outlook to reflect stronger business results in the fourth quarter. The company also raised its guidance for 2008 results, but the boost to futures was short-lived.

Earnings season kicks off with results from Dow component Alcoa (AA, Fortune 500) due after the market close. Analysts surveyed by Briefing.com forecast that the company's earnings fell 55 percent from a year-earlier levels.

David Kelly, chief market strategist for JPMorgan Funds, said he believes stock investors aren't focused on earnings quite yet, but that rather there is a tug between recession fears and the belief that recent sell-offs have produced attractive prices for many stocks.

"I think that's a fundamental struggle here that could help futures look OK even with negative momentum in the market," he said.

Kelly said the results of the New Hampshire primary, with an upset win for Hillary Clinton and a comeback victory for John McCain in the Republican primary might be weighing on the markets slightly because it casts uncertainty on the nomination process.

"If after Iowa and New Hampshire, we had two wins for Clinton and two wins for (Mitt) Romney, it'd be much clearer where the races are headed," he said. "We now have what looks like a two-horse race on the Democratic side, and at least a four-horse race on the Republican side, and that is having an overall effect on markets because they don't like uncertainty."

But Kelly said he doesn't believe the election results will be the big factor for investors Wednesday.

"What we have is a clash between the low pressure system of recession fears and the high pressure system of valuation," he said. "The election is a little bit of fog out there somewhere. It's not the big weather story."

The only key economic report due Wednesday is the weekly report on U.S. fuel inventories, which is forecast to show yet another decline in supplies. Oil prices rose ahead of that 10:30 a.m. ET report, adding 59 cents to $96.92 a barrel in electronic trading, although that's off highs of the morning that had taken prices above $97 a barrel.

Among stocks to watch, Apple (AAPL, Fortune 500) agreed to scrap its online pricing policies across Europe for its iTunes music downloads, settling a dispute with the EU, regulators there announced. Apple shares lost almost 4 percent in early trading in Frankfurt on the news.

Troubled discount brokerage E*Trade Financial (ETFC), which Tuesday saw shares dip to an all-time low on growing mortgage segment losses, said Wednesday it sold about $3 billion of mortgage-backed securities and municipal bonds in the fourth quarter in addition to its previously announced sales.

McGraw-Hill Cos. (MHP, Fortune 500), the parent of both the Standard & Poor's credit ratings agency and BusinessWeek magazine as well as an educational publisher, said after the bell Tuesday it is cutting more than 600 jobs, resulting in a fourth-quarter charge of $43.7 million.

Also after the close of trading Tuesday, Bear Stearns (BSC, Fortune 500) confirmed earlier reports that James Cayne was giving up the CEO spot, while remaining in the chairman position at the embattled Wall Street firm. Shares, which slipped nearly 7 percent during regular trading Tuesday, edged 0.3 percent higher in after-hours trading.

Late Tuesday General Motors (GM, Fortune 500) CEO Rick Wagoner unveiled concept cars powered by plug-in hybrids and fuel cells at the Consumer Electronics Show in Las Vegas, saying "the auto industry can no longer rely exclusively on oil." He also showed off technology that may one day allow cars to drive themselves.

In global trade, most Asian markets edged higher. European stocks tumbled in morning trading.