Ambac could rise further on takeover speculation...

Billionaire Wilbur Ross is reportedly in talks to buy bond insurer Ambac Financial Group (ABK). ABK shares closed down 17.3% Thursday after the New York Insurance Department said its plan to rescue the bond insurers will take time, but surged 8.65% after hours on buyout rumors.

Goldman to Lay off Workers - Spooks Market

Goldman Sachs (GS) said it is targeting the bottom 5% of performers in its workforce to lay off as part of its annual review process, CNBC reported Friday. The review targets about 1,500 of 30,000 positions. Goldman's statement came in response to a Reuters report saying the financial giant was aiming to lay off 5% of its global workforce.

Goldman told CNBC the review was entirely related to individual performance, not business conditions.

The Dow is now down 160 pts after earlier being up 110 points. A clear overreaction...

E-Trade Shares Rise on "Turnaround Plan"

Investors bought up E-Trade Financial Corp. shares, overlooking a massive quarterly loss on expectations the discount brokerage can revitalize its flagging business. But analysts warned exposure to potentially toxic mortgage debt could hamper the company's growth.

Honeywell Net Up 18%, Sees Softer Economy

Aerospace titan earns $689 million, or 91¢ a share, as it continues to post strong sales growth though it warns of a "softer" global economy in 2008. Wall Street expected EPS of 91¢. Shares gain 4%.

Caterpillar 4Q Net Jumps 11%, Backs Outlook

Heavy-equipment maker posts net profit of $975 million, or $1.50 a share, driven by strong growth overseas. Revenue rises 10% to $12.14 billion, beating forecasts of $11.79 billion. Dow component says recession-like conditions are developing in the U.S., but believes growth will hold up outside the country and affirms its forecast for a 5% to 15% increase in 2008 earnings. Shares gain 2%.

Microsoft Beats Expectations.....

Microsoft Corp. (MSFT). The Redmond, Washington-based software maker on Thursday said second-quarter earnings almost doubled to $4.71 billion or 50 cents a share from $2.63 billion or 26 cents a share same time last year. Revenue rose 30% to $16.37 billion from $12.54 billion last year on the back of robust holiday sales and enterprise demand. For the third quarter, Microsoft said it expects earnings of 43-45 cents a share and revenue between $14.3-$14.6 billion.

Companies Reporting Earnings Today...

• Caterpillar Inc. (CAT). Expected to report Q4 earnings of $1.50 per share, an increase of 13.41% from the same quarter last year when the company earned $1.32, according to analysts polled by Thomson Financial.

• Commerce Bancorp Inc. (CBH). Expected to report Q4 earnings of $0.30 per share, down 25.50% from the same quarter last year when the company earned $0.40.

• Fortune Brands Inc. (FO). Expected to report Q4 profits of $1.42 per share, an increase of 2.01% from the same quarter last year when the company earned $1.39.

• W.W. Grainger Inc. (GWW). Expected to report Q4 profits of $1.28 per share, an increase of 18.24% from the same quarter last year when the company earned $1.08.