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Behind The Morning Rally

The futures are indicating a modest oversold bounce this morning. This comes after the Dow set another 6-year low on Friday and finished the week with its worst week since October.

In its quarterly monetary policy report released today, China’s central bank warned of deflation risks. The report states, "At present, the power to push prices up is weak, and the downward pressure is relatively strong. Deflation risks are relatively big."

Citigroup is up 8% pre-open on reports that it is in discussions with the U.S. government for it to boost its stake in the bank to as much as 40%. To do so, the government would convert much of its preferred shares into common stock. While this would certainly dilute the equity of common shareholders, it would fall short of full nationalization of the bank. On Friday, Citi, along with many of the banks, plunged midday on fears that the government was contemplating full nationalization of some banks.

Other U.S. banks are also up strongly ahead of the bell: Bank of America up 12%, Wells Fargo up 8%, SunTrust Banks up 7%, U.S. Bancorp up 5%, JPMorgan up 4%.

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Gold stocks are down around 2% pre-open, as gold falls about $17 after settling above $1,000 on Friday.

In other news:

Japan’s Nikkei reports that Toyota plans to cut production about 20% this year to 6.5 million vehicles. This would be the first time in 5 years that production has fallen below 7 million units.

HMO Humana is down 9% in pre-market trading as the company said it is concerned that preliminary 2010 Medicare Advantage payment rates from the government would have “significant adverse impact” on premiums for the company’s Medicare Advantage members. The company will continue to closely analyze the rates, but has for now reaffirmed its full year earnings guidance of $5.90-$6.10 in line with analysts’ estimates of $5.93.

U.S. Airways will resume offering complimentary non-alcoholic beverages on its domestic flights beginning March 1. The change comes amid competitive pressures. Last year, the carrier was the first and ultimately only domestic airline that charged coach passengers for soft drinks, as other airlines resisted enacting a similar policy on their flights.

This post was written by CNBC producer, Robert Hum

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Questions? Comments? tradertalk@cnbc.com

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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