Got this when I ran my sp__updatestats procedure in a SQL Agent jobstep, but it worked in Query Analyzer. The reason? The default settings are probably different in QA rather than external connections similar to SQL Agent.

Msg 1934, Sev 16: UPDATE STATISTICS failed because the following SET options have incorrect settings: 'ARITHABORT'. [SQLSTATE 42000]

The solution was to recreate the procedure that ran UPDATE STATISTICS using a SET command within the procedure. 

CREATE PROCEDURE dbo.sp__UpdateStats
AS
SET ARITHABORT ON 
SET QUOTED_IDENTIFIER ON 
...

We started to get this problem after I added a computed column to a table.