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• The European markets are trading slightly lower this morning with the DJ Stoxx 50 down -0.03%. Bearish factors for European stocks this morning include a decline in European retailer sentiment in March, weaker European consumer confidence figures, and ECB Council member Axel Weber's comment that the ECB will raise interest rates "if needed" to counter inflation. Asia-Pacific stocks today closed mostly higher with positive earnings and revenue news from Chinese-oil-company Cnooc (share price +6.8% today) and from South-Korean-manufacturing giant Samsung Electronics (share price +1.3%): Japan +1.71% Hong Kong +2.74%, China +4.51%, Taiwan +0.20%, Australia -0.38%, Singapore +0.22%, South Korea +1.58%, Bombay +2.22%.
• US personal income/consumption and PCE deflator – Today’s Feb personal income report is expected to show an increase of +0.3%, matching January’s report of +0.3%. Meanwhile, Feb personal spending is expected to ease to a paltry +0.1% from +0.4% in January. The market will be looking for a progressive weakening of consumer income and spending due the likelihood that the US economy is already in recession and due to the likelihood of a continued weakening in the US labor market, which will further undercut consumer income, confidence and spending. The markets are eagerly awaiting today’s PCE deflator statistics for an update on the inflation outlook. The market consensus is that the Feb PCE deflator will ease to +3.5% y/y from +3.7% y/y in January. The January figure of +3.7% was just mildly below the 17-year high of +3.9% posted in September 2005. The PCE deflator has been pushed higher by strong energy and food prices. Meanwhile, the Feb core PCE deflator, which is the Fed’s preferred inflation measure, is expected to show a small increase of +0.1% m/m, below the +0.3% m/m increase seen in January. On a year-on-year basis, the Feb core PCE deflator is expected to ease slightly to +2.1% y/y from +2.2% y/y in January. The expected report today of +2.1% would leave the core deflator at the lower end of the range of 1.9% to +2.5% seen in the past four years, which would be a positive development. The Fed is hoping that the inflation statistics start to move lower considering that the Fed is currently preoccupied with trying to save the US banking system and is being forced to ease regardless of the inflation outlook. To the extent that the inflation statistics move a bit lower, the Fed can more plausibly justify its super-easy monetary policy. On the other hand, to the extent that the inflation statistics remain high, market concern will grow that the Fed is sowing the seeds of an eventual burst in inflation.
• US consumer confidence – Today’s final-March US consumer confidence index from the University of Michigan is expected to show a -0.5 point decline to 70.0, enlarging the previously-reported –0.3 point decline to 70.5 seen in early-March. That would leave the final March US consumer confidence figure down by a total of –0.8 points from February. The expected report today of 70.0 would be a new 16-year low in US consumer confidence, falling even below the lows seen in connection with the 2001 recession and going back to the previous US recession in the 1990-91. US consumer confidence is being hit by falling home prices, an apparent US recession, a fading US labor market, and high gasoline and food prices.

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• June S&Ps this morning are trading +7.20 points on a rating upgrade on Lehman Brothers from Citigroup and on positive earnings news for Acenture. The US stock market yesterday opened higher but zigzagged lower throughout the day and closed lower (Dow -0.97%, S&P 500 -1.15%, Nasdaq Composite -1.87%).
• Bearish factors for stock prices yesterday included (1) the 7.2% decline in Oracle as the world's 3rd largest software maker said sales including maintenance fees from acquired companies were $5.37 billion in the quarter ended Feb 29, below analysts' estimates of $5.41 billion, (2) the drop in banking shares after a Lehman analyst slashed his earnings-per-share estimates for large and mid-sized US banks this year by 7%, citing higher-than-forecast loan-related losses, (3) the 8.9% fall in Lehman Brothers on speculation it faces a liquidity crisis similar to the one that forced the collapse of Bear Stearns, (4) the 5.7% drop in Merrill Lynch, the biggest US brokerage, after a Sanford C, Bernstein analyst said Merrill may write down $4.5 billion on CDO's and post a Q1 loss, and (5) the comment from Atlanta Fed President Lockhart who said the US economy appears to be on the verge of recession with little growth this quarter and that a recovery in the second half of the yea r that may be slower than expected.
• Bullish factors for stock prices yesterday included (1) the unexpected upward revision to Q4 consumer spending, (2) the 7.1% gain in ConAgra Foods after the company reported Q3 earnings that were higher than expected and boosted its full-year profit forecast and sold its commodity trading unit to focus on food, (3) the 10% gain in Clear Channel Communications after lawsuits filed by the broadcaster and a temporary injunction issued by a Texas judge against the lending banks not to interfere with its ageement to be bought by private equity firms bolstered speculation the $19.5 billion deal will be salvaged, (4) the 4.8% gain in McCormick & Co. after the world's biggest maker of spices increased sales growth predictions for the full-year after boosting prices to counter rising commodity prices, and (5) the larger than expected fall in weekly unemployment claims.
• Lehman Brothers (LEH) is trading 4% higher in European trading this morning after Citigroup upgraded the stock to a "buy" from "hold," calling Lehman's stock price "extremely attractive." The Citigroup analyst also said that "Lehman has ample liquidity to run its business."
• Bear Stearns (BSC) is down 6% in European trading after news that Bear Stearns Chairman James Cayne sold his shares in the company for $61 million, suggesting he now has no personal inclination to seek a higher acquisition price from JPMorgan or some other suitor.
• Alcoa (AA) is up +1.3% in European trading this morning after Lehman Brothers raised its rating on Alcoa to "overweight" from "equal-weight" due to the analyst's view that (1) the downside risks for aluminum prices are less than for other commodities, and (2) the company's profits should start to benefit from higher capital investments in recent years.
• Accenture (ACN) rallied 4.1% in after-hours trading yesterday after the world's 2nd largest technology-consulting firm said Q2 profit increased to 64 cents a share, higher than analysts' estimates of 56 cents a share.
• Usana Health Services (USNA) slumped 32% in after-hours trading yesterday as the vitamin maker cut its 2008 earnings forecast, saying full-year profit may drop 20% from 2007 on declining North American business.

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• June 10-year T-notes this morning are trading -4.5 ticks on higher S&Ps this morning. June T-notes yesterday whipsawed lower then higher in a volatile session before finally closing down -9.5 ticks. Bearish factors for T-note prices yesterday included (1) the unexpected upward revision to consumer spending in Q4 (Q4 personal consumption +2.3% versus previous +1.9%), (2) the comment from Atlanta Fed President Lockhart that inflation has been "elevated" in recent months and has become a "more prominent concern," and (3) supply pressures as tepid demand was seen at the Treasury's $18 bln 5-year T-note auction. Bullish factors for T-note prices yesterday included (1) the comment from Minneapolis Fed President Stern who said tighter credit conditions may "restrain the US economy for a time," and (2) the prediction by Oppenheimer to expect global brokerages and banks to take another round of writedowns on their mortgage-related positions.
• The dollar this morning is mixed with the dollar/yen up +0.36 yen and the euro/dollar up +0.30 cents. The dollar index yesterday closed with slight gains. Bullish factors for the dollar yesterday included (1) the larger than expected drop in weekly unemployment claims, and (2) the unexpected upward revision to Q4 consumer spending, temporarily dampening recession fears. Bearish factors for the dollar yesterday included (1) comments from Atlanta Fed President Lockhart that the US economy appears to be on the verge of recession with Q1 GDP to show "little if any growth," and that the expected 2nd-half recovery "may be delayed," and (2) the comment from Cleveland Fed President Pianalto that the current home price drop in the US is having a "detrimental" impact. 
• May crude oil prices this morning are trading -63 cents a barrel and May gasoline is trading -0.58 cents a gallon on some long liquidation pressure after yesterday's sharp rally and on a clima by an Iraqi oil official that oil exports from the Basra export terminal have returned to normal after yesterday's pipeline bombing and fire. May crude oil prices yesterday continued this week's rally and closed +$4.68 a barrel at a 1-week high and May gasoline closed +6.39 cents a gallon. Bullish factors for crude oil prices yesterday included (1) the pipeline bombing in southern Iraq that temporarily disrupted supplies to Iraq's main export terminal in Basra and threatened up to 2 mln bbl per day of crude oil exports, and (2) continued fighting in Iraq between the Iraqi army and Shiite militants for the 3rd straight day. Bearish factors for crude oil prices yesterday included (1) the stronger dollar, and (2) concerns global demand may drop as the US economic slowdown spreads to other parts of the world.

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Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): PLL-Pall Corp. (BEST earnings consensus $0.57 per share), KBH-KB Homes (-.63)

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