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• The European DJ Stoxx 50 this morning is sharply higher by +1.63% on this week's upward rebound in financial stocks and on lower oil prices again this morning. European retailers, airlines and automakers rallied today on lower oil prices. Asia-Pacific stocks today closed mostly higher on yesterday's US stock market rally and optimism about lower oil prices: Japan +0.97%, Hong Kong +2.69%, China -0.74%, Taiwan +3.46%, Australia +1.99%, Singapore +3.06%, South Korea +1.94%, Bombay +5.94%.
• Mortgage apps – This morning's MBA mortage applications report showed weakness with a -6.2% decline in the MBA market index, a -5.6% decline in the refinancing sub-index and a -6.7% decline in the purchases sub-index. The refi index is just mildly above its recent 7-year low and the purchases sub-index is just mildly above its recent 5-1/2 year low, indicating the weak state of mortgage activity and the housing industry. In the latest week, the 30-year mortgage rate eased sharply by 11 bp to 6.26%, which is down by a total of 19 bp from the 10-month high of 6.45% seen in the last week of June. Still, the 30-year mortgage rate is up sharply from the 6% level seen as recently as May.

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• September S&Ps this morning are trading +6.50 points on this morning's $2.04 sell-off in oil prices. The US stock market yesterday rallied sharply from early losses to close moderately higher (Dow +1.18%, S&P 500 +1.35%, Nasdaq Composite +1.07%).
• Bullish factors for stock prices yesterday included (1) yesterday's $3.40 per barrel sell-off in crude oil prices which occurred as Tropical Storm Dolly headed south of key oil rigs and refineries off the Texas and Louisiana coast, (2) noted Deutsche Bank analyst Mike Mayo's comment that bank losses have not spread as "much as feared," (3) a sharp 27% rally in Wachovia after Wachovia's CEO said that a stock sale is "not on the plan," (4) a sharp rally in UAL on falling oil prices and the announcement the firm will cut costs by eliminating 7,000 jobs (the Amex Airline index soared by 22% yesterday), (5) a +2.4% rally in Caterpillar on stronger than expected earnings ($1.74) on strong demand from Asia and the Middle East, and (6) a +10% rally in UnitedHealth Group on better than expected earnings.
• Bearish factors for stock prices yesterday included (1) negative earnings news from American Express late Monday which pushed American Express down -7.1% yesterday and took Capital One and Discover lower as well, (2) Apple's weaker-than-expected guidance for fiscal-Q4 released late Monday, which caused Apple's shares to close -2.6% yesterday (guidance of $1.00 per share for EPS and $7.8 billion for sales was well below the analyst consensus of $1.24 for EPS and $8.3 billion for sales),
• Washington Mutual fell -2.6% in after-hours trading yesterday after reporting a $3.3 billion quarterly loss, although the bank also announced a plan for cutting $1 billion in costs.
• Costco is down -2.6% in European trading this morning ahead of its earnings report today.
• Yahoo is up +2.2% in European trading this morning after positive results from the company on strong partnerships.
• Norfolk Southern may show strength today after reporting stronger-than-expected earnings.
• AT&T this morning reported Q2 earnings of 76 cents per share, which was right on the analyst consensus.

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• September 10-year T-notes this morning are trading -13 ticks ticks on strength in S&Ps and European stocks and on supply overhang ahead of today's 2-year T-note auction and tomorrow's 5-year T-note auction. Sep T-note prices yesterday closed -9.5 ticks and edged to a new 3-week low. Bearish factors included (1) the sharp rally in the stock market, (2) Philadelphia Fed President Plosser's comment that the Fed should raise interest rates "sooner rather than later," (3) yesterday's poor 20-year TIPS auction results and supply overhang ahead of today's 2-year T-note auction and tomorrow's 5-year T-note auction, (4) the rally in financial stocks on reduced concern about more losses and capital raises, and (4) yesterday's sell-off in crude oil prices which takes some of the upward pressure off the inflation statistics and some of the spending pressure off US consumers, The main bullish factor yesterday was the 4-point decline in the Richmond Fed index to -16, which was weak er than the expected 3-point increase to -9.
• The dollar is moderately higher this morning with the dollar/yen up +0.49 yen and the euro/dollar down -0.48 cents. The dollar index yesterday rallied sharply. Bullish factors yesterday included (1) the improved view of the US banking sector with yesterday's rally in banking stocks, (2) Treasury Secretary Paulson's claim that the US government is on top of the situation in the US banking sector and his comment that a strong dollar is "really very important," and (2) Philadelphia Fed President Plosser's comment about the need for higher interest rates. The euro yesterday saw technical selling after falling to a 2-week low. 
• Sep crude oil prices this morning are trading -$2.04 per barrel and August gasoline is trading -5.64 cents a gallon. Hurricane Dolly, with wind speeds of 85 mph, is expected to strengthen and make landfall around midday today near the Texas-Mexico border. While some oil companies have evacuated oil rigs farther north, Dolly is still expected to only produce a minor disruption of oil flows in the Gulf of Mexico, thus leading to a continued decline in oil prices. Sep crude oil prices yesterday closed -$3.40 per barrel and fell to a new 1-1/2 month low. The main bearish factor yesterday was the expectation that Dolly will hit land near the Texas-Mexico border and will steer south of key US oil rigs and refineries. Dolly as of yesterday has caused the closure of only 4.7% of oil and gas output in the Gulf of Mexico as of mid-morning Tuesday, according to the US Minerals Management Service. Crude oil prices yesterday also fell on yesterday's sharp rally in the dollar. The market consensus for today's weekly DOE report is for a -600,000 bbl decline in crude oil inventories, a +200,00 rise in gasoline inventories, and a +2.35 million bbl rise in distillates, and an unchanged refinery operating rate of 89.5%.

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Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): ATT-AT&T (BEST earnings consensus $0.76 per share), BA-Boeing (1.33), COP-ConocoPhillips (3.48), PFE-Pfizer (0.54), PEP-Pesico (1.02), QCOM-Qualcom (0.54), MCD-McDonalds (0.86), WYE-Wyeth (0.86), EXC-Exelon (1.02), BUD-Anheuser Busch (0.93), GD-General Dynamics (1.44), PX-Praxair (1.06), AMZN-Amazon.com (0.38), AFL-Aflac (1.01), TFV-Travelers (1.46), EMC-EMC Corp (0.18), ALL-Allstate (1.32), WLP-Wellpoint (1.36), GENZ-Genzyme (0.97), APD-Air Products (1.31), BTU-Peabody Energy (0.59), NE-Noble Corp (1.33), MCK-McKesson (0.80), WFR-MEMC Electronic Materials (1.01)