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• The European DJ Stoxx 50 this morning is trading -0.52% on weakness in the financial sector. Barclay's is down 9% today and UBS is down 8% after Merrill Lynch late yesterday announced that it would sell another $8.5 billion in stock, causing concern about the lack of transparency at global banks and that other banks may need to take additional write-downs and raise more capital. Asia-Pacific stocks closed lower across the board after yesterday's sell-off in the US: Japan -1.46%, Hong Kong -1.89%, China -1.87%, Taiwan -3.03%, Australia -1.52%, Singapore -0.82%, South Korea -2.00%, Bombay -3.89%. Nomura Holdings is down 1.2% in European trading after Japan's largest brokerage firm reported a larger-than-expected net loss of 76.6 billion yen after taking a 63.1 billion yen reserve ($586 million) for potential costs tied to bond insurers. Toyota fell 3.3% on the company's forecast for lower global sales. Sony is down 4% on lower earnings guidance. The stock market in India fell sharply today by -3.89% after India's central bank raised its key rate by 50 bp to 9.0%, which was the third rate hike in two months and was larger than the expected 25 bp rate hike. The rate hike was due to inflation pressures (wholesale prices +11.9% in July). India's central bank also reduced its GDP forecast for this year. Pakistan's central bank today raised its key rate by 1 percentage point to 13% from 12%.
• US home prices – Today’s May S&P/Case-Shiller Composite-20 home price index is expected to deteriorate further to –16.0% y/y from –15.3% y/y in May. That would be a record low for the series, although the history for the series is limited and only goes back to 2002. The IMF yesterday released a pessimistic report saying that there was no indication that the bottom of the US housing crisis is yet in sight. Indeed, US home prices are likely to continue dropping as long as there is a dearth of buyers and a huge supply of homes on the market. In this environment, home sellers have no choice but to cut the price of their home to get it sold or just leave it sit on the market indefinitely. The supply of new homes on the market is currently at 10.0 months, which is just mildly below the 27-year high of 11.2 months posted in March. The supply of existing homes on the market is currently at a 23-year high of 11 months.
• US consumer confidence – Today’s July U.S. consumer confidence index from Conference Board is expected to fall –0.4 points to 50.0, adding to the –7.7 point decline to 50.4 seen in June. The June level of 50.4 was a 16-year low and was just mildly above the 34-year low of 47.3 posted in early 1992. US consumer confidence has plunged this year due to the housing crisis, the US banking crisis, extremely high gasoline prices, and a fading labor market. On the brighter side for today’s report, the University of Michigan last Friday reported that its final-July US consumer confidence index rose +4.6 points to 61.2 from early-July, versus expectations for a –0.2 point decline to 56.4. Friday’s report left the index up +4.8 points from the June figure of 56.4. US consumers may have felt a little better following the recent federal stimulus checks and based on the fact that the US GDP growth has not yet turned negative.

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• September S&Ps this morning are trading +0.90 points on positive results from Amgen. The US stock market yesterday sold-off and closed sharply lower (Dow -2.11%, S&P 500 -1.86%, Nasdaq Composite -2.00%).
• Bearish factors for stock prices yesterday included (1) the prediction by the IMF that there is no end in sight to the US housing slump and US banks need to raise more capital as "credit risks remain elevated," (2) comments from Minneapolis Fed President Stern who said inflation in the US is a concern and headwinds to growth may be picking up, (3) comments from Fed Governor Warsh who said the US economy is "underperforming" as financial market instability continues to weigh on growth, and (4) continued concerns for financial companies on fears of more writedowns related to subprime mortgage securities and the realization that any recovery in the financial sector may be muted until the housing market recovers. 
• Bullish factors for stock prices yesterday included (1) the prediction from analysts at JPMorgan Chase that the bear market in US stocks will probably "bottom" in the next month on lower oil prices, Congressional passage of the housing bill, and better-than-expected bank earnings, (2) the +4.9% rally in Kraft Foods as the world's second-largest foodmaker reported better-than-expected profit after increasing prices on 90% of its foods and beverages and as shipments fell less than the company expected, and (3) the 12% surge in Amgen after its experimental osteoporosis drug prevented fractures in a trial.
• Merrill Lynch (MER) plunged 12% in after-hours trading yesterday but has recovered this morning in European trading and is trading 1% higher. The world's biggest brokerage said it will record $5.7 billion of writedowns in Q3 because of additional losses on the sale of collateralized debt obligations (CDOs). Merrill also said it plans to raise $8.5 billion in new capital by selling stock.
• Amgen (AMGN) is up +1.8% in European trading this morning after the company reported Q2 earnings of $1.14 per share, which was above the analyst consensus of $1.03. In addition, Amgen raised its 2008 earnings guidance.
• Hartford Financial Services Corp (HIG) fell 4% in after-hours trading yesterday after the insurer reported that its earnings fell 13% due to higher catastrophe claims.

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• September 10-year T-notes this morning are trading +2.5 ticks on the Merrill Lynch capital raise and lower bank stocks in Europe. September T-note prices yesterday rallied and closed +26.5 ticks. Bullish factors for T-note prices yesterday included (1) carryover support from European debt prices which rallied after German consumer confidence fell to a 5-year low, (2) the prediction from the IMF that there is no end in sight to the US housing recession and that a period of slow economic gwoth may be prolonged by deteriorating credit conditions, (3) the comment from Minneapolis Fed President Stern that credit problems in US markets may get worse, (4) comments from Fed Governor Warsh that the US economy is "underperforming" as financial market instability continues to weigh on growth, and (5) flight-to-quality as the stock market sold off.
• The dollar is trading mildly higher this morning with the dollar/yen up +0.30 yen and the euro/dollar down -0.14 cents. The dollar index yesterday closed lower on bearish factors which included (1) comments from Minneapolis Fed President Stern that the US recdit crunch will get worse, and (2) the prediction from the IMF that there's no "bottom" in sight to the US housing recession and that deteriorating credit conditions for US consumers and banks may prolong a period of slow growth. Bullish factors for the dollar yesterday included (1) the larger-than-expected drop in Aug German GfK consumer confidence to a 5-year low, and (2) hawkish comments from Fed Governor Mishkin that "sharp increases" in the price of commodities have "driven inflation above rates consistent" with price stability, raising speculation that he may favor raising interest rates sooner than expected. 
• September crude oil prices this morning are trading +45 cents and September gasoline is trading +1.75 cents a gallon. September crude oil prices yesterday closed +$1.47 and September gasoline closed +3.32 cents. Bullish factors yesterday included (1) the disruption of Nigerian crude oil production by Royal Dutch Shell after militants sabotaged two crude oil pipelines, and (2) the weaker dollar. Bearish factors for crude oil prices yesterday included (1) comments from Minneapolis Fed President Stern that the US credit crisis will get worse, further weakening the economy and reducing crude demand, and (2) the prediction from Dresdner Bank that crude oil prices will drop below $100 a barrel this year as "conditions are building for a sustained fall in the oil price, primarily led by Saudi-driven OPEC policy." The market consensus for Wednesday's weekly DOE report is for a -1.3 million bbl decline in crude oil inventories, a +100,000 bbl rise in gasoline stockpiles, a + 1.5 million bbl rise in distillates, and an unchanged refinery operating rate of 87.1%.

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Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): MET-Metlife (BEST earnings consensus $1.51 per share), CL-Colgate-Palmolive (.94), NOV-Natioanl Oilwell Varco (1.14), NOC-Northrop Grumman (1.40), ETR-Entergy (1.50), VIA-Viacom (0.58), WMI-Waste Management (0.59), VLO-Valero Energy (1.34), x-US Steel (3.82), ERTS-Electronic Arts (-0.33), MHP-McGraw-Hill (0.67), LNC-Lincoln National (1.33), COH-Coach (0.50), NRG-NRG Energy (0.54), FISV-Fiserv (0.80), GNW-Genworth Financial (0.56), EQ-Embarq (1.27), GM-General Motors (-2.41), ANR-Alpha Natural Resources (0.53), SAF-Safeco (1.41), XRAY-DENTSPLY International (0.49), MAS-Masco (0.19), CEPH-Cephalon (1.08), FMC-FMC (1.18), AG-Agco (0.97), NCR-NCR (0.35), HSC-Harsco (1.02), CVA-Covanta Holdings (0.27), LRCX-Lam Research (0.39)

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