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• The European DJ Stoxx 50 this morning is trading +0.69% as better-than-expected earnings at AstraZeneca, UK's second-largest drugmaker, and K+S AG overshadowed weaker-than-expected earnings from Sanofi-Aventis SA and Unilever. Also hurting European stock prices this morning was Deutsche Bank recording larger-than-expected debt writedowns for Q2 and the rise in the July Euro-Zone CPI estimate to a 16-year high of +4.1%. Asia-Pacific stocks today closed mostly higher: Japan +0.07%, Hong Kong +0.18%, China -2.74%, Taiwan -0.65%, Australia +0.82%, Singapore +0.14%, South Korea +1.14%, Bombay +0.48%.
• Claims – Today’s weekly initial unemployment claims report is expected to show a decline of –13,000 to 393,000, reversing part of last week’s surge of +34,000 to 406,000. Meanwhile, weekly continuing claims are expected to rise by +43,000 to 3.150 million following last week’s report of -9,000 to 3.107 million. Initial and continuing claims are near the highest levels seen in about the past 5 years, illustrating that employee layoffs are running at high levels and that the number of people on the unemployment rolls is piling up. Regarding the labor market, market attention is mostly focused on tomorrow’s July unemployment report. The market is expecting tomorrow’s July payroll report to show a decline of –75,000, adding to the –62,000 decline seen in June. Payrolls have now fallen for six consecutive months by a total of -438,000. The market is expecting the July unemployment rate to rise +0.1 point to 5.6%, thus edging to a new 4-year high.
• US GDP – Today’s Q2 GDP report is expected at the surprisingly strong level of +2.3%. That would follow weak GDP growth of +1.0% in Q1 and +0.6% in Q4-2008. However, the strong Q2 GDP report is due mainly to the federal stimulus program, which is now wearing off and will likely lead to lower GDP growth in the second half of the year as high gasoline prices and the housing crisis rise to the forefront again. Still, the US economy should remain supported by export growth. The consensus expectations among economists are for GDP growth of +1.5% in Q3 and +0.8% in Q4. Traders at Intrade.com are more pessimistic about the US economy than most economists. Traders at Intrade.com are discounting the chances for a US recession in 2009 at the relatively high level of 55%, which is surprisingly high since US GDP would have to be negative in both Q3 and Q4 in order for that prediction to prove true.
• Employment cost index – Today’s Q2 employment cost index (ECI) is expected to show an increase of +0.7%, matching the +0.7% increase seen in Q1. On a year-on-year basis, the ECI is likely to be little changed from the Q1 report of +3.3%. The ECI is the broadest measure of employee costs and is therefore closely watched as a proxy for wage inflation pressures. The Q1 increase in the ECI of +3.3% is well above the generally-accepted 2.0% ceiling for inflation, which means that employee costs are still running high. However, employment costs are likely to fade given the softening labor market. Employment costs are therefore not currently a major area of concern, especially compared with the impact on the inflation statistics of oil and commodity prices.
• Chicago purchasing managers index – Today’s July Chicago purchasing managers index is expected to fall –0.6 points to 49.0, more than reversing the upward rebound of +0.5 points to 49.6 seen in June. The Chicago PMI in June of 49.6 was just slightly below the boom-bust level of 50. However, the index has remained below the 50 mark for the past five consecutive months, suggesting that the Chicago-area manufacturing sector is contracting. The market is expecting tomorrow’s July national ISM manufacturing index to show a –1.2 point decline to 49.0, falling back below 50 after June’s upward rebound by +0.6 points to 50.2. The national ISM index poked above 50 in June, but has been below 50 in five of the last seven months, suggesting that the national manufacturing sector is in a recession.

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• September S&Ps this morning are trading +1.90 on lower oil prices and carryover strength from European bourses. The US stock market yesterday extended Tuesday's gains and closed on its high (Dow +1.63%, S&P 500 +1.67%, Nasdaq Composite +0.44%).
• Bullish factors for stock prices yesterday included (1) the unexpected rise in the Jul ADP employment change, a precursor to tomorrow's unemployment report, (2) the rally in financial companies after the Fed said it was extending its emergency lending program for banks and securities firms until Jan 30, 2009, and (3) the action by the SEC in prolonging its ban on naked short selling in Fannie Mae, Freddie Mac and 17 brokerage companies in an attempt to thwart stock price manipulation. 
• Bearish factors for stock prices yesterday included (1) the +$4.58 a barrel rise in crude oil prices, (2) the 2% fall in MetLife as the biggest US life insurer cut its full-year earnings forecast and said Q2 operating profit was $1.30 a share, far below analyst estimates of $1.51 a share, and (3) the 11.9% plunge in Wyeth after its experimental Alzheimer's drug bapineuzumab, developed with Elan Corp., was linked to a brain-swelling side effect in a test and the drug showed no benefit for the majority of Alzheimer's patients.
• Akamai Technologies (AKAM) tumbled 19% in after-hours trading yesterday and is trading 17.6% lower this morning in Europe as the largest supplier of software and services to spped up the delivery of Web pages said it anticipates annual adjusted net income between $1.63 to $1.69 a share, down from a previous forecast of $1.68 to $1.71.
• First Solar (FSLR) rallied 7% in after-hours trading yesterday as the world's biggest maker of thin-film solar power modules said Q2 profit rose 57% on greater demand for its lighter, lower-cost technology.
• Deutsch Bank AG, Germany's largest bank, is trading 0.5% lower this morning after the bank posted larger-than-expected debt writedowns of 2.3 billion euros ($3.6 billion) in Q2 and CEO Ackermann said he "remains cautious" on the rest of the year.
• Visa (V) is trading 2.8% higher in Germany this morning as the world's largest credit-card company posted Q2 earnings of 59 cents a share, easily beating analysts' estimates of 48 cents a share,
• Starbucks (SBUX) is trading 4.3% higher in Germany this morning after forecasting 2009 earnings of 90 cents to $1.00 a share, above analysts' estimates of 92 cents, saying its current restructuring will save the company $200 to $210 million in 2009 or 17 to 18 cents a share.

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• September 10-year T-notes this morning are trading +2 ticks. September T-note prices yesterday closed unchanged. Bearish factors for T-note prices yesterday included (1) the unexpected increase in the Jul ADP employment change (+9,000 versus expectations of -60,000), (2) supply fears with the US Treasury saying they may increase the amounts and frequency of the 10-year T-note and 30-year T-bond auctions to fund the burgeoning budget deficit, (3) the action by the Fed in extending their emergency lending program for banks and securities firms until Jan 30, 2009, easing concerns of an inter-bank credit crunch, and (4) lesssening demand for the safety of Treasuries as the stock market continued to climb. A bullish factor for T-note prices yesterday was carryover strength from European debt prices which rallied on the weaker-than-expected July Euro-Zone consumer confidence and July Euro-Zone economic confidence figures which both fell to 5-year lows.
• The dollar/yen is up +0.09 yen this morning and the euro/dollar is up +0.38 cents. The euro this morning is seeing support after the Jul Euro-Zone CPI estimate came in at a 16-year high of 4.1%. The dollar index yesterday rallied to a 5-week high but closed little changed. Bullish factors for the dollar yesterday included (1) the unexpected increase in employment in the Jul ADP employment report, and (2) the greater-than-expected decline in Jul Euro-Zone economic confidence to a 5-year low. Bearish factors for the dollar yesterday included (1) the rally in crude oil prices after the unexpected decline in gasoline inventories, and (2) profit taking as the dollar has rallied sharply in the past 2-weeks. 
• September crude oil prices this morning are trading -66 cents a barrel and September gasoline is trading -2.23 cents a gallon. September crude oil prices yesterday rallied sharply and closed +$4.58 a barrel and September gasoline closed +12.67 cents a gallon. Bullish factors for crude oil prices yesterday included (1) the unexpected decline in gasoline inventories in yesterday's DOE inventory report (gasoline -3.53 million bbl versus expectations of a +350,000 bbl build), (2) the report out of Nigeria that because of militant attacks on its oil facilities, Nigeria is pumping less than 1 million bbl of crude oil a day, less than its OPEC quota of 2.1 million bbl a day, and (3) the comment by Iranian leader Khamenei that his country will push forward with its nuclear program. Bearish factors fro crude oil prices yesterday included (1) the rise in Iraqi oil production to 2.43 million bbl a day, the highest level since the Mar 2003 US invasion, and (2) the 2.4% decline i n US fuel consumption in the past four weeks from the same period last year, signaling declining demand.

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Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): XOM-Exxon Mobile (BEST earnings consensus $2.53 per share), CVS-CVS Caremark (0.60), MO-Altria Group (0.45), APA-Apache (4.07), MA-MAstercard (2.01), MRO-Marathon Oil (1.59), CHK-Chesapeake Energy (0.88), FPL-FPL Group (0.93), D-Dominion Resources (0.52), ATVID-Activision Blizzard (0.18), ADP-Automatic Data Processing (0.42), K-Kellog (0.81), AET-Aetna (0.93), MOT-Motorola (-0.03), AEP-American Electric Power (0.69), CNX-Consol Energy (0.81), AOC-AON Corp. (0.72), CA-CA Inc. (0.34), CBS-CBS (0.52), SWN-Southwestern Energy (0.37), PH-Parker Hannifin (1.50), IP-International Paper (0.41), XEL-Xcel Energy (0.30), CTSH-Cognizant Technology Solutions (0.36), NMX-Nymex Holdings (0.82), AIZ-Assurant (1.63), CVC-Cablevision Systems (0.11), MEE-Massey Energy (0.76), IRM-Iron Mountain (0.18), DNB-Dun & Bradstreet (1.10)

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