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• The European DJ Stoxx 50 this morning is up +0.72% on better-than-expected earnings by steel-maker ThyssenKrupp and higher oil and mining stocks. European stocks shook off news that the Euro-Zone Q2 GDP fell -0.2% q/q (vs +0.7% in Q1) but rose +1.5% y/y. German Q2 GDP fell by -0.5% (vs +1.3% in Q1). Mining stocks are higher today with the $7.00 rally in gold prices and 6.7 cent rally in copper (BHP Billiton +6%, Rio Tinto +5%, Barrick Gold +1.4%) Asia-Pacific stocks today closed mixed: Japan -0.51%, Hong Kong +0.47%, China -0.05%, Taiwan +0.46%, Australia +0.60%, Singapore +0.17%, South Korea +0.62%, Bombay -2.44%.
• Unemployment claims – Today’s weekly unemployment claims report is expected to show a decline of -20,000 to 435,000, more than reversing last week’s +7,000 increase to 455,000. Meanwhile, weekly continuing claims are expected to fall -1,000 to 3.331 million following last week’s increase of +31,000 to 3.311 million. The labor market appears to be seeing further deterioration with initial claims last week rising to a 6-year high and with continuing claims rising to a 4-1/2 year high. Those new highs indicated that layoffs are picking up and that the number of people on unemployment is piling up. Payrolls have now fallen for seven consecutive months and the US unemployment rate is at a 4-year high of 5.7%. Fresh weakness in the labor market would not be surprising as businesses prepare for an extended period of sub-par economic growth tied to the fading federal stimulus program, continued high energy and commodity prices, the banking crisis, and the US housing crisis .
• CPI – Today’s July CPI report is expected to show an increase of +0.4% m/m on an overall basis and +0.2% on a core basis (ex food and energy). That would follow June’s report of +1.1% m/m overall and +0.3% core. On a year-on-year basis, the July CPI is expected to edge higher to +5.1% from the 17-year high of +5.0% in June. On a year-on-year basis, the July core CPI is expected to be unchanged from June at +2.4%. The June core CPI report of +2.4% was 0.4 points above the generally-accepted +2.0% ceiling for inflation, but was well below the 12-year high of +2.9% posted in September 2006. The Fed remains concerned about the US inflation outlook with the inflation statistics at high levels on an historical basis. However, the urgency about the inflation outlook has eased recently with the sharp downward correction in energy and commodity prices. That decline in energy and commodity prices will remove some of the upward pressure on the inflation statistics in coming months and give the Fed a little more breathing room to reflate the US economy before starting to remove its easy 2.0% monetary policy.

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• September S&Ps this morning are trading +3.30 points on better-than-expected results from Wal-Mart and higher European stocks. The US stock market yesterday moved lower and continued Tuesday's losses (Dow -0.94%, S&P 500 -0.29%, Nasdaq Composite -0.08%).
• Bearish factors for stock prices yesterday included (1) the -2.4% decline in the S&P 500 Retailing Index after July retail sales posted their first decline in 5 months, (2) the -4.1% tumble in the KBW Bank Index after Richmond Fed President Lacker said the worst may not be over for US banking losses and as Merrill Lynch says the credit crisis is still "far from over," and (3) inflation concerns as July import prices rose more than expected with the +21.6% y/y rise a record high for the series that goes back to Sep 1983. 
• Bullish factors for stock prices yesterday included (1) the rally in energy stocks as crude oil moved higher for the first time in the last four days, (2) the 31% surge in Longs Drug Stores after CVS Caremark said it would acquire Longs for $2.7 billion to expand its reach to the western US, and (3) the 4.7% increase in Applied Materials after the largest maker of chip-production machinery said orders will increase 5% to 10% in the quarter ending October from the previous three months, reducing concern of a slowdown in the chip sector.
• Wal-Mart is up +1.7% in European trading this morning after reporting Q2 earnings of 87 cents per share, which was 2 cents better than the analyst consensus of 85 cents.
• Invesco (IVZ) rallied 6% after news that it will replace IAC/InterActiveCorp in the S&P 500 index.
• GM is trading 2% higher in Europe this morning after saying that it may accelerate its $10 billion cost savings plan.

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• September 10-year T-notes this morning are trading +1 tick. September T-note prices yesterday rallied early but then faded into the afternoon and closed -10 ticks. Bearish factors for T-note prices yesterday included (1) the larger-than-expected gain in July import prices (+1.7% m/m and an all-time high of +21.6% y/y since the series begain in Sep 1983 versus expectations of +1.0% m/m and +20.4% y/y), and (2) concerns today's July CPI may come in higher-than-expected. Bullish factors for T-note prices yesterday included (1) a flight-to-quality after the stock market sold off on continued credit loss concerns as Merrill Lynch predicted that the current credit crisis is "broad, deep, and global" and "far from over," and (2) comments from Richmond Fed President Lacker that the worst may not be over for US banking losses as it may take four or five years for the ultimate loss rate to be realized as "we are still pretty early on with the most problematic mortgages" made i n 2006 and 2007.
• The dollar is trading slightly higher this morning with the dollar/yen up +0.22 yen and the euro/dollar down -0.15 cents. The dollar index yesterday closed with slight gains. Bullish factors for the dollar yesterday included (1) the stronger-than-expected July import price report, highlighting current inflation risks, and (2) the sell-off in the British pound to a 22-month low against the dollar after the Bank of England (BOE) cut its Q1 growth forecast for 2009 to +0.1% from +1.0% and BOE governor Mervyn King said he sees a "chill in the economic air," increasing chances of a BOE interest rate cut. Bearish factors for the dollar yesterday included (1) the rally in the yen to a 1-week high against the dollar as the US stock market sold-off on continued credit loss concerns, and (2) a rally in crude oil prices which renewed concern that higher energy prices may curb US consumer spending. 
• September crude oil prices this morning are trading +11 cents a barrel and September gasoline is trading +0.25 cents a gallon as the market consolidated following yesterday's rally. September crude oil prices yesterday rallied sharply and closed +$2.99 a barrel and September gasoline closed +8.91 cents a gallon. Bullish factors for crude oil prices yesterday included (1) the unexpected drops in crude oil and distillate inventories and the larger-than-expected decline in gasoline stockpiles in yesterday's weekly DOE inventory report (crude -316,000 bbl versus expectations of +300,000 bbl, gasoline -6.39 million bbl versus expectations of -2.15 million bbl and distillates -1.76 million bbl versus expectations of a +1.95 million bbl climb), and (2) the larger-than-expected drop in the refinery capacity rate (-1.1 to a 3-month low 85.9% versus expectations of -0.5 to 86.5%). Bearish factors for crude oil prices yesterday included (1) the stronger dollar, and (2) the repo rt from the API showing US gasoline consumption falling 2.1% to an average of 9.07 million bbl a day this year through the end of July, a five year low.

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Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): WMT-Wal-Mart (BEST earnings consensus $0.84 per share), KSS-Kohls (0.73), A-Agilent Technologies (0.53), EL-Estee Lauder (0.56), ADSK-Autodesk (0.52), JWN-Nordstrom (0.64), URBN-Urban Outfitter (0.29), DV-Devry (0.38), FLO-Flowers Foods (0.27), BR-Broadridge Financial (0.70), SJM-JM Smucker (.075), HAR-Harman International (0.76), IRF-International Rectifier (-0.19), AZPN-Aspen Technology (0.30), RGLD-Royal Gold (0.27)

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