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• The European DJ Stoxx 50 this morning is trading -1.49% on carry-over weakness from yesterday's US stock market sell-off and on continued concerns about the financial sector after JPMorgan analysts issued a bearish report on Lehman Brothers. Barclay's is down -4.5% today and Societe Generale is down 3%. Asia-Pacific stocks today closed lower nearly across the board: Japan -2.28%, Hong Kong -2.13%, China +1.52%, Taiwan -0.32%, Australia -2.38%, Singapore -1.75%, South Korea -1.70%, Bombay -0.70%.
• PPI – Today’s July PPI report is expected to show an increase of +0.6% m/m overall and +0.2% m/m on a core basis. That would follow the June report of +1.8% m/m overall and +0.2% m/m core. On a year-on-year basis, the June CPI is expected to tick up to a new 27-year high of +9.3% y/y. The July core PPI is expected to move higher to +3.2% y/y from the 16-1/2 year high of +3.0% posted in June. The June PPI of +9.2% was clearly alarming, as was the +3.0% core PPI figure, which is well above the generally-accepted 2.0% ceiling for inflation. However, the recent decline in energy and commodity prices should help to bring the inflation figures down a bit in coming months. The markets will be looking for a slightly stronger-than-expected PPI report today after last Thursday’s July CPI report. July CPI rose +0.8% (versus expectations of +0.4%) and the core CPI rose +0.3% (versus expectations of +0.2%).
• Housing starts – Today’s July housing starts report is expected to fall –9.9% to 960,000, more than reversing the sharp +9.1% increase to 1.066 million seen in June. July building permits are expected to fall –14.8% to 970,000, reversing most of June’s revised +16.4% increase to 1.138 million. The upward blip in housing starts in June was due to a change in New York City’s building code and not to any fundamental improvement in the housing market situation. The underlying weakness of housing starts in June was seen by the fact that housing fell –4% excluding the jump in the construction of multi-family units in the Northeast. Today’s expected decline in housing starts to 960,000 today would push the series to a new 17-year low, taking out the current 17-year low of 977,000 units posted in May. US housing starts are likely to remain at anemic levels into next year since the huge supply of new homes on the market has to be whittled down before US homebuilders can eve n think about building new homes on spec. US homebuilders at present are basically only building homes that have been pre-sold to a buyer.

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• September S&Ps this morning are trading -4.70 on continued worries about the financial sector and on lower stocks overseas. The US stock market yesterday opened higher but then sold off throughout the day to finish lower (Dow -1.55%, S&P 500 -1.51%, Nasdaq Composite -1.45%).
• Bearish factors for stock prices yesterday included (1) the 22% plunge in Fannie Mae and 25% fall in Freddie Mac to their lowest levels in 17-years after a Barron's article raised concern that the shareholders of the biggest US home-loan financiers would be wiped out if the US government stepped in to rescue the companies, (2) the sell-off in homebuilders after the Aug NAHB housing market index stayed at its lowest level since the index was created in 1985, (3) the 7.3% drop in GM, the world's largest automaker, after its CEO said he's not seeing signs of a recovery in the US economy or in vehicle sales following the recent decline in oil prices, and (4) Citigroup's cut in its year-end forecast for the S&P 500 Index by 4.8% to 1,475, citing the "unsettled credit enviroment."
• Bullish factors for stock prices yesterday included (1) the 90 cent a barrel decline in crude oil prices, (2) the 5.4% gain in MBIA and the 4.8% rise in Ambac after Standard & Poor's affirmed its rating of 619 classes of US asset-backed securities backed by the two largest bond insurers, and (3) the 12% jump in UnionBanCal after California's second-biggest bank agreed to a $3.5 billion cash offer from Japan's Mitsubishi UFJ Financial Group for the third of UnionBanCal it did not already own.
• Lehman Brothers (LEH) is trading slightly lower this morning after JPMorgan Chase analysts said that Lehman may post $4 billion in write-downs and that the company will lose $3.30 in Q3, which is triple the current analyst consensus. Separately, the Wall Street Journal reported today that Lehman is in talks to sells parts of its investment management business.
• Fannie Mae (FNM) this morning fell 2% to a new 19-year low, while Freddie Mac (FRE) rose +3.6%, following the plunge seen in both stocks yesterday on the Barron's article.
• Home Depot (HD) is up +0.5% in European trading this morning after the posting Q2 earnings of 71 cents, well above the analyst consensus of 61 cents.
• Intel (INTC) is trading -0.7% in European trading this morning ahead of its debut today of its new chip that directly controls computer memory.
• Nymex Holdings (NMX) is up +0.9% in European trading this morning after its shareholders approved the $8.3 billion acquisition of Nymex by CME Group.

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• September 10-year T-notes this morning are trading +6 ticks ticks on today's weakness in global stocks. September T-note prices yesterday rallied to a 4-month high and closed +9.5 ticks. Bullish factors for T-note prices yesterday included (1) flight-to-safety as the equity market tumbled, (2) speculation that a slowdown in global economic growth will temper inflation, (3) carryover support from European debt prices after the yield on the 10-year German bund fell to a 3-month low, and (4) speculation that today's economic reports will show no let-up in the housing slump and that producer-price inflation slowed last month. A bearish factor for T-note prices yesterday was concern that a US government rescue of Freddie Mac and Fannie Mae may lead to an increase in the issuance of Treasuries in order to pay for the bailout.
• The dollar/yen is down -0.36 yen and the euro/dollar is slightly lower by -0.02 cents. The dollar rallied to a 5-3/4 month high against the euro yesterday before closing slightly lower. Bearish factors for the dollar yesterday included (1) the strength in the yen as the carry trade was unwound due to the slumping equity market on concern a US government bailout of mortgage lenders Fannie Mae and Freddie Mac will wipe out the shareholders of the mortgage-finance companies, and (2) continued concerns for the US housing market as the Aug NAHB housing market index stayed at its lowest level since the index began in 1985. Bullish factors for the dollar yesterday included (1) the larger-than-expected fall in the July French business sentiment to a 5-year low, and (2) the prediction from JPMorgan Chase, the third-largest US bank, that the dollar may trade at $1.47 per euro by year-end compared with a previous forecast of $1.50. 
• September crude oil prices this morning are trading -75 cents a barrel and September gasoline is trading -1.52 cents a gallon. Tropical Storm Fay did not reach hurricane status and is making landfall in southern Florida today, with little impact on oil rigs in the Gulf of Mexico. September crude oil prices yesterday moved lower and closed -$0.90 a barrel and September gasoline closed -4.50 cents a gallon. Bearish factors for crude oil prices yesterday included (1) expectations that Tropical Storm Fay will miss oil rigs and platforms in the Gulf of Mexico, and (2) concerns that a weakening global economy will sap energy demand as the US NAHB housing market index stayed at a record low in Aug and as French business sentiment sank to a 5-year low in July. Bullish factors for crude oil prices yesterday included (1) the weaker dollar, and (2) the prediction from the Centre for Global Energy Studies that OPEC, the supplier of more than 40% of the world's crude, will cut c rude oil output in the first quarter of next year to prevent crude oil prices from falling below $100 a barrel.

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Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): HPQ-Hewlett-Packard (BEST earnings consensus $0.83 per share), MDT-Medtronic (0.68), HD-Home Depot (0.61), TGT-Target (0.76), ADI-Analog Devices (0.45), MYGN-Myriad Genetics (-0.29), JKHY-Jack Henry (0.32), SKS-Saks (-0.19), PFGC-Performance Food (0.42)

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