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• The European DJ Stoxx 50 this morning is trading +0.99% on lower oil prices (-$1.16) and continued optimism after the US government took over Fannie Mae and Freddie Mac. Automakers and airlines are higher today on the sell-off on oil prices. British Air is up +4.6%, Ryanair is up +6%, and Daimler is up +2%. UK banks rallied today on a report by the London-based Times that the UK government may take measures to support the UK mortgage market. Royal Bank of Scotland is up +5% and HBOS, the largest US mortgage lender, is up +3.7%. Asia-Pacific stocks today closed mostly lower: Japan -1.77%, Hong Kong -1.46%, China +0.59%, Taiwan -3.51%, Australia -1.72%, Singapore -0.88%, South Korea -1.57%, Bombay -0.30%.
• Pending home sales – Today’s July pending home sales report is expected to fall –1.5%, reversing part of the +5.3% increase seen in June. The pending home series has been volatile in the past three months with a +7.1% increase in April, a –4.9% decline in May, and a +5.3% increase in June. On a year-on-year basis, pending home sales were down –12.1% y/y in June, which was an improvement from the record low of –23.9% seen in December 2007. The pending home sales report measures the change in home sales contracts and generally leads to existing home sales within one to two months, thus providing some leading information on the existing home sales series. The US existing home sales series has been moving sideways near record lows since late last year. There are few homebuyers out looking for homes due to fears that home prices will fall farther and that the US economy will become even worse. In addition, mortgages continue to be tough to get for anyone other some hom ebuyers with strong credit scores and 10% or 20% down. The supply of existing homes on the market is currently at 10.6 months, which is just below the 22-year high of 11.0 months posted in June. The lack of buyers, combined with the big supply of homes on the market, is putting continued downward pressure on home prices.
• Wholesale inventories – Today’s July wholesale inventories report is expected to show an increase of +0.7%, adding to the increase of +1.1% seen in June. The level of wholesale inventories is becoming a bit of a problem since it rose to +9.5% y/y in June, up from +4.1% y/y as recently as November 2007. The rise in wholesale inventories suggests that inventories are starting to pile up at wholesalers, which implies they will start cutting orders and undercut the economy. On the brighter side, the overall level of inventories in the US economy remains low. The business inventories-to-sales ratio in June fell to a record low of 1.23 months.

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• September S&Ps this morning are trading +5.70 points on lower oil prices and some upward carry-over momentum from yesterday. The US stock market yesterday rallied sharply except for the Nasdaq which only had mild gains (Dow +2.58%, S&P 500 +2.05%, Nasdaq Composite +0.62%).
• Bullish factors for stock prices yesterday included (1) hopes that the US government's takeover of Fannie Mae and Freddie Mac will stabilize the global financial system, (2) the report by the Washington Service that US bank directors and executives bought $296.2 million of their own stock between May through July, the most in at least two decades, signaling bank insiders believe their companies will bounce back from the credit-market crunch, (3) the 4% rally in Goldman Sachs after Merrill Lynch upgraded its recommendation of Goldman to "buy" from "underperform," and (4) the 12% surge in the S&P 500 homebuilders index on speculation the government's takeover of Fannie Mae and Freddie Mac will stop the downward spiral in US home prices.
• Bearish factors for stock prices yesterday included (1) continued worries about the health of the US banking sector after Silver State Bank of Henderson Nevada became the 11th US bank to fail this year, (2) the prediction from Nobel prize-winning economist Granger that the US financial crisis isn't over and more institutions will probably report losses tied to the collapse of the subprime-mortgage market, (3) comments from Dallas Fed President Fisher that "no question" the US economy is weakening and that it will be weak for "several quarters," and (4) earnings downgrades for Goldman Sachs, Lehman Brothers and Merrill Lynch by Oppenheimer analyst Whitney who cited a decline in trading volume and share sales.
• Airlines are seeing some support this morning on the lower trade in oil prices. UAL this morning is up nearly 5% in European trading this morning.
• Dell (DELL) is up 2.5% in European trading this morning after news that Founder Michael Dell recently bought $100 million on stock in the company.
• Toll Brothers (TOL) and KB Home (KBH) may see weakness today after Credit Suisse downgraded the stocks to "neutral" from "outperform" and cut its rating for the US homebuilder industry to "market weight."
• H.B. Fuller (FUL) dropped 16% in after-hours trading yesterday after the paint manufacturer said 2008 earnings will be less than previously forecast because of rising raw-material costs.
• DineEquity (DIN) fell over 8% in after-hours trading yesterday after the owner of Ihop and Applebee's restaurant chains said its CFO resigned.

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• December 10-year T-notes this morning are trading -9.5 ticks on higher global stocks. December T-note prices yesterday overcame sharp early losses but still closed down by -6.5 ticks. Bearish factors for T-note prices yesterday included (1) reduced flight-to-quality demand for US Treasuries as the stock market surged after the US government took over Fannie Mae and Freddie Mac, (2) supply concerns as the US government's takeover of Fannie Mae and Freddie Mac may mean a huge increase in the issuance of Treasuries to boost the US government's balance sheet, and (3) the jump in inflation expectations as the rates between 5-year TIPS and conventional US 5-year T-notes rose 12 bp on speculation the Treasury's action to take over Fannie/Freddie may prove inflationary if the Fed monetizes Treasury debt. Bullish factors for T-note prices yesterday included (1) speculation that the US government's takeover of Fannie Mae and Freddie Mac will not do much to help the US economy, and (2) comments from Dallas Fed President Fisher that "no question" the US economy is weakening and that it will continue to be weak for "several quarters."
• The dollar is trading trading mildly lower this morning with the dollar/yen down -0.36 yen and the euro/dollar up +0.34 cents. The dollar index yesterday rallied sharply and closed at an 11-1/2 month high. Bullish factors for the dollar yesterday included (1) speculation the US government's takeover of Fannie Mae and Freddie Mac will boost investor confidence in US financial markets and encourage continued foreign investment in US assets, (2) the fall in the euro to a 11-month low against the dollar after the Sep Euro-Zone Sentix investor confidence fell more-than-expected to a 5-year low, and (3) the continued sell-off in the British pound to a 2-1/3 year low after the Bank of New York Mellon lowered its 2008 year-end forecast for the British currency to $1.70 from an earlier prediction of $1.75 saying the slumping UK economy will prompt the Bank of England to cut interest rates. Bearish factors for the dollar yesterday included (1) the collapse of Silver State Bank of Henderson Nevada, the 11th US bank failure this year, due to bad real-estate loans and the ongoing housing slump, and (2) the prediction from Nobel prize-winning economist Granger that the US financial crisis isn't over and more institutions will probably report losses tied to the collapse of the subprime-mortgage market. 
• October crude oil prices this morning are trading -$1.16 a barrel and October gasoline is trading -5.78 cents a gallon. Saudi Arabia's oil minister today said the oil market is "well balanced" and that inventories are in a "healthy position," which sparked ideas that Saudi Arabia will reject calls from OPEC hawks such as Iran, Libya and Venezuela to cut production. October crude oil prices yesterday posted a 5-month low but then recovered to close +$0.11 a barrel. October gasoline closed +6.42 cents a gallon. Bearish factors for crude oil prices yesterday included (1) the continued rally in the dollar index to an 11-1/2 month high, further pressuring commodity prices, (2) comments from Nigeria's Petroleum Minister that "nothing significant" will happen in today's OPEC meeting in Vienna, raising speculation OPEC will leave crude oil output and quota levels unchanged, and (3) comments from the chief economist at Saudi British Bank that Saudi Arabia has an "interest" in oil prices falling below $100 a barrel and will seek to alleviate high oil prices as they still make a huge amount of money with crude around $90 a barrel. Bullish factors for crude oil prices yesterday included (1) the threat of Hurricane Ike entering the Gulf of Mexico and doing damage to oil refineries and oil platforms, (2) comments from the Iranian Oil Minister that the oil market is "over-supplied," and (3) comments from OPEC President Khelil that "all options are open" when the cartel meets today in Vienna.

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Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): JW-Wiley John&Son (BEST earnings consensus $0.52 per share), PAY-Verifone Holdings (0.34)

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