• The OECD today cut its forecast for 2007 OECD-country GDP growth to +2.5% from +3.2% in 2006, which would be the weakest level since 2003. The 2.5% GDP forecast was down from the +2.9% forecast issued in May. The main reason for the GDP cut was the OECD's view that US GDP in 2007 will slow to +2.4% in 2007 from +3.3% in 2006. The +2.4% US GDP forecast was down from the OECD's May forecast of +3.1%. The OECD expects the US economy to slow mainly because of the housing sector, where the OECD said US homebuilding has "further to fall." The OECD said that US growth "is moderating, not stalling." The OECD expects the Fed to cut interest rates in late 2007 if US inflation eases. Regarding Europe, the OECD expects higher Eurozone interest rates of +3.75% by mid-2007 and 4% in early 2008 due to improving European domestic demand. Regarding Japan, the OECD expects Japanese GDP growth of +2.0% in 2007 and 2008 after +2.8% growth in 2006. The OECD expects Japan to delay another rate hike until Q3-2006 but to then raise rates from the current 0.25% level to 1.0% by the end of 2008. The OECD expects the Chinese economy to continue to show GDP growth of more than 10% for the next 2 years.

   

• European finance ministers tried some verbal intervention today by saying that "Excessive volatility and disorderly movements in exchange rates are undesirable for economic growth." However, the foreign ministers said that the strong euro does not yet threaten Europe's economic growth.

   

• The Chinese yuan yesterday rose to a new 13-year high against the dollar and moved sideways today due to the ongoing weakness in the dollar. The yuan is likely to show further strength against the dollar leading up to Paulson-Bernanke mission to China in mid-December where Treasury Secretary Paulson will be pressuring China for additional currency revaluation and more balanced trade. President Bush called Chinese President Hu Jintao last night and the Chinese President said that he will seek more "balanced" trade relations with the US.

   

• Dec S&Ps this morning are trading -0.20 points as the market consolidates following yesterday's sharp sell-off. Dec S&Ps overnight were helped by the fact that the European and Japanese stock markets have been stable overnight and have been able to avoid the sharp sell-off seen yesterday in the US stock market. The US stock market yesterday fell sharply (Dow -1.29%, S&P 500 -1.36%, Nasdaq Composite -2.21%). Bearish factors yesterday included the continued weakness in the dollar (which chased investors away from US securities), technical selling, and carry-over weakness from Wal-Mart's news that November same-store sales fell -0.1%.

   

• European stocks are trading slightly lower (Stoxx -0.08%, FTSE -0.23%). The Nikkei index today closed -0.19%.

   

• Intel is up +0.2% in European trading this morning after the Wall Street Journal reported that Intel will dive back into the venture capital market with more than $1 billion in new capital, thus trying to rebuild its technological advantage.

   

• Exxon Mobil (XOM) is up +0.6% in European trading this morning as Jan crude oil prices are trading higher in electronic trading this morning.

   

• Palm (PALM) fell 5.5% in after-hours trading yesterday and is down -3.4% this morning in European trading. Palm late yesterday reduced its fiscal-Q2 guidance to 16 cents a share from 23 cents due to a delay in obtaining approval for a Treo product it expected to ship in fiscal-Q2 but which will now be delayed until fiscal-Q3. Merrill Lynch responded by lowering its stock rating on Palm to "neutral" from "buy.

   

• Durable goods orders – Today’s Oct durable goods orders report is expected to show a sharp decline of -5.0%, falling back after the +8.3% surge seen in September. Most of the volatility in durable goods orders in Sep-Oct is due to transportation orders. Excluding transportation orders, today’s Oct durable goods orders report is expected to show a small gain of 0.1% following September’s gain of +0.5%. The market continues to closely watch the orders pipeline given the need for some new orders to boost the sagging manufacturing sector. The ISM manufacturing index in October fell -1.7 points to a 3-year low of 51.2, which was only 1.2 points above the boom-bust level of 50.

   

• US consumer confidence – Today’s Nov US consumer confidence report from the Conference Board is expected to show a +0.6 point increase to 106.0, which would more than reverse the -0.5 point decline seen in October to 105.4. The Conference Board’s US consumer confidence index has been moving basically sideways this year in the range of 100-110 and is currently near the middle of that range at 150.4. US consumer confidence in the past several months has improved mildly mainly because of the decline in gasoline prices. Other positive factors for consumer confidence include the generally strong stock market, the sharp 60 bp decline in mortgage rates seen in the past 4-months, and the tight US labor market. However, consumers still have some major worries, which include the US housing sector, historically high gasoline prices, and Iraq.

   

• Existing home sales – Today’s US Oct existing home sales report is expected to show a decline of -0.6% to 6.15 mln, adding to the -1.9% decline seen in September to 6.18 mln. The expected decline today to 6.15 mln units would leave the series at a new 3-year low and down 15.4% from the record high of 7.27 mln units posted in June 2005. There have been hopes that the US housing sector might be in the process of bottoming out, but the recent Oct housing starts report (released Nov 17) of 14.6% reinstated the gloom in the US housing market. US mortgage rates have plunged by 60 bp in the past several months, which makes buying a home more affordable and thus provides some underlying support for the US housing sector. However, potential homebuyers needn’t be in any hurry to buy a home since there is a glut of homes on the market and home prices may fall in coming months, making a purchase even more affordable down the road. The supply of existing homes on the market is currently near a 13-year high.

   

   

• Dec T-note prices this morning are trading -2 ticks as the market awaits today's slew of economic reports and today's 2-year T-note auction. Dec T-note prices yesterday closed +3 ticks. The weak dollar yesterday pressured the T-note market initially, but T-notes then rallied on the sharp sell-off in the US stock market which sparked some hopes for an inflow of cash from equity sales.

   

• The dollar this morning is trading steady to slightly higher (dollar/yen +.24 yen, euro/dollar +0.03 cents). The dollar yesterday fell sharply on continued technical selling and worries about US interest rate differentials and Chinese reserve diversification. The euro was the big winner yesterday as it rallied to a new 1-3/4 year high against the dollar and a new record high against the yen. The yen was held back by dovish comments from Bank of Japan chief Fukui.

   

• Jan crude oil prices this morning are trading +36 cents as upward momentum continues from yesterday. Jan crude oil prices yesterday rallied sharply by +$1.08 per barrel. Bullish factors yesterday included (1) colder weather in the US, (2) the sharp sell-off in the dollar, and (3) a London newspaper report citing Saudi Oil Minister Ali al-Naimi as saying that OPEC at its December 14 meeting may implement another production cut if oil prices fail to stabilize on the Oct 20 cut. The market is looking for tomorrow's weekly DOE report to show a +1 mln bbl rise in crude oil inventories, a +550,000 bbl rise in distillates, and a 1 mln bbl rise in gasoline inventories. The market consensus is for a +0.8 point rise in the refinery operating rate to 88.9%.

   

Earnings reports (confirmed releases for companies with market caps above $1 bln listed by mkt cap): DG-Dollar General (IBES consensus earnings estimate: $0.154 per share), CHS-Chico's Fas (.245), ETE-Energy Transfer (.430), DBRN-Dress Barn (.365), JTX-Jackson Hewitt (-.376)
 

Morning Quote Board