Overnight U.S. Stock News

• June S&Ps this morning are trading -3.30 points due to Bank of America's weaker-than-expected results this morning, ongoing concerns about record oil prices, and nervousness ahead of this week's peak for Q1 earnings reports. The US stock market last Friday rallied sharply (Dow +1.81%, S&P 500 +1.81%, Nasdaq Composite +2.61%).

• Bullish factors for stock prices last Friday included (1) an improved view of Q1 earnings after stronger than expected earnings reports from several key companies, (2) Friday's 18% rally in Google after the company reported strong earnings driven by overseas growth and higher click advertising, (3) the 6.2% rally in Intel which was driven by strong earnings and Intel's statement that the weak economy is so far not depressing chip demand, which supported the overall tech sector, (4) strength in the financial sector driven by stronger-than-expected earnings and continued ideas that the worst might be over from the banking crisis, and (4) strength in oil company stocks as crude oil rallied to a new record high.

• Bearish factors for stock prices last Friday included (1) the negative implications of the new record high in oil prices for US consumer spending and for corporate earnings, and (2) last Friday's sharp rise in US interest rates, and (3) the sharply reduced expectations seen last week for Fed easing in coming months.

• Schlumberger (SLB) is trading +0.5% higher at $102.36 in European trading this morning after Morgan Stanley raised its rating to "overweight" from "equal-weight" and raised its target price to $135 from $125.

• Bank of America (BAC) was up 1.9% in European trading this morning after a Financial Times report that BofA plans to sell part of its stake in China Construction Bank Corp to shore up its capital. However, Bank of America fell back and is now down about -1.7% after reporting Q1 earnings this morning of 23 cents, which was well below the consensus of 41 cents.

• National City Corp (NCC) may show some strength today on newswire reports that Ohio's largest bank may get a $6-7 billion capital injection from Corsair Capital LLC to shore up its capital.

• Dell (DELL) may show some weakness this morning after a negative weekend Barron's article said that the stock isn't a bargain despite the 31% drop in the past two years because a turnaround is not assured.

• UAL Corp (UAUA) may show some strength today after weekend news that United Airlines plans to increase business travel fares and ticket-change fees to help offset the cost of higher fuel

Today's U.S. Market Focus

• June 10-year T-notes this morning are trading +9 ticks on lower US and European stocks and some short-covering after the sharp recent losses. June T-note prices last Friday closed -7 ticks and posted a very sharp overall sell-off of 2-02 points for the week. Bearish factors last Friday included (1) the sharp rally in the US stock market last Friday which reduced credit market flight-to-quality concerns and caused a flow of capital from the credit market to stocks, (2) last Friday's sharp rally in the banking sector which indicated substantially reduced market concerns about US banking system health, (3) the substantial cut in expectations for Fed easing with the market now expecting only a 25 bp rate cut at next week's FOMC meeting, (4) supply pressure ahead of this week's Treasury auctions, (5) the sharp 2-day 17 bp rise in the 3-month dollar Libor rate to 2.91% after the British Banking Association threatened to bank any member banks that were deliberating reporting artificially low interbank rates to the BBA for the calculation of Libor rates in an attempt to reduce their borrowing costs, and (6) technical long liquidation pressure.

• The dollar is trading lower this morning with the dollar/yen is down -0.47 yen and the euro/dollar up +0.09 cents. The dollar index rallied moderately last Friday and closed +0.33 points at 72.012. The dollar/yen rallied to a new 2-month high and closed +0.55 yen at 102.26 yen. The euro/dollar fell moderately last Friday from the recent record high to closed -0.91 cents. Bullish factors for the dollar last Friday included (1) the improved dollar interest rate differential situation with the surge in the 3-month dollar Libor rate late last week and sharply reduced expectations for Fed easing, (2) last Friday's sharp rally in the US stock market, and (3) the improved view of the US banking sector on ideas the worst may be over for the banking crisis.

• May crude oil prices this morning are trading +16 cents after OPEC reiterated that it would not raise production in response to record prices. May gasoline this morning is trading slightly lower by -0.07 cents. May crude oil prices last Friday closed sharply higher by +$1.83 per barrel at $116.69 and posted a new record high of $116.80. May gasoline prices last Friday closed +3.15 cents at 298.93 cents, posting a new record high. Bullish factors include (1) the sharp US stock market and ideas that the US recession may be shallower than earlier thought, (2) US Energy Secretary Samuel Bodman's statement that the US government will continue to buy crude oil for the Strategic Petroleum Reserve even with oil prices above $100 per barrel, (3) continued comments from OPEC officials that OPEC is unwilling to boost oil production despite record high prices, and (4) continued technical buying with the new record high. Bearish factors last Friday centered on the recovery in the dollar.

Today's U.S. Earnings Reports

Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): MRK-Merck (BEST earnings consensus 0.85 per share), BAC-Bank of America (.46), LLY-Eli Lilly (.96), HAL-Halliburton (.64), TXN-Texas Instruments (.44), WFT-Weatherford (1.01), ROH-Rohn & Haas (.89)

Global Financial Calendar