Overnight U.S. Stock News

• June S&Ps this morning are trading -4.30 points on Wal-Mart's forecast for slightly lower than expected earnings in Q2 and on weaker European stocks. The US stock market yesterday grinded higher throughout the day and ended with decent gains (Dow +1.02%, S&P 500 +1.10%, Nasdaq Composite +1.76%).

• Bullish factors for stock prices yesterday included (1) the 1.5% gain in Wal-Mart as the world's largest retailer had its share-price forecast raised to $67 from $57 by Citigroup, citing the potential for increased earnings at the retailer's overseas stores, (2) the 28% surge in Electronic Data Systems after the WSJ reported that Hewlett-Packard was near a deal to buy the company for as much as $13 billion, (3) the rally in consumer stocks after JPMorgan Chase said the US government's $117 billion tax-rebate program and a likely rally in the dollar will boost companies dependent on consumer spending, (4) the 6.6% gain in Alcoa, the world's third-largest aluminum producer, after a Ernst & Young LLC analyst said Rio Tinto Group and Vale do Rio Doce may bid for a mining company this year, and (5) the 9.6% gain in Clear Channel after the company confirmed proceedings in court cases were delayed today so parties can continue settlement discussions over the radio broadcaster's buyout.

• Bearish factors for stock prices yesterday included (1) the 7.3% drop in ImClone Systems as the maker of the cancer drug Erbitux was downgraded to "underweight" from "equal-weight" at Morgan Stanley, (2) the 16% fall in Pioneer Drilling after the provider of oil and gas drilling services delayed its Q1 results to investigate internal financial reporting, and (3) the 3.4% fall in Transocean, the bigest offshore driller, and the 1.5% drop in Schlumberger, the largest oil-field service contractor, as crude oil fell almost $2 a barrel.

• Wal-Mart reported Q1 EPS of 76 cents (1 cent above the 75-cent consensus) and revenue was up +10% yr/yr. Wal-Mart gained sales as it trimmed prices on groceries and pharmacy items to attract customers away from competitors. Wal-Mart provided Q2 EPS guidance of 78-81 cents, which was in a range below the analyst consensus of 81 cents. Wal-Mart is down -0.5% in European trading this morning since the weaker-than-expected Q2 guidance offset the slightly better than expected Q1 report.

• US investment banking stocks are being undercut by a research note by Oppenheimer's Meredith Whitney saying that the investment banking sector is facing harsher conditions than the market is discounting and cutting EPS forecasts. Merrill is down 1.4% and Morgan Stanley is down -0.7% in European trading, although Goldman Sachs is up +1.1%.

• Hewlett Packard this morning reported fiscal Q2 EPS ex-items of 87 cents per share, which was better than the analyst consensus of 84 cents.

Today's U.S. Market Focus

• June 10-year T-notes this morning are trading +2 ticks on mildly lower S&Ps. June T-notes yesterday traded higher most of the day but gave up their gains into the close and closed down -1 tick. Bearish factors for T-note prices yesterday included (1) the comment from Chicago Fed President Evans that current interest rate policy is "appropriate," possibly signaling an end to the Fed's interest rate cuts, and (2) the rally in the stock market, lessening demand for US Treasuries. Bullish factors for T-note prices yesterday included (1) concern that this week's economic reports will point to further weakness in the US economy, and (2) speculation that most of the proceeds from the $71 billion in maturing issues this week will be reinvested back into Treasuries.

• The dollar/yen is trading slightly higher by +0.06 yen, while the euro/dollar is trading with a fairly large loss of -0.79 cents. The euro this morning is being undercut by technical selling. The dollar index yesterday closed lower. Bearish factors for the dollar yesterday include (1) comments from ECB President Trichet that the ECB's current monetary policy will maintain its goal of maintaining "price stability," lessening chances of an ECB rate cut, and (2) the strength in the British pound after UK producer prices last month climbed at the fastest pace since 1986, prompting traders to scale-back the expectations for BOE rate cuts. Bullish factors for the dollar yesterday included (1) the weakness in the yen as the stock market rallied and encouraged the yen carry trade, and (2) speculation that the worst of the financial crisis is over after MBIA, the worl'ds largest bond insurer, reported a narrower Q1 loss than analysts' had estimated.

• June crude oil prices this morning are trading -34 cents a barrel and June gasoline is trading -1.07 cents a gallon. The main bearish factor this morning is the International Energy Agency's cut in its 2008 demand forecast by 390,000 barrels per day (bpd) to 86.84 mln bpd. June crude oil prices yesterday retreated from a record high and closed down -$1.73 a barrel and June gasoline closed -3.700 cents a gallon. June crude oil yesterday posted an all-time high of $126.40 per barrel and June gasoline posted a record high of $3.2180 per gallon. Bearish factors for crude oil prices yesterday included (1) the 3.9% y/y drop in Chinese crude oil imports in April, raising concern that rising energy prices are curbing demand in the world's second biggest consumer of crude oil, and (2) the slowdown in India's industrial production to a weaker-than-expected 3% in Feb, the slowest pace since 2002, as record high crude oil prices may be beginning to hurt demand in emerging market economies. Bullish factors for crude oil prices yesterday included (1) the weaker dollar which prompts investors to buy commodities as a hedge against inflation, and (2) comments from Iran's OPEC Governor that OPEC doesn't plan to convene before its scheduled September meeting.

Today's U.S. Earnings Reports

Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): WMT-Wal-Mart (BEST earnings consensus $0.75 per share), AMAT-Applied Materials (.22), ERTS-Electronic Arts (.00), DISH-Dish Network (.51), TJX-TJX (.41), ETE-Energy Transfer Equity LP (.61), WFMI-Whole Foods Market (.31), TWTC-Tme Warner Telecom (-.02), FOSL-Fossil (.39), HRC-Hill-Rom Holdings (.75), LIZ-Liz Claiborne (.14), AZPN-Aspen Technology (.31), PAET-PAETEC Holding (.01), IART-Integra Lifesciences Holdings (.51), VGR-Vector Group (.21)

Global Financial Calendar