• The European markets are trading higher today on better than expected earnings reports from clothing-retailer Hennes & Mauritz and hedge-fund manager Man Group Plc, and record earnings from insurer Swiss Life. Solar-module manufacturer Q-Cells (FRA:QCE) is sharply higher by 8% this morning, and may support US solar stocks this morning after the company provided 2008 revenue guidance of 1.275 billion euros, higher than the analyst consensus of 1.2 billion euros, The European DJ Stoxx 50 is up +1.42% this morning. Asia-Pacific stocks closed mostly lower today due to yesterday's sell-off in the US stock market: Japan -0.80%, Hong Kong +0.21%, China -4.23%, Taiwan -1.85%, Australia -0.18%, Singapore +1.00%, South Korea -0.26%, Bombay -0.44%.

   

• Claims – Today’s weekly initial unemployment claims report is expected to show a decline of -8,000 to 370,000 following last week’s report of +22,000 to 378,000, which matched a 2-1/2 year high first posted back in January. Meanwhile, weekly continuing claims are expected to show a +28,000 increase to 2.893 mln following last week’s report of +32,000 to 2.865 mln, which was a 3-1/2 year high. Both the initial and continuing unemployment claims series are at elevated levels, highlighting the increased layoff activity by US companies and the pile-up of people on the unemployment rolls. Regarding the labor market, the financial markets are mainly looking ahead to next Friday’s March payroll report, which is expected down -45,000. Payroll growth has already fallen for two consecutive months, the first time that has happened since 2003 when the US economy was recovering from the 2001-03 bust.

   

• Q4 GDP revision – The market is not expecting Q4 GDP to be revised from its last report of +0.6%. The market is not expecting revisions for Q4 personal consumption (+1.9%) or the Q4 GDP price index (+2.7%). The current market consensus is that the US economy has already sunk into a recession and that Q1 GDP may be slightly negative. Q2 GDP could be even weaker. At this point, the market is hoping for an upward rebound in the second half of 2008, although that is a long way away from a forecasting standpoint when the financial markets are simply trying to string together a few consecutive weeks without a new crisis.

   

• 5-year T-note auction – The Treasury today will sell $18 billion in 5-year T-notes. Today’s 5-year T-note issue was trading at 2.56% in when-issued trading late yesterday afternoon. The 12-auction averages for the 5-year are as follows: 2.44 bid cover, $128 million in non-competitive bids, 2.17 bp tail to the median yield, 7.38 bp tail to the low yield, 37% taken at the high yield. Indirect bidders, a category comprised mainly by foreign central banks, have taken an average of 25.8% of the last twelve 5-year auctions, which is below the average of 33.8% seen across all recent Treasury coupon auctions

• June S&Ps this morning are trading +8.90 points on carry-over from positive European stocks this morning. The US stock market yesterday moved lower throughout the day and closed near its low (Dow -0.88%, S&P 500 -0.88%, Nasdaq Composite -0.71%).

   

• Bearish factors for stock prices yesterday included (1) the unexpected decline in durable goods orders for Feb, (2) the drop in new home sales for Feb to a 13-year low, (3) the 5.9% drop in Citigroup after an Oppenheimer analyst cut her Q1 earnings forecast to a Q1 loss of -$1.15 a share (down sharply from an earlier prediction of -$0.28) and cut her full-year earnings estimate to a loss of -$0.15 a share from a profit of $0.75, and (4) the 17% plunge in Clear Channel Communications on concern banks will pull loans for the broadcaster's $19.5 billion takeover.

   

• Bullish factors for stock prices yesterday included (1) the 5.4% gain in Freeport-McMoran, the world's 2nd largest copper producer, after Goldman Sachs reported the company is a candidate for takeover by Brazil's Cia. Vale do Rio Doce, (2) the 39% surge in Rambus after the company won the final phase of its patent lawsuit against Hynix Semiconductor, the first step toward collecting royalties from other manufacturers, and (3) the rally in big name oil companies and oil service companies as crude oil rallied over $4.00 a barrel yesterday and gasoline surged to an all-time high.

   

• Cisco Systems is slightly higher by 3 cents at $61.52 this morning in European trading after Goldman Sachs added the network equipment maker to its conviction buy list.

   

• Major oil companies are higher this morning in European trading (Exxon +0.5%, ConnocoPhillips +0.6%) on oil prices which are higher today after a pipeline explosion in southern Iraq threatened to reduce Iraqi oil exports.

   

• Google (GOOG) is down 2.2% in European trading this morning after the company reported slower growth in text advertising.

   

• Lennar Corp (LEN) may show some strength on today's open after the third largest US homebuilder reported a loss of 56 cents a share, which was smaller than the consensus of $1.18 per share.

   

• MF Global (MF) may show some strength on today's open after news that the renegotiation of an agreement with its former parent Man Group will make available $800 million in cash to boost liquidity in the futures and options brokerage firm, which saw a sharp drop in its stock earlier this month on liquidity concerns.

   

• Hartford Financial Services (HIG) may show some strength on today's open after Sanford C. Berstein upgraded the stock to "outperform" from "market perform."

   

• Oracle (ORCL) dropped 7.4% in after-hours trading yesterday and is down 7.3% in European trading this morning as the world's third largest software maker said sales including maintenance fees from acquired companies were $5.37 billion in the quarter ended Feb 29, below analysts' estimates of $5.41 billion

   

Today's U.S. Market Focus

• June 10-year T-notes this morning are trading -5 ticks on higher European stocks and S&P futures. June T-notes yesterday closed higher by +4 ticks. Bullish factors for T-note prices yesterday included (1) the unexpected decline in durable goods orders for Feb (-1.7% and -2.6% ex-transportation versus expectations of +0.7% and -0.3% ex-transportation), (2) the comment from Dallas Fed President Fisher that he sees a "sustained period of anemic economic activity," (3) flight-to-quality from the sell-off in the stock market, and (4) the better than expected demand seen for the $28 bln 2-year T-note auction. Bearish factors for T-note prices yesterday included (1) the comment from Dallas Fed President Fisher that inflation is rising to a "uncomfortable" level, (2) the better than expected new home sales for Feb (-1.8% to a 13-year low of 590,000 versus expectations -1.7% to 578,000), and (3) hawkish comments from ECB President Trichet that inflation will remain above its 2% target for most of 2008 and that the Euro-Zone economy has "sound fundamentals" and the ECB expects growth in the euro region to continue.

   

• The dollar this morning is trading mildly higher on today's S&P rally with the dollar/yen up +0.29 yen and the euro/dollar down -0.41 cents. The dollar index yesterday sold off with the euro moving up to a 1-week high. Bearish factors for the dollar yesterday included (1) hawkish comments from ECB President Trichet who said the Euro-Zone economy was "sound" and that interest rates at a 6-year high will contribute to its aim of containing inflation, thus dampening hopes of an ECB rate cut, (2) the unexpected rise in business confidence in Germany and France, signaling the Euro-Zone economies may weather record high energy prices and the US economic slowdown, (3) the rally in the yen as global equity markets tumbled, and (4) US recession fears with durable goods orders unexpectedly declining in Feb and Feb US new home sales in the US dropping to a 13-year low.

   

• May crude oil prices this morning are trading +$1.02 a barrel after a pipeline bombing in Iraq cut supplies to Iraq's main export terminal in Basra. May gasoline is trading -1.29 cents a gallon. May crude oil prices yesterday rallied sharply and closed +$4.68 a barrel while May gasoline closed +6.39 cents a gallon. Apr gasoline yesterday posted an all-time (nearest futures) high of $2.7752 a gallon and May gasoline posted a contract high. Bullish factors for crude oil prices yesterday included (1) the larger than expected decline in gasoline inventories in yesterday's DOE inventory report (gasoline -3.29 mln bbl versusu expectations of -1.15 mln bbl), (2) the action by Sanford C. Bernstein in raising its 2008 crude oil price forecast by 27% to $92.30 a barrel, (3) the weak dollar, and (4) the unexpected rise in business confidence in Germany and France, signaling the Euro-Zone may continue to see strong energy demand. Bearish factors for crude oil prices yesterday included (1) weak demand as total implied fuel demand in the US dropped 2.2% in the past 4-weeks y/y, causing the rise in gasoline inventories to the recent 15-year high and a cut-back in production by refiners (the refinery capacity rate dropped 1.7 points to 82.2%, the lowest in 2-1/2 years), and (2) economic concerns as durable goods orders for Feb unexpectedly declined and new home sales for Feb dropped to a 13-year low

   

Today's U.S. Earnings Reports

Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): CAG-Conagra Foods (BEST earnings consensus $0.41 per share), APOL-Apollo Group (.52), MKC-McCormick (.38), RHT-Red Hat (.19), GPN-Global Payments (.42), LEN-Lennar (-.13), WSM-Williams-Sonoma (1.12), SCS-Steelcase (.25), TXI-Texas Industries (.37), TIBX-Tibco Software (.07), SCHL-Scholastic (-.21)

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Global Financial Calendar