• European stocks are trading slightly lower with the DJ Stoxx 50 down -0.06%. The European banking sector was undercut today by a 4% decline in Royal Bank of Scotland on news that it will sell 12 billion pounds of new stock to raise capital, and by a 5% decline in Barclays. Meanwhile, Asia-Pacific stocks today closed mixed: Japan -1.09%, Hong Kong +0.88%, China +0.88%, Taiwai -0.51%, Australia -0.64%, Singapore +0.51%, South Korea -0.82%, Bombay +0.27%.

• Richmond Fed index – Today’s April Richmond Fed manufacturing index is expected to fall -4 points to 2, reversing some of the +11 points gain in March seen to 6. The 11-point gain seen in March put the Richmond Fed index back into positive territory for the first time since last September. The Richmond Fed manufacturing index is one of the few US manufacturing indicators that is in positive territory. In fact, the ISM manufacturing index has been below the boom-bust level of 50 for the past two consecutive months (Feb-March) and in three of the last four months. The economic data suggests that the US manufacturing sector is already in a recession.

• Existing home sales – Today’s March existing homes sales report is expected to show a –2.2% decline to 4.92 mln, reversing most of the modest recovery of +2.9% to 5.03 mln seen in February. The February gain brought the existing home sales series up from the record low of 4.89 mln units seen January 2008 (although the history of the series only goes back to Jan 1999). Spring has arrived, which is traditionally the season for strong home sales. However, there is little reason to expect any fundamental pickup in home sales considering that potential home buyers are being scared off by falling home prices, the difficulty of obtaining mortgages, and job concerns amidst a likely US economic recession.

• House price index – Today’s February OFHEO US house price index is expected to fall –1.5% m/m, adding to the –1.1% m/m decline seen in January. On a year-on-year basis, the OFHEO US house price index in January was down by a total of -4.1% from the peak seen in April 2007. That is much less than the other key US house price indexes, which have seen declines of roughly 15% from the peak.

• 5-year TIPS auction – The Treasury today will sell $8 bln in 5-yr inflation-adjusted TIPS T-notes. The Treasury’s schedule for the 5-year TIPS auction is to sell an initial issue in April and then sell a smaller reopening in October. The size of today’s auction is the same as the $8 billion 5-year TIPS that the Treasury sold in April 2007. Today’s issue was trading at 0.78% in when-issued trading late yesterday afternoon. The 6-auction averages for the 5-year TIPS auctions are as follows: 2.13 bid cover, $73 mln in non-competitive bids, 4.03 bp tail to the median yield, 11.48 bp tail to the low yield, and 85% taken at the high yield. Foreign central banks favor the 5-year TIPS auction as seen by the fact that indirect bidders (a group mainly comprised of foreign central banks) have taken an average of 37.8% of the last six 5-year TIPS auctions, which is above the average of 33.8% across all recent Treasury coupon auctions.

• June S&Ps this morning are trading slightly lower by -0.60 points on negative guidance from Texas Instruments and on continued concern about Q1 earnings. The US stock market yesterday traded sideways and closed mixed (Dow -0.19%, S&P 500 -0.16%, Nasdaq Composite +0.21%).

• Bullish factors for stock prices yesterday included (1) the 4.4% gain in Apple after Citigroup raised its Q2 profit estimate for the company citing "solid" sales of Macintosh computers, (2) the 5% rally in Schlumberger as the oilfield contractor was raised to "overweight" from "equal-weight" at Morgan Stanley, which increased its stock target price on the company to $135 from $125, (3) the 7.3% gain in Quest Diagnostics after the company reported Q1 profit of 72 cents a share, beating analysts estimates of 70 cents, and (4) the rally in big name oil companies as crude oil rallied yet again to another all-time high of $117.83 a barrel.

• Bearish factors for stock prices yesterday included (1) the 28% plunge in National City to a 17-year low as Ohio's biggest lender was forced to cut its dividend to 1 cent from 21 cents and sold stock to a group of investors led by Corsair Capital LLC for a 40% discount from last Friday's closing price, (2) the 3.7% drop in Wells Fargo after an Oppenheimer analyst cut her recommendation on the stock to "underperform" from "market perform" saying the stock's PE ratio may fall and slashed her 2008 EPS guidance to $1.20 from $2.15, (3) the 2.5% drop in Bank of America as the 2nd largest US bank by assets said profit dropped for a third straight quarter as the bank set aside $6.01 billion for bad loans, (4) the 2.3% fall in Caterpillar as Wachovia reduced its rating on the company to "market perform" from "outperform" and Credit Suisse lowered its rating to "neutral" from "outperform,"and (5) the 6.9% fall in Sears Holdings after Bank of America said they wouldn't renew a $1 billion letter of credit under existing terms, raising concerns of Sears access to cash.

• Texas Instruments is down 3% in European trading this morning after its Q2 EPS guidance of 42-48 cents, which was below the analyst consensus of 49 cents.

• DuPont reported Q1 EPS at $1.31 per share and sales rose +9.3% due to the strong agriculture markets which boosted sales of pesticides and genetically modified corn and soybean seeds. Q1 EPS of $1.31 beat the analyst consensus of $1.28. However, DuPont provided Q2 EPS guidance of $1.05, which was below the analyst consensus of $1.08, and full-year 2008 EPS guidance of $3.40 to 3.55 that was in line with the analyst consensus of $3.48.

• SunTrust Banks, Inc, the regional bank based in Georgia, reported Q1 EPS of 81 cents per share, which was down from $1.44 in the year-earlier quarter and was below the analyst consensus of $1.03 per share.

• Netflix (NFLX) dropped 12% in after-hours trading yesterday and is down 13% in European trading this morning as the largest US mail-order movie service provider provided 2008 EPS guidance of $1.16 to $1.29 a share, down from February guidance of $1.18 to $1.30.

• Novellus Systems (NVLS) slipped 5% in after-hours trading yesterday as the maker of equipment that turns silicon wafers into semiconductors said Q1 profit fell to 15 cents a share, below analysts estimates of 16 cents, as excess memory-chip inventory forced customers to curb orders.

Today's U.S. Market Focus

• June 10-year T-notes this morning are trading -11 ticks on stable global stock markets and on suppply overhang from this week's Treasury auctions. June T-notes yesterday rallied and closed up +8 ticks. Bullish factors for T-note prices yesterday included (1) Bank of America's Q1 profit miss, reviving concern credit-market losses will widen, (2) comments from Fed Governor Kroszner that any recovery in the subprime mortgage market may not occur soon because of the need for lenders and investors to spend more time in assessing risks, (3) flight-to-safety with the declining equity market, and (4) concern that today's Mar existing home sales report will show continued housing market weakness. Bearish factors for T-note prices yesterday included (1) supply concerns with $8 bln in 5-year TIPS to be auctioned today to go along with the higher than expected $30 bln in 2-year T-notes (the most ever) to be auctioned tomorrow and $19 bln in 5-year T-notes (the most in 5 years) to be auctioned Thusday, (2) Bank of England's announced of a 50 billion pound ($100 billion) swap facility of government bonds for mortgage-backed securities, potentially easing short-term money market tensions, and (3) comments from ECB Council member Weber that his bank will consider whether it needs to raise interest rates to contain inflation.

• The dollar/yen is down -0.06 yen this morning and the euro/dollar is up +0.28 cents. The dollar index yesterday closed modestly lower. Bearish factors for the dollar yesterday included (1) the comment from ECB Council member Liebscher that inflation leaves no room for the ECB to lower interest rates even with risks to the economic outlook on the "downside," and (2) euro-supportive comments from ECB Council member Weber that the ECB will consider whether it needs to raise interest rates to contain inflation. Bullish factors for the dollar yesterday included (1) the comment from ECB President Trichet that the financial-market crisis is not over and there are still tensions in money markets, (2) the action by Lehman Brothers in recommending that investors sell the pound against the dollar as the worst housing slump in Britain in 30-years will force the Bank of England to cut its target rate by 100 bp to 4.00% by January, and (3) weakness in the Canadian dollar as the market expects a 50 bp rate cut to 3.00% by the Bank of Canada at its monetary policy meeting today.

• May crude oil prices this morning are trading +17 cents a barrel and May gasoline is trading -0.30 cents a gallon. May crude oil prices yesterday swung on both sides of unchanged before closing up +$0.79 a barrel although May gasoline closed down -0.0102 cents a gallon. May crude oil posted an all-time high of $117.83 per barrel yesterday while May gasoline posted a record high of $3.0040 per gallon. May heating oil rose to a record high of $3.3309 per gallon. Bullish factors for crude oil prices yesterday included (1) the attack on Nigerian pipelines by rebels last week which caused the suspension of 169,000 barrels a day and Royal Dutch Shell's statement that it will declare force majeure on exports of Bonny crude from Nigeria in April and May starting today, (2) comments from the OPEC Secretary-General that there's "no shortage of oil" in the market and from OPEC's President that "any increase in production now will not have an impact on prices because there's a balance between supply and demand," (3) the weaker dollar, (4) the comment from CIBC World Markets that oil prices are heading higher, regardless of a US downturn, because of increasing fuel consumption in emerging markets, and (5) the firing of a rocket on a Japanese crude oil tanker off the coast of Yemen. Expectations for tomorrow's DOE inventory report are for a +1.6 mln bbl rise in crude oil inventories, a -2.5 mln bbl drop in gasoline inventories, an unchanged reading in distillate stockpiles and a +0.7 point increase in the refinery capacity rate to 82.1%

Today's U.S. Earnings Reports

Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): T-AT&T (BEST earnings consensus $0.74 per share), MCD-McDonalds (.70), WYE-Wyeth (.89), DD-Du Pont (1.28), UNH-UnitedHealth Group (.80), LMT-Lockheed Martin (1.63), YHOO-Yahoo! (.10), CME-CME Group (4.81), KMB-Kimberly-Clark (1.07), BHI-Baker Highes (1.20), NSC-Northfolk Southern (.78), STI-Suntrust Banks (1.03), BSX-Boston Scientifoc (.13), YUM-YUM! Brands (.40), BTU-Peabody Energy (.15), PCAR-Paccar (.77), SII-Smith International (.87), WU-Western Union (.28), OMC-Omnicom Group (.62), PH-Parker Hannifin (1.34), BRCM-Broadcom (.28), AMP-Ameriprise Financial (1.01), COH-Coach (.45), FITB-Fifth Third Bancorp (.47)

Global Financial Calendar