• European stocks are trading mildly lower with the European DJ Stoxx 50 index down -0.25% on some mild disappointment over earnings reports released today. Michelin is down 8% today after weak guidance and downgrades by Merrill and Morgan Stanley. Asia-Pacific stocks today closed mixed: Hong Kong +0.97%, China +1.28%, Taiwan -2.07%, Australia +0.07%, Singapore -0.91%, South Korea -0.74%, Bombay +2.13%.

• Home prices � Today�s Feb S&P/Case-Schiller Composite-20 home price index is expected to weaken further to �12.0% y/y from �10.7% y/y in January. The Case-Schiller index series shows that home prices rose at double-digit rates from 2000 through 2005. However, starting in January 2006, the series started dropping sharply and turned negative in early 2007. Today�s expected 12% decline in the Case-Schiller index actually understates the size of the decline in home prices since median home prices on an inflation-adjusted basis have actually shown an overall decline of about 20% so far from the peak in 2005.

• US consumer confidence � Today�s April U.S. consumer confidence from the Conference Board is expected to show a -3.4 point decline to a 14-1/2 year low of 61.1, adding to the sharp decline of �11.9 points to 64.5 seen in March. The March level of 64.5 was a 5-year low and was just 3.1 points above the 14-1/2 year low of 61.4 posted in March 2003. Expectations for a decline in today�s Conference Board US consumer confidence index are based on last Friday�s news that the University of Michigan�s US consumer confidence index in April fell -6.9 points to a new 26-year low of 62.6.

• FOMC meeting � The 2-day FOMC meeting begins today. The federal funds futures market is discounting a 78% chance that the FOMC at this week�s meeting will cut the funds rate target by 25 bp to 2.00%. The Fed has so far slashed t he funds rate by 300 bp from 5.25% last September to the current level of 2.25%. However, after the expected rate cut to 2.00%, the market is then expecting the Fed to halt its easing move to see how the situation develops for the banking system crisis, the US economy, and inflation. The market is currently expecting the Fed to start raising the funds rate next year by a total of 75 bp to 2.75% by next summer.

• June S&Ps this morning are trading -3.40 points. The US stock market yesterday traded higher most of the day until fading late and finishing mixed (Dow -0.16%, S&P 500 -0.11%, Nasdaq Composite +0.06%). The S&P 500 Index yesterday posted a 3-1/2 month high.
• Bullish factors for stock prices yesterday included (1) the 23% surge in Wrigley after Mars agreed to purchase Wrigley with financing from Warren Buffet's Berkshire Hathaway for $80 a share in cash, 28% more then last Friday's closing price, (2) the 9.5% gain in Ford after Kirk Kirkorian said he owns 100 million shares of Ford and seeks an additional 20 million, (3) the prediction by Lehman Brothers that Q1 earnings numbers will provide the fuel for a further stock market rally as the market was priced in for a substantial "miss," (4) the 8.5% rally in Sysco as the largest food distributor to restaurants in North America said Q3 profit rose 9% on higher prices and net income climbed to 40 cents a share, beating analysts estimates of 38 cents, and (5) the 2.5% gain in Verizon as the second largest US phone company said Q1 profit jumped 9.8% as mobile-phone customers spent more on text messages and wireless Internet browsing.
• Bearish factors for stock prices yesterday included (1) the rise in the US vacancy rate in Q1 2008 to 2.9%, the highest since the series began in 1956, as 2.3 million homes are currently empty and for sale, (2) the action by Standard & Poor's to lower its assumption for how much money would be recovered from defaults of mortgage-linked CDOs, which may lead to increased downgrades and writedowns on the securities, (3) the prediction by Bank of America that subprime delinquencies may accelerate as seasonal factors that were behind the temporary improvement in delinquencies starts to fade, and (4) the 6% drop in Goodyear Tire & Rubber as the largest US tiremaker was cut to "neutral" from "overweight" by JPMorgan Chase and CRT Capital Group downgraded the company to "fairly valued" from "buy."
• Visa (V) dropped over -6% in after-hours trading yesterday and is down -4.9% in European trading this morning as the world's largest credit-card network in its first earnings report since its IPO last month reported earnings that failed to meet the most optimistic predictions.
• McDermott (MDR) is down -8% in European trading this morning after the company issued earnings guidance of 54 cents per share, which was well below the analyst consensus of 69 cents.
• Wachovia (WB) is up +1.0% in European trading this morning after Deutsche Bank upgraded the shares to "buy" from "hold" on the analysts' view that the bank will not need any further capital raises.
• Hartford Financial Services Group (HIG) fell 2.5% in after-hours trading yesterday as the insurer said it expects to earn $9.20 to $9.50 a share this year, down from a January forecast of $9.80 to $10.20.

Today's U.S. Market Focus

• June 10-year T-notes this morning are trading +2.5 ticks on this morning's lower trade in S&Ps. June T-notes yesterday moved higher and closed up +9 ticks. Bullish factors for T-note prices yesterday included (1) the rise in the US vacancy rate (the share of homes empty and for sale) to 2.9% in Q1-2008 (the highest since records began in 1956), (2) Standard & Poor's lower assumptions for how much money would be recovered from defaults of mortgage-linked collateralized debt obligations (CDOs), a move that may add to the record number of downgrades on the securities, (3) market expectations for weak US consumer confidence, GDP and employment reports this week, highlighting the fragile state of the US economy, and (4) carry-over support from strong European bund prices as German Apr CPI came in weaker than expected. Bearish factors for T-note prices yesterday included (1) the rally in the S&P 500 Index to a 3-1/2 month high, reducing the appeal of Treasuries and (2) the rally in crude oil to an all-time high, increasing inflation anxieties.
• The dollar/yen is trading -0.09 yen this morning and the euro/dollar is -0.85 cents. The dollar is higher against the euro going into the 2-day FOMC meeting on speculation that FOMC may signal it is done easing for the time being. The dollar index yesterday closed slightly weaker. Bearish factors for the dollar yesterday included (1) the unexpected rise in the Apr German Gfk consumer confidence up to a 7-month high, strengthening the euro, (2) the action by the European Commission to raise their prediction on Euro-Zone inflation this year to 3.2% from a February forecast of 2.6%, further crimping expectations of an ECB rate cut later this year and (3) ECB President Trichet's comment that the ECB must set interest rates with the sole goal of maintaing price stability, even during times of financial market turmoil. Bullish factors for the dollar yesterday included (1) weakness in the yen as the S&P 500 Index rallied to a 3-1/2 month high, encouraging the carry-trade and (2) speculation that the Fed may signal it is finished with its rate-cutting cycle after the 2-day FOMC meeting that begins today.

• June crude oil prices this morning are trading -94 cents a barrel and June gasoline is trading -2.52 cents a gallon as striking Scotland refinery workers went back to work, which will allow BP's Forties pipeline to progressively come back on line over the next several days. June crude oil prices yesterday moved higher and closed up +$0.23 a barrel and June gasoline closed -2.500 cents a gallon. June crude oil posted an all-time high of $119.93 per barrel yesterday. Bullish factors for crude oil prices yesterday included (1) the continued shut down of the Forties North Sea Pipeline System (which carries 700,000 bbl a day or 40% of the UK's oil production) after a strike at the Grangemouth refinery in Scotland cut power supplies to the pipeline, (2) the continued strike in Nigeria against Exxon Mobile for a fifth day, halting daily output of 860,000 bbl of crude oil per day, (3) the weaker dollar, (4) the prediction by Deutsche Bank that there is a "huge risk" oil prices will continue to rise until demand collapses because additional supplies are limited and alternative fuels are decades away from replacing crude oil, (5) the action by the Nigerian militant group MEND to say it will continue its campaign to attack every oil and gas pipeline in Nigeria, further curtailing Nigerian crude oil production and (6) carry-over support from the rally in natural gas which shot up to a 2-1/3 year high. Expectations for tommorow's DOE inventory report are for a +1.5 mln bbl increase in crude oil inventories, a -1.15 mln bbl drop in gasoline stockpiles, a -250,000 bbl drop in distillate inventories and a +0.2 increase in the refinery capacity rate to 85.8%

Today's U.S. Earnings Reports

Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): GLW-Corning (BEST earnings consensus $0.42 per share), BNI-Burlington Northern Santa Fe Corp.(1.22), MA-Mastercard (1.99), ADM-Archer-Daniels Midland (.69), VLO-Valero Energy (.29), MHS-Medco Health Solutions (.53), SPG-Simon Property Group (.38), ESRX-Express Scripts (.67), X-US Steel (1.86), WMI-Waste Management (.46), AVP-Avon Products (.44), CBS-CBS Corp. (.33), LNC-Linclon National (1.31), MHP-McGraw-Hill Companies (.24), BXP-Boston Properties (.61), GGP-General Growth Properties (.55), TT-Trane (.34), HRS-Harris Corp. (.72), MAS-Masco Corp. (.21), AG-Agco Corp. (.46), EQ-Embarq Corp. (1.19), WEC-Wisconsin Energy (.86), DVA-Davita (.78), CBG-CB Richard Ellis Group (.22), SPR-Spirit Aerosystems Holdings (.56), BGC-General Cable (1.13)

Global Financial Calendar