Thursday's Brew Nov 16

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. Major stock indices are higher to start the day today, driven by the Core CPI data release, which showed a lower than anticipated increase. The NASDAQ may be pressured through the day by Dell's earnings delay and a warning from Applied Materials.

OVERSEAS MARKETS

The NIKKEI dipped 0.49% while the Hang Seng edged higher 0.32% Thursday. The Bank of Japan ended its two-day meeting leaving interest rates unchanged. Japanese banking shares led the market lower, as Shinsei Bank Ltd. lowered its forecast. In Hong Kong, the market rose on the mild industrial expansion report, which gave participants hope that the government would not apply restrictive monetary policy.

The European Central Bank will convene today, but is not expected to issue a rate decision. Benefiting from the release of favorable American CPI data, stocks across Europe are higher today. The FTSE 100 index leads area markets, up 0.32% so far today.

ECONOMIC DATA & NEWS

Thursday threatened to ring the economic warning bells again with the release of the Consumer Price Index, but instead is likely to ring in a celebration today. Economists surveyed by Briefing.com saw the index decreasing 0.3%, but expected a rise of 0.2% for the Core CPI measure (Bloomberg's survey saw a 0.3% rise). The actual Core CPI rise of 0.1% was welcomed good news, possibly indicating that the Fed has gotten it right and inflation is coming under control. This is perhaps the most important news of the month and could spark another leg of rally heading into the holiday season.

October Industrial Production is also on the schedule Thursday, with expectations for a 0.2% rise, according to Briefing.com (Bloomberg's survey sees a 0.3% rise). October Capacity Utilization is seen at 82% by both polls, compared to 81.9% last period. Finally, the November Philly Fed Survey is seen measuring between 5.0 to 5.5.

Fed Governors Randall Kroszner and William Poole will address the Cato Institute conference on Fed Policy in the Face of Crises, while Fed Governor Susan Bies speaks at an EU/U.S. banking forum in Washington D.C. One more talking head of note takes the podium Thursday, Financial Accounting Standards Board Chairman Robert Herz will address the Financial Executives International Conference in New York.

COMMODITY MARKETS

Crude oil and distillates are rising today, as the Department of Energy data released yesterday showed supplies of distillate fuels, including heating oil and diesel, fell 3.57 million barrels last week. Gasoline supplies declined 3.78 million barrels to 200.3 million. As we pointed out recently, refinery maintenance season has ended, and distillate inventories are likely to increase in our view, while crude inventory is likely to decrease. The opposite of this widely held view surprised markets yesterday and continues to drive oil higher today. There remains concern that OPEC could again cut production as a result of its December meeting, but we do not expect so. However, we continue to expect tensions surrounding the Iranian nuclear issue to maintain a floor for crude near $60, with significant upside potential if tensions rise.

Gold is higher today roughly 0.7%, while copper is down fractionally. Seasonal demand during the holidays adds support for gold, while it continues to have safe-haven appeal as Mid-East unrest persists.

STOCKS IN THE NEWS

Dell Computer (DELL) delayed its third-quarter earnings report and stated federal regulators had begun a formal investigation into the company. The quarterly report, previously scheduled for today, is expected to be released later in the month. Though the company stated the delay was unrelated to the SEC probe, the release was especially concerning. The company stated it was unaware of the focus of the SEC investigation. DELL shares were down 3.7% this morning.

Applied Materials (AMAT) reported quarterly EPS of $0.30, a penny below estimates compiled by Thomson Financial. AMAT also warned fiscal 2007 would start slow due to flat-panel display softness.

Reporting Earnings on Thursday, Hewlett-Packard, Starbucks, Sears Holdings, Gap, Autodesk, Williams-Sonoma, Hillenbrand Industries, Barnes & Noble, Helmerich & Payne, Claire's Stores and Big Lots. (See the disclosure at Wall Street Greek)