Tuesday's Brew Nov 14

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. Stocks are higher today on positive PPI and retail sales data, but the Fed meeting minutes to be released later today have the potential to spoil the appetite of investors.

OVERSEAS MARKETS

The NIKKEI 225 rocketed higher 1.67% Tuesday, on a reassuring government report showing GDP growth was higher than expected. Asia's largest economy grew 2% in the third quarter, a full percentage point more than the median expectation of economists surveyed by Bloomberg. Japanese stocks had been wavering of late, on the heels of North Korea instability and other economic reports that seemed to show the economy weakening. Tomorrow, the Bank of Japan will begin a two-day meeting, concluding Thursday with its decision on interest rates.

European stocks were down earlier this AM, but have turned for the better on better than expected Core PPI results in America. European stocks were down early on the release of economic growth data for the European region, which showed growth of 0.5% for the third quarter. Also, investor confidence in Germany was measured at its lowest level since 1993.

ECONOMIC DATA & NEWS

Tuesday starts the week's economic data roll with the October Producer Price Index release. Economists polled by Briefing.com expected PPI to show a 0.4% drop, and PPI actually fell 1.6%, better than expected. The drop is significantly impacted by lower energy prices, but Core PPI, which excludes volatile food and energy prices, was expected to rise 0.1% and it fell 0.9%, a result much better than expectations. This should add some lift to markets today, but the pending releases of further economic data are keeping markets cautious after an early pop.

A second barometer of economic strength, October's retail sales data was released this morning. It was seen decreasing by 0.4%, according to Bloomberg, and the actual result showed a decrease of 0.2%. However, September's numbers were revised lower, showing a decrease of 0.8%. Most important, purchases in October excluding gasoline rose 0.4%. Decreasing retail sales would have be concerning, as the consumer has been a stalwart of the American economy over the years. Sales results may yet be impacted by wallet constraint due to rising consumer debt and debt expenses as credit card providers squeeze already money tight mortgage holders. Also, and not to be ignored, the retail environment may be saturated, and due for some capacity reduction. However, the sales results do not portend a bad consumer environment, in our view. Economists may remain concerned that potentially higher energy prices may once again squeeze consumers at a time when their mortgages are already squeezing them. Still, unemployment remains low, supportive to the economy, and today's data was positive, in our opinion.

A third piece of important data will reach the market Tuesday. The minutes of the October meeting of the Federal Reserve have the ability to drive markets, as its content is closely screened to provide reading for future Fed action and concerns. Tuesday also brings September Business Inventories, seen by Bloomberg rising 0.5%, versus a 0.6% rise in August.

Other interesting bits of information that seem set to take a back seat to the economic releases of the day, still hold the potential to headline the news. Ford Motor is expected to file its delayed 10-Q with the SEC on Tuesday. The delay was attributed to accounting error and restatement. One might read into Ford's recent change of CEO as portending a certain depth of bad news within the release. Thus, Ford's release and its conference call at 10 AM could move markets.

St. Louis Fed Chief William Poole will address the Chartered Financial Analysts Society in Wilmington, Delaware. The New York Society of Securities Analysts will holds its banking conference Tuesday. Finally, not to be ignored, internationally, India and Pakistan will resume their peace talks.

COMMODITY MARKETS

Metals prices are mostly bouncing higher today after Monday's collapse. Today's news from Japanese and American markets implies continued demand for raw materials, alleviating the pressure that came on yesterday's supply data showing inventory growth in the copper market.

Crude oil prices are stable today, as the market digests data, but we expect crude to rise in the near term. If economic health is okay in Japan and inflation tamed in America, and Iran facing threats from Israel, oil seems destined to go higher, in our view.

STOCKS IN THE NEWS

Reporting earnings Tuesday, Wal-Mart, Home Depot, Target, Staples, Agilent Technologies, TJX Companies, Analog Devices, American Eagle, DR Horton, Abercrombie & Fitch, Ross Stores and Saks Incorporated. Home Depot (HD) reported quarterly EPS of $0.73, versus analyst expectations for $0.75. HD blamed the weakening housing market and a calm hurricane season for its results. The company also lowered its guidance for the rest of this year. HD is down approximately 1.2% in early trading. Wal-Mart reported EPS of $0.62 before a one-time gain, compared to consensus expectations of $0.59, as compiled by Thomson Financial. However, WMT tightened and reduced its EPS guidance range for the full year. Despite that news, WMT shares are up 2.5%, as the retailer is seen as a serious competitor on price this holiday season. We hope you enjoyed "Today's Morning Coffee" and wish you a good day trading. (See Wall Street Greek for our disclosure.)