Wednesday's Brew Nv 22

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. Equity markets trading typically lightens significantly on the Wednesday before the holiday, barring any external stimulus. In early activity today, stocks are relatively unchanged across the Dow, S&P 500 and NASDAQ indices. With the holiday approaching, the bond market closes at 2 p.m. and CBOT trading ceases at 1 or 1:30 for all contracts except equities.

OVERSEAS MARKETS

Work overseas grinds on, as the World Economic Forum meets in Turkey from Wednesday through Friday. Stocks rose strongly across Asia today, with the Hang Seng climbing 1.28% to a record high. The NIKKEI rose 1.14% and Australia's S&P/ASX 200 Index appreciated 1.64%. Economic stimulus from Chinese growth is expected to continue to fuel the region. Within Australia, Quantas Airways Ltd. rose 15% as it was approached for takeover by Macquarie Bank Ltd. and Texas Pacific Group.

Stocks across Europe are mostly higher this morning, but in the U.K., the FTSE 100 presents anomaly, dipping 0.29% in early activity. We cannot pinpoint a specific factor for Europe's strength today, except that generally merger and acquisition activity within Europe has been strong, and continues to support pricing.

ECONOMIC DATA & NEWS

Wednesday brought the most important economic news of the week with the release of the University of Michigan's consumer sentiment index. A Bloomberg consensus of analysts poll saw a reading of 93.1 versus 92.3 last period. The actual reading was 92.1, lower than forecast but near a 15-month high. The reading seems to indicate that consumers remain relatively confident as a high employment rate and falling energy prices have helped to offset the impact of a weakening housing market.

U.S. Weekly Initial Jobless claims were reported 12,000 higher than the prior week, reaching 321,000. Economists surveyed by Bloomberg expected the figure to measure near the prior week's number. Fed view seems to be that a weakening labor market could help decrease labor cost pressure on inflation, but it's a slippery slope as economic recession might not be far off in such a scenario. We will continue to closely watch the interrelation between housing, employment, the consumer debt burden and spending.

The Mortgage Bankers Association released its seasonally adjusted index of mortgage application activity for the week ended Nov. 17. Application activity decreased 3.7% to 623.6 from the previous week's 647.5. This occurred despite a decrease in mortgage rates during the period. The index is contributed to by both refinancing and purchasing loans. The MBA's seasonally adjusted purchase index fell 2.8%, and was well below its year-ago level. Refinancing activity had been the savior of this indicator during the recent past, but perhaps that fuel is running thin now as well. This is the key reason we are recommending portfolio managers underweight the financial sector, especially lenders and mortgage brokers.

COMMODITY MARKETS

The Department of Energy reported crude-oil, gasoline and other distillates' inventories Wednesday. Crude stocks were widely anticipated to rise, while distillates were expected to fall, according to a Bloomberg News survey. Crude oil slipped slightly after the report should inventory rose more than expected and gasoline stocks rose, versus expectations for draw on inventory.

Plutonium, which climbed yesterday on speculation that a new fund might increase buying of the commodity futures, is seeing that hot air come out of its sails today. Metals are generally higher, as recent Asian demand concerns have been appeased by favorable economic data from Japan and Hong Kong, in our opinion.

STOCKS IN THE NEWS

Reporting earnings on Wednesday are Patterson Company Inc., Possis Medical, and appropriately so, turkey producer Hormel Foods Corp. Reckson Associates Realty will hold a shareholders meeting in Melville, NY Wednesday, of note because the company is the subject of a takeover bid by Carl Icahn and Macklowe Properties.