Friday's Brew - Dec 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. Trading volume should be light across markets today, as Wall Street mavens leave the office early to spend their excessive bonuses on congratulatory toasts and last minute shopping. Ahead of the Christmas holiday, the bond market will close at 2 p.m. A series of key economic releases this morning, including durable goods orders and personal consumption have started stocks lower.

OVERSEAS MARKETS

The NIKKEI 225 Index rose 0.34%, as good news from Toyota lifted Japanese shares. Toyota expects a 4% global production rise and 6% revenue increase for 2007. Based on market share and production estimates of rivals General Motors and Ford, Toyota's growth should make it the world's largest automobile manufacturer by year end. Toyota's shares rose 1.6% in Japan today as a result.

Trading in Hong Kong seems to be benefiting from a heavy end of year IPO calendar. The Hang Seng Index rose 0.51%, supported by the launch of trading in the shares of China's second largest rail operator. Guangshen Railway Co. climbed 64% on its first day of trading. However, Hong Kong's minor league system, mainland China, saw declines in most indices. Vietnam's Ho Chi Minh Index experienced yet another day of large losses, declining 4.5%, while India recovered from its skid of earlier this week, with the BSE Sensex 30 gaining 0.65%.

With Britain's domestic travelers grounded due to fog, the FTSE 100 Index seemed dazed and confused through midday trading, inching higher just 0.10%. The usual holiday terror rumors abound concerning the U.K., after an official leaked news that much of Europe was in a state of high alert this week and next. The CAC 40 was off 0.28% in early trading, while the DJ STOXX 50 was fractionally lower. Some of the blame for the case of the doldrums was attributed to yesterday's Philly Fed data, showing a decline in the area's manufacturing activity where growth was expected. With a good deal of the Christian world already on holiday, we believe you cannot read much into today's market movement. However, some important news was released in the U.S. this morning.

ECONOMIC DATA & ANALYSIS

Three significant data releases at 8:30 AM today will likely be the deciding factor in whether the markets will be naughty or nice. November Durable Goods were reported, with expectations for a 1.5% increase, versus an 8.3% decrease in the most recent period. Heading into the data, we published our expectation that durable goods orders might benefit from a stabilization of orders at aircraft manufacturer Boeing. The reported data showed a rise in orders of 1.9%. Excluding transportation equipment, including orders for Boeing made aircraft, the data showed a decline of 1.1%, compared to a 1.6% drop in the prior period. Also important, orders for business investment were relatively weak.

November Personal Income was seen rising 0.4%, as compared to an October rise of the same magnitude. The reported data showed a slightly lower increase of 0.3%. November Personal Consumption was anticipated to show a 0.6% increase, versus a 0.2% rise in October. Actual data showed an increase of 0.5%, again lower than anticipated. Overall, we believe the data portends to drag upon stocks today. A stronger consumption number would likely have given lift to the market, with expectations that retail spending might benefit through the important fourth quarter.

Further depressing markets, the University of Michigan's reading on consumer sentiment showed a measure of 91.7 for November, versus 92.1 in October.

In an improbable meeting, Vladimir Putin is convening in Kiev today with the man he has been accused of attempting to assassinate, Ukrainian President Viktor Yushchenko. Yushchenko's ally and foreign minister, Borys Tarasyuk, was recently voted out of office by the Ukrainian Parliament in a move Yushchenko labeled as illegal. Yushchenko's rival and current Prime Minister, Viktor Yanukovych, who happens to be Russia's man and the loser of the most recent presidential election, pushed for the removal of Tarasyuk. During today's meeting, the ousted foreign minister will sit in with Putin and Yushchenko. Ah, to be a fly on that wall.

COMMODITY MARKETS

Natural gas continues lower, down 1.9%, on abnormally warm weather in North America. We recommend investors consider purchase of the domestically sourced fuel or companies involved in its production, as regional and global powers strategically position for conflict with Iran. In Wednesday's edition of "Today's Morning Coffee," we provided detail of our expectation, and in the coming week, we will publish the first issue of The Geopolitical Factor, providing a study of how current and forecast geopolitical risks may impact markets. In interesting contrast to natural gas, crude oil and heating oil are both trading slightly higher this morning.

STOCKS IN THE NEWS

Walgreen's is scheduled to report earnings results for its fiscal first quarter today. Stay tuned for our outlook for 2007, coming soon. We hope you have found value in your "Morning Coffee," and we wish you a great day trading. See our disclosure at the site, Wall Street Greek.