Wednesday's Brew Ja 3

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. U.S. equity markets are off to the races this morning, after the U.S., U.K. and Europe enjoyed a terrorism-free New Year's holiday weekend. Also adding lift to the market this morning, crude oil futures are testing the $60 level, due to a mild global weather outlook for 2007 and near-term warmth on the east coast of North America.

OVERSEAS MARKETS

The key news today is coming out of Thailand, as the SET Index fell 3.03% after eight bomb blasts shook Bangkok, killing three and injuring 38. However, the terrorism was likely attributable to a local faction in protest of the recent military coup and currently ruling government. Since Al Qaeda or another global threatening group was probably not involved, most other global markets shook off the disruption.

Mainland Chinese shares enjoyed a second strong day Wednesday, with the Shanghai-Shenzhen 300 Index climbing 3.09%. PricewaterhouseCoopers LLP issued a report indicating that Shanghai's bourse could attract $26 billion in IPO fund raising in 2007, compared to $19.3 billion for Hong Kong. The Hang Seng Index rose 0.51% on the day.

The Singapore Straits Times Index climbed 1.74% today, as a government report showed that economic growth sped up to an annualized rate of 7.6% in the fourth quarter of 2006, compared to 5.6% growth in the third quarter.

Europe and U.K. markets were relatively calm through midday Wednesday, with the DJ STOXX 50 Index up a negligible amount while the FTSE 100 was down slightly. This is an interesting situation, as the U.S. equity market is off to the races today. Relative inactivity in Europe may be more of a sign of a longer holiday for many Europeans versus Americans.

ECONOMIC DATA & ANALYSIS
Wednesday will mark a busy start to the year, as several important economic data bits are due for release. The Federal Reserve will post the minutes of its December meeting for starters, and the market can often get spooked by the tone and verbiage used in the meeting. The housing market will get its first read of the year with the release of November's construction spending data. A survey by Bloomberg News shows a consensus expectation for a 0.5% decline, which would mark the fifth consecutive monthly fall. The most recent measure of construction spending for October showed a 1.0% drop.

Also on Wednesday, look for the Institute for Supply Management's December Manufacturing Index at 10:00 a.m. Bloomberg's poll shows an expectation for a reading of 50.0. A measure above 50 indicates expansion, and November's reading showed a measure of 49.5. Recent regional manufacturing data has been mostly negative, until last week's Chicago region data, which showed growth.

A report by ADP Employer Services showed that companies in the U.S. cut 40,000 jobs in December. This marked the first decline since April 2003, and followed an increase of 158,000 in November. Economists' expectations were for a gain of 120,000 jobs. The Labor Department's December jobs report scheduled for Friday may shed more light on the situation.

COMMODITY MARKETS

Crude oil is down 1.5% thus far today and is testing the $60 floor, as warmer than normal weather is expected to continue to reduce demand for heating oil. Natural gas is up 0.24%, as it greatly priced in the weather impact over the past few trading days.

Cocoa leads all commodities futures higher today, up approximately 3.4%, as traders speculate that dry weather in the Ivory Coast, the world's most important supplier, may limit supply. Gold is up 0.17% today, while copper is crashing 6.06%. Copper had what many traders called a speculative bubble built into the price in 2006, but significant supply is coming online while demand in the U.S. and Europe may begin to slow in 2007, in our view.

STOCKS IN THE NEWS

Sonic Corporation is scheduled to report earnings on Wednesday, with the consensus view for a $0.20 EPS expectation versus $0.18 a year ago. Home Depot separated with its CEO and Chairman, Robert Nardelli, as he resigned effective immediately. Expert opinion and clear logic point to a less than amicable separation. Mr. Nardelli will receive a pay package estimated at $210 million, including roughly $20 million in severance. Home Depot (HD) shares were up roughly 3.1% in early trading.

Lennar (LEN) shares were down about 2% this morning, as the company reported expectations for a loss in the fourth quarter, including charges, on continued housing market weakness. We hope you enjoyed and found value in "Today's Morning Coffee," and we wish you a good start to 2007. (disclosure)