Today's Key News - Feb 16

Good Morning. At this hour, despite data that seems to indicate the Fed's expectations are playing out, major U.S. markets are mostly lower. This morning's PPI data reduces market concern about inflation as evidenced by the movement of treasury rates, and the housing data reinforces our view that the housing industry and market has not yet bottomed. However, the combination seems to coincide with the Fed's view for modest economic growth and a weakening of inflationary pressure in 2007. Still, concern that the housing market weakness could seriously impact consumer spending, and January consumer sentiment showed a decrease today, illustrates the relevance of housing on the overall economy.

Asia:
Hang Seng Index +0.14%; Shanghai/Shenzhen 300 +0.3%; NIKKEI 225 -0.12%; KRX 100 +0.45%

U.K. & Europe:
DJ STOXX 50 Index -0.17%; FTSE 100 -0.22%; CAC 40 -0.07%; DAX -0.14%; Russian RTS Index +0.03%

KEY HEADLINE NEWS

• Wall Street Greek predicted it: The second leg lower in housing has begun. January housing starts fell 14.3%, to an annual pace of 1.408 million, well below expectations. We will expand on our views for housing in depth in "Today's Coffee" later today.
• Producer prices, excluding food and energy, came in as expected, up 0.2% in January. The data continues to make Ben Bernanke's Fed look amazingly accurate.
• The Reuters/University of Michigan's Consumer Sentiment Survey for February showed a greater than expected decline to 93.3 in February, from 96.9 in January. The consensus of economists surveyed by Bloomberg expected a reading of 96.5.
• The People's Bank of China surprised the market Friday, announcing yet another tightening of credit restrictions. Banks in China will be required to increase the reserve they carry to 10% of deposits, from 9.5% previously. Smaller banks will be required to hold 10.5% of deposits in reserve.
• We want to insure you do not miss this important bit of news out today. We warned you when the story first broke, why you should not hold Apple shares. Today, news broke that federal prosecutors are strongly considering pressing criminal charges against former executives at several firms. The risk remains that Steve Jobs could be implicated, in our view.
• Russia is reportedly considering withdrawing from an intermediate range nuclear missile treaty, due to the U.S. effort to build a missile shield system in Eastern Europe. The important information to take away is that the rift between Russia and the west continues to widen, a sad reversal from the progress begun by the Reagan administration.

Check back in later this morning, as "Today's Morning Coffee" will outline in greater detail the day's activity in overseas and commodity markets, and provide economic data & analysis and stock specific news. (disclosure)