Friday's Brew - Mar 2

Enjoy your fresh coffee with our summary and analysis of the market activity of the day and a medley of important information you should find useful. As we anticipated, the market declined today ahead of the weekend, and before a significant meeting of the National People's Congress that is kicking off in China on Saturday. We suspect the U.S. market could open higher on Monday, but much depends on what happens in Asia over the weekend and on Monday. Keep up with the happenings that will drive the market next week by checking back in with Wall Street Greek for the next issue of "The Greek's Week Ahead" on Sunday and "Wake Up Call" on Monday morning.

OVERSEAS MARKETS

All eyes are on overseas markets these days, and we must ask, why does the day start in Asia and not in New York, the financial capital of the world? So, with the onset of globalization, we take the lead from Asia these days, however, our securities markets maintain the strength to change global market direction, as shown on Thursday. Still, Monday marks the official start to the meeting of the National Peoples Congress in China, and considering the recent government direction taken toward tightening of credit, there remains significant risk for shares. Barring any news from China, we would expect stocks to look higher on Monday, but we'll have to wait until Monday morning to refine our forecast.

Meanwhile, the Hang Seng rose 0.49% today, while the Shanghai and Shenzhen 300 Index climbed 1.4%, but reportedly traded cautiously according to CNBC's Asia correspondent. In Japan, as the yen strengthened further against the dollar, and the NIKKEI 225 fell 1.35%. India may be showing early signs of a will to spread the contagion, as the BSE SENSEX 30 collapsed 2.08% on the day, after recovering a bit the day before.

Europe was weak early, but recovered a bit of ground before closing, likely related to fluctuations in America. The barometer for the Euro region, the DJ STOXX 50, fell 0.6%. Meanwhile, the FTSE 100 and DAX, which had been down heavy as the U.S. market opened, ended the day about unchanged and down 0.56%, respectively.

ECONOMIC DATA & ANALYSIS

After a busy week, today provided investors with an opportunity to digest all the economic data presented it. Still, one new piece of data hit the wires at 10:00 a.m. EST. The University of Michigan provided its consumer sentiment reading for February. Expectations were for a result of 93.5, versus a preliminary reading of 93.3 on February 16th. As if we had not had enough negative news this week, the actual result came in below expectations at 91.3. It was only January when the measure read as high as 96.9, so it is becoming more and more apparent that the Fed's outlook for a slowing economy this year is likely to play out. Higher gasoline prices probably weighed on lower income Americans, driving down confidence in February.

However, William Poole, Fed President for the Bank of St. Louis, indicated today that he did not expect the economy to fall into recession. He said that he expects the economy to grow 3% over the next four quarters. The official Fed forecast for 2007 is for growth of 2.5% to 3.0%. Anyway, it was nice to hear reassuring comments from an active Fed representative. The boss, Ben Bernanke, is scheduled to speak this evening at an economic conference held at Stanford University.

COMMODITY MARKETS
Why is gold dropping, you must be asking yourself, and don't worry, everybody is asking the same question. I'm still putting it together, to be quite honest (never believe the people with the quick answers to tough questions), but gold dropped another 3.08% today nonetheless. Hey Greek! I thought you said gold was a safe haven. Well, it looks like many investors believed the same thing, and included a decent bit of gold in their portfolios in case Iran blew up. So, portfolio managers are likely now in need of capital to fund their leveraged equity positions, and it seems as though they are selling gold to do so. It's also possible the yen carry trade unwind is flooding capital into the yen to reverse the borrowing, while funding that with gold sales. The performance of gold has certainly been good enough to attract investment from yen borrowers. It's only fitting that lead led all commodities higher today, rising 5.7%.

Brent crude ended the day relatively unchanged, while natural gas fell 1.08%. However, a cold spell is headed for the Northeastern U.S. Monday that could boost natural gas next week. Also, the heat is turning up on Iran, as a Saturday conference call is expected to speed the U.N. Security Council toward the early drafting of a new resolution next week. It's interesting that Mahmoud Ahmadinejad traveled to Saudi Arabia, because soon he may be restricted from travel except to the nation's of his allies. This is his last chance to reach out for support from nations riding the fence on the issue of Iran's nuclear rights. I think we can expect him to travel to the remaining nations within the Middle East that might deny his landing in the near future.

STOCK SPECIFIC NEWS
American International Group upset a handful of analysts today by reporting its earnings on a Friday. This always sets them off, as they busily scurry to finish updating earnings models and reports before the end of the day, while quietly cursing their misfortune. They have to work quickly, or otherwise, they would have to come in on Saturday, God forbid... I worked so many Saturdays in an empty office it's disgusting to me. The sensor-activated lights would turn off from time to time, illustrating to me how alone I was in fulfilling my fiduciary responsibility to you the investor... You would be amazed at the amount of thought that goes into some of the reports you are basing your investment decisions upon, but you always got 100% from me. For those of you who have perhaps been misled by a few AIG analysts, maybe you can take solace in their suffering today.

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