Wake Up Call - Recession Threatens

"Wake Up Call" has been designed to provide you with today's key news that may drive the market this morning.

International markets tanked overnight, and continue weak in Europe at this hour. U.S. equities are indicating a broadly, but somewhat mitigated lower open this morning considering yesterday's sharp decline. Economic news this morning was somewhat positive, but the market is more concerned about the outlook than old news. We are flirting with recession, and Wall Street Greek sees continued weakness for equities and energy commodities in the near future. For your in-depth weekly market-moving event planner, see "The Greek's Week Ahead."

Asia:
Hang Seng Index -2.57%; Shanghai/Shenzhen 300 -1.62%; NIKKEI 225 -2.92%; Taiwan TAIEX -1.48%; BSE SENSEX 30 -3.49%; KRX 100 -2.31%; Ho Chi Minh -3.8%

U.K., Europe & Middle East:
DJ STOXX 50 Index -2.09%; FTSE 100 -1.74%; CAC 40 -1.66%; DAX -1.78%; Russian RTS Index -3.65%; Tel Aviv 25 -1.98%; Tadawul All Share +0.48%; DFM General -1.33%

Key Headline News:

• *** Overseas markets weakened significantly overnight on concern about the U.S. economy. Asian stocks are especially threatened, as the companies they represent ownership in rely upon export sales into the critical U.S. market. Likewise, if liquidity dries up, European shares may lose the premium that has been built in on the prospect of acquisitions. M&A activity has been an important driver behind European equities' rise of late.
• *** Welcome back risk after your long vacation. Credit risk spreads are widening, as investors require higher rates of return before investing in riskier securities. Credit spreads had all but disappeared, and I even read an article this weekend that argued against the likelihood of recession, partly based on the fact that risk spreads were so tight. That's the thing with forecasts, you can't base them on the current environment. We retract our previously stated confidence in Ben Bernanke's view, and are increasingly seeing Hank Paulson as just another yesman cheerleader. It makes sense, as he did arrive on the scene from the corporate world where brown-nosing earns the appreciation of robotic managers. Not here pal! Recent productivity data implies the workforce is excessive, especially since inventory has been working off. So, we can expect unemployment to rise, in our view. Consumers already appear to be spending less, as indicated by recent retail data. If we lose the consumer, we are heading for recession, in our view.
• *** Lehman Brothers reported earnings a penny ahead of consensus views and mentioned subprime weakness. This news, despite the EPS result, is likely not good enough to appease market concerns for the investment banks' forward opportunities. LEH is down 1.4% in pre-market activity.
• *** General Motors reported a profit, but missed analysts' expectations for their fiscal fourth quarter on an operating basis. Otherwise, GM benefited from the partial sale of its GMAC finance arm, but reported weakness from the unit's operating contribution. The good news was that auto sales rose, versus expectations for a decline. However, GM shares were down 1.7% in pre-market activity as consumer weakness and tighter lending portends further doldrums for the sector. In auto related news, Chrysler has found some suitors, as Magna International Inc., Cerberus Capital Management LLC and a team led by Blackstone Group and Centerbridge Partners LP are rumored to be interested.
• *** Despite all the subprime issues, weekly mortgage applications rose last week on rates that were driven down by economic concerns. I just hope they didn't benefit any from desperate work of subprime brokers and lenders trying to stay afloat.
• *** The current account deficit narrowed to $195.8 billion in the fourth quarter, a greater narrowing than consensus expectations, from $229.4 billion in Q3. Improved exporting activity was partly accredited for the change.
• *** Import prices rose 0.2% in February, far below expectations. Excluding oil prices, import prices actually decreased. The inflation hawks at the Fed should find this news comforting.
  

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Check back in later today, as "Today's 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)