Wake Up Call - Sound the Alarm

Good morning. U.S. equities are dealing with more bad news from the subprime world again today and weak retail sales data for February reported this morning. Equity futures are indicating a broadly lower open today as a result. For your in-depth weekly market-moving event planner, see "The Greek's Week Ahead."

Asia:
Hang Seng Index -0.56%; Shanghai/Shenzhen 300 +0.92%; NIKKEI 225 -0.66%; Taiwan TAIEX +0.72%; BSE SENSEX 30 +0.62%; KRX 100 -0.41%; Ho Chi Minh -1.06%

U.K., Europe & Middle East:
DJ STOXX 50 Index -0.73%; FTSE 100 -0.68%; CAC 40 -0.77%; DAX -0.86%; Russian RTS Index -0.19%; Tel Aviv 25 -0.66%; Tadawul All Share +0.19%; DFM General +0.08%

Key Headline News:

• * February's retail sales report will be a negative driver today, as retail sales rose 0.1%, short of the consensus forecast for a rise of 0.3%. Sales excluding motor vehicles and gasoline, which increased in price last month, fell 0.3%, indicating a chip in the armor of the previously infallible consumer. After last week's posting of weak same-store results for February, we are officially raising the red warning flag on this economy. We think that today's news threatens equities significantly, and despite the IEA report on oil, we expect oil prices to decline as well. We would maintain a diversified portfolio by asset class, and also hedge risk with diversification and the use of short investment.
• * Subprime woes continue, as Accredited Home Lenders Holding Co. (LEND) said it would not file its 10K on time, and had experienced significant margin calls on its loans that it has thus far met. It also reported seeking waivers and extensions of waivers of certain financial and operating covenants under its warehouse and repurchase facilities. Shares of LEND are under significant pressure this morning, and rightly so, down 46% in pre-market trade, after declining 27% yesterday. It looks to us like LEND is heading the way of NEW. New Century reported today that the SEC opened an investigation upon it. NEW appears on the verge of bankruptcy, and its shares are down heavily again this morning in pre-market activity.
• * As we predicted, higher food prices are driving inflation, in this instance within China. Consumer prices in China rose 2.7% in February, short of Bloomberg's consensus view for 2.8%. The yen rose today, we believe in anticipation of rate hikes in China that could help to continue the carry-trade reversals of recent weeks. Also, weakness in the U.S. economy may be driving capital out of investments there, some of which may be funded with yen borrowings. At the same time, the recovering Japanese economy may offer investors in discussed markets a path from their endangered environments.
• * Goldman Sachs reported strong EPS growth, as was expected. Goldman's exposure to the subprime mortgage market is estimated by some experts in the middle of major investment banks, according to a report we caught on CNBC yesterday. GS shares are up 1.3% in pre-market activity.

You can receive our articles in your email inbox at the moment we publish to the site. Just click here and provide us with your email address. We respect your privacy, and never share your information with third parties. 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)