US MORNING BRIEFING: Renewed Rate Cut Hopes To Lift Stocks. U.S. stock futures steady as Fed call nears; VMware tumbles

US MORNING BRIEFING: Renewed Rate Cut Hopes To Lift Stocks

Last Update: 1/29/2008 6:38:41 AM

DJIA Futures 12,420.0 +43.0 +0.4%
S&P 500 Futures 1361.1 +6.5 +0.5%
Nasdaq Futures 1814.0 +3.8 +0.2%
Above are as of 0608 ET

FTSE 100 5872.9 +84.0 +1.5%
Xetra DAX 6895.6 +76.8 +1.1%
CAC40 4927.2 +78.9 +1.6%
Above are as of 0555 ET

Nikkei 225 13,478.9 +391.0 +3.0%
Hang Seng 24,291.8 +238.2 +1.0%
Above are closing prices

SNAPSHOT:

-U.S. stocks seen slightly higher; Treasurys seen lower; Brent crude steady; gold
higher.

-Watch for U.S. chain store sales at 0745 ET; durable goods at 0830 ET; Redbook
retail sales index at 0855 ET and ABC/Washington Post consumer confidence at 1700
ET.

-Dollar lower versus yen and pound, but higher versus euro

-E.U.’s Barroso: E.U. to publish lower 2008 growth forecasts; euro-zone adjusted
current account surplus falls in November.

U.S. MARKETS OUTLOOK: Stock futures point to a positive open in New York, albeit
in relatively subdued trading, as investors remain sidelined ahead of the FOMC
meeting.

“We expect a muted day, with all eyes on Wednesday’s (Fed) decision,” said David
Jones, a trader at U.K. spreadbettor IG Index.

Investors will continue to debate the outcome of the meeting, with hopes of a 50
basis point cut renewed following Monday’s poor new home sales data.

Market participants also will look to consumer confidence at 1000 ET to try to
gauge the Fed’s thinking.

“Any numbers away from expectations could cause a degree of volatility as
investors exaggerate news stories as jitters continue to keep investors on edge,”
said James Hughes, a market analyst at CMC Markets.

At 0608 ET S&P 500 futures were up 6.5 points at 1361.1, Nasdaq 100 futures rose
3.8 points to 1814.0 and the Dow industrial futures were up 43 points at 12,420.

EQUITIES: American Express (AXP) said after market hours Monday that its
fourth-quarter net income dropped 9.9%, as the company set aside more money to
cover loan losses. Shares fell 2.7% in late U.S. but currently are up 0.54% in
Frankfurt.

SanDisk (SNDK) shares fell 6.2% in Frankfurt trade as the flash-memory product
maker posted a below-par outlook after the U.S. closing bell, with executives
saying that the company’s performance in 2008 will likely be challenged by
weakening consumer spending.

Meanwhile, VMWare Inc. (VMW) stock plunged as much as 27% in after-hours trading
after its fourth-quarter report failed to live up to investors’ expectations,
despite revealing that net income more than doubled on an 80% increase in
revenue. VMWare shares are down 22.8% in Frankfurt.

On the earnings calendar Tuesday, Countrywide Financial Corp. (CFC)
fourth-quarter numbers will be watched, after the company recently agreed to be
acquired by Bank of America, having been hit hard by the subprime crisis. The
Wall Street Journal reported Monday that the fear of potential regulatory
crackdowns helped drive Countrywide into the arms of Bank of America.

Yahoo! (YHOO), U.S. Steel (X), Dow Chemical (DOW), Valero Energy (VLO), and
Lexmark (LXK) are slated to report earnings and elsewhere, the Banc of America
Securities Gaming Conference kicks off Tuesday in Las Vegas, and runs until
Thursday.

FOREX: The dollar is mixed, driven lower against some currencies by Japanese
exporter buying of the yen but higher against others by increased expectations of
a 50-basis-point rate cut by the U.S. Federal Reserve Wednesday. At 0530 ET, the
dollar had fallen to Y106.65 from Y106.89 late Monday in New York, while the euro
eased back to $1.4772 from $1.4789 and the pound rose to $1.9873 from $1.9829.

BONDS: U.S. Treasurys are expected to open lower in New York, as weak housing
numbers from Monday encourage the market to expect a 50-basis- point rate cut
from the Fed Wednesday, and switch funds into equities. The data slate
concentrates on durable goods orders, where there is some chance of a
forecast-busting number due to high aircraft orders already released by Boeing.
The DJN/CNBC forecast for December durable goods is for a rise of 2%, while both
Barclays and Royal Bank of Scotland expect 4%. In London, the two-year note is
down 3/32, at 99 22/32 to yield 2.23%, and the 10-year note is down 6/32, at 105
98/32 to yield 3.60%. The 30-year note is down 5/32 at 111 23/32 to yield 4.29%.

Spreads on European credit derivative indexes are tighter, in line with the
stronger performance of U.S. stocks overnight and European stocks Tuesday
morning. The next landmark event is the Fed’s interest rate decision Wednesday,
with strategists forecasting a widening in spreads if the Fed fails to deliver
the 50-basis-point cut that markets are already discounting.

Bunds and gilts remain lower, on strong equity markets.

COMMODITIES: Crude oil futures are slightly higher as the market looks ahead to a
possible Fed rate cut Wednesday, which could boost the economic outlook. The oil
market continues to take its lead from economic news, although traders are also
anticipating Wednesday’s Department of Energy data - forecasts for builds in
crude and gasoline inventories, and a decline in distillate stocks - and Friday’s
OPEC meeting.

“We very well could see further strengthening in the energy markets as we head
into the Wednesday’s Fed meeting, assuming, of course, that the (DOE) figures out
the same day don’t do much damage,” says Edward Meir at MF Global. At 0555 ET,
ICE March Brent is up 34 cents at $91.72 a barrel, while Nymex March WTI is up 31
cents at $91.30/bbl.

Spot gold has set another record high Tuesday, edging to $929.80 a troy ounce,
$2.90 higher than at the New York close, boosted by power cuts in South Africa,
which forced mines to shut down. However, gold prices fell back a little on talk
of some electricity being restored. The market will await the Fed rate decision,
a trader says, adding that if the Fed disappoints market expectations with only a
25-basis-point cut, any pullback will only be a knee-jerk reaction. The momentum
in the bull market is too strong and gold will trade to $1000/oz regardless, he
says. At 0525 ET, spot gold was at $926.90/oz, up 1.7% from Monday’s low in New
York, while silver was at $16.64, up 1.7% from Monday’s low.

=======TODAY’S CALENDAR=======

ET COUNTRY/PERIOD

0745 US Jan 26 ICSC-UBS Chain Store Sales
0830 US Dec Durable Goods
0855 US Jan 26 Redbook Retail Sales Index
1000 US Jan Conference Board Consumer Confidence Index
1700 US Jan 27 ABC/Washington Post Consumer Confidence Index
N/A US Jan FOMC meeting, day 1
N/A US Florida Presidential primaries
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