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Stocks Heading Lower at Open - Instability on Korean Peninsula in Focus

November 23, 2010 – The futures are indicating lower openings for the broader markets as the Street reacts to rising tensions in the Korean peninsula. Concerns about European sovereign debt are also weighing on the markets this morning.

The GDP and personal consumption numbers were slightly higher than expected while corporate profits could give the Street reason for concern. Real GDP came in up 2.5% on an annual basis in Q310 (last month’s estimate was 2% and expectations for this revision were for 2.3%), personal consumption expenditures were up 2.8%, compared with 2.2% in Q210, while corporate profits were down at $44.4 billion compared to $47.5 billion in Q210.

The Street is shrugging off the better than expected GDP numbers in pre-market activity. Previously owned home sales in October are expected to have increased at a seasonally adjusted rate of 4.6 million units (hit a 15-year low in July).

The dollar has been rallying against the euro, and is relatively stronger again this morning, with the euro trading at $1.3474 The primary factor pressuring the euro has to do with concerns about European debt. The dollar is benefitting from its so-called ‘safe haven’ status this morning amongst international concerns.

Gold is up $1.50 to $1,359.30. The relative strength in gold probably has to do with its ‘safe haven’ status as well, and we think this is much more legit as a ‘safe haven’ than the dollar, given the fact that Washington continues to dilute the greenback and has no serious answer or policy to stem its printing press and debt spending.

Oil prices are down $1.24 to $80.50. The Energy Department is expected to report tomorrow that inventories decreased by 2 million barrels last week from 357.6 million.

In terms of what we expect in today’s session, look for more choppiness and downside pressure as traders react to international risk and position heading into a holiday-shortened week, as well as anticipate for tax selling season coming up after Thanksgiving.


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