Morning Update

Stocks Suggest Red on Black Friday

After posting a string of wining streaks recently, stocks are under pressure following the Thanksgiving Day holiday. Although volume is expected to be light as the equity and bond markets will close early today, there will most likely be plenty of attention on the retail sector on Black Friday. In other equity news, Watson Pharmaceuticals received FDA approval to launch its generic version of GlaxoSmithKline's depression drug Wellbutrin. Treasuries are mixed in early action and overseas, Asia was mostly higher, with India showing resiliency amid tragedy, and Europe is lower.

As of 8:42 a.m. ET, the December S&P 500 Index Globex futures contract is 6 points below fair value, the Nasdaq 100 Index is 14 points below fair value, and the DJIA is 73 points below fair value. Crude oil is down $0.64 to $53.80 per barrel, and gold is up $3.90 per ounce at $812.40. The overnight LIBOR rate rose 17 bp to 1.16%, while the three-month LIBOR rate rose 2 bp from Thursday's 2.20% reading to 2.22%.

Although volume is expected to be light as the equity markets will close early at 1 pm ET, there most likely will be plenty of attention paid to the retail sector as today is "Black Friday," which marks the first day of the season when retailers traditionally move out of the red. Even though consumer spending and confidence have taken a severe blow from the plethora of economic headwinds and the tight credit markets, retailers are offering "doorbuster" deals today in hopes to spark sales and attempt to capture some of the potential pent-up discretionary income from the recent relief consumers have be given at the gas pumps. The National Retail Federation is expecting holiday sales to increase 2.2%, the weakest in 6 years, and online retailers are also expecting a tough year, with comScore expecting flat sales versus a year ago, a disappointment relative to the 19% year-over-year rise posted in 2007.

Treasuries mixed

Treasuries are mixed in early action and will most likely be subdued today as the bond market will close early at 2 pm ET and there are no major economic reports scheduled for release today.

Yields have come under pressure recently as we have seen several signs, such as rising unemployment, severely depressed consumer confidence, and dismal manufacturing data that point to the possibility of a deep and extended recession.

However, Liz Ann Sonders' Recovery Watch 2009, also found at www.schwab.com/marketinsight, points out that it may be time to look for signs of a recovery from a US recession that she has believed we entered at the end of 2007. In her article, she discusses duration, consumer sentiment, and the "crucial" look at the reactions of policy makers in attacking the softening economic conditions.

Tech warning weighing on Europe

Stocks in Europe are under pressure in relatively light afternoon action as weakening crude oil and key industrial metals prices weigh on energy and mining firms, while a slashed sales forecast from STMicroelectronics (STM $7) is souring sentiment overseas. STM is down over 5% after reducing it sales guidance from a previous range of flat to down 8% to an outlook of down between 13-18%, due to a slowdown in demand from the wireless, automotive, and computer peripherals industries.

Meanwhile, while central banks across the globe are slashing their respective key lending rates, Russia's central bank raised its main interest rate for the second time this month in an attempt to prop up the ruble, stem capital outflow, and damp "inflationary trends," according to Bloomberg. The Russian RTS Index is down over 3%.

Japan gains, China wanes, and India triumphs over adversity

Stocks in Asia were mostly higher in the final trading day of the week as Japan posted a solid advance with the best weekly gain in a month according to Bloomberg. The upward move in Japan came despite a drop in factory output, a drop in household spending, and reduced profit forecast from the world's largest consumer-electronics maker. Panasonic (PC $15) fell almost 11% after the company lowered its full-year profit forecast by 90%, saying it now expects to post net income of 30 billion yen, versus a previous forecast of 310 billion yen on weakening demand amid the global recession and a drop in product prices. Panasonic said industry prices for flat-screen TVs will most likely drop 30% this fiscal year, below its previous outlook of a 20% decline.

Elsewhere, stocks in China fell over 2%, led by financial and commodity issues amid recessionary fears, but shares in India posted a respectable advance in the first trading session since the terrorist attacks in the country's financial region of Mumbai.