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Dec.13

8:00 AM ET

Wednesday, 13 Dec 2006

CNBC's Domm: The Market Outlook

Posted By:Patti Domm

Sectors:Financial Services | Basic Resources | Oil & Gas

Companies:Home Depot Inc | Best Buy Co Inc

U.S. stocks are taxiing towards a slightly higher opening today as airline takeover activity is set to give the transports a lift. Retail sales data for November could also give the market some direction and provide further clues to the consumer this holiday season.

MERGERS AT THE GATE: Our Phil Lebeau is reporting on takeover talks between United Airlines [UAUA Loading... () ] and Continental Airlines[CAL Loading... () ] which have picked up steam. Meanwhile, industry rival Delta Air Lines [DAL Loading... () ]continues to consider US Air's [LCC Loading... () ] unwelcome $8 billion bid. The urge to merge does not end with the majors. Air Tran Holdings offered to acquire Midwest Air Group[MEH Loading... () ] , in a roughly $290 million deal. Midwest is not embracing the deal, and across the Pacific Australia's Qantas [QUBSF Loading... () ]shot down an $8.6 billion bid from an international consortium, including US private equity player Texas Pacific. Continental and United shares skidded yesterday on a weak forecast from Continental, after takeover rumors drove the shares higher Monday.

HO HUM FED: Markets are taking the Fed's comments in stride. The Fed held interest rates steady yesterday but sharpened its view on the slowdown in housing to include the word "substantial" ahead of slowing. "It's subtle..'economic growth has slowed over the course of the year partly reflecting a substantial slowing of the housing market,'" our Rick Santelli says. "it's telling us what the data already told us." The Fed, under chairman Ben Bernanke, has changed the way it speaks to the market, Santelli said. He noted the "Greenspan Fed" used to be give more of a hint of what was ahead. "I don't think the statement changes anything. The bond market is always a little pessimistic."

European markets are mostly higher on a strong performance in the banking and retail sectors. The weakening yen gave a bounce to Tokyo stocks overnight as exporters shares climbed.
The dollar is firmer as the yen continues to take a beating against the Euro.

OPEC OVER A BARREL: Reuters reports OPEC appears willing to hold off on output cuts until winter passes in order to diminish the possibility of price spikes that could hurt the world economy. Earlier today, the International Energy Agency urged OPEC not to reduce output any further as supply is already tightening in the world market ahead of winter. Reuters quoted the head of Libya's delegation as saying there would probably not be a cut. Oil is weaker this morning on the reports as OPEC members gather for their meeting tomorrow in Nigeria. Our Sharon Epperson today reports on the developments and has a special report on why Nigeria is so key to world oil supply.

In other takeover activity, Home Depot [HD Loading... () ] is in a deal to buy Homeway, China's first home improvement retailer. As we said in our first post of the day--our Carl Quintanilla reports from China as Treasury Secretary Henry Paulson leads a delegation including Fed Chairman Ben Bernanke and a group of US cabinet members to engage in talks on economic matters in Beijing.

The SEC proposes raising the bar for individuals investing in hedge funds to $2.5 million in net assets, more than double the current level. The SEC will consider this today as it grapples with hedge fund regulation. Our Hampton Pearson is reporting the story.

Prudential cut its rating on Best Buy [BBY Loading... () ] to neutral from overweight after the company reported weaker than expected earnings yesterday.