The market is on Fed watch today as traders await a speech by Fed Chairman Ben Bernanke on inflation. Stocks are weaker ahead of the open this morning after some negative earnings news. European markets are trading lower and Asia was mixed overnight.
The Dow yesterday closed up 38 points at 13649 just 26 points below its record close. Year-to-date the Dow is up 9.5%. The Nasdaq rose three to 2670, a fresh 6-1/2 year high, and the S&P 500 climbed little over one to 1531 just eight points below its record close.
Two big retailers soured the market's mood today with weaker forecasts. Home Depot cut its 2007 outlook, and blamed weakness in the housing market for its sales decline. Home Depot said earnings per share would be 15 percent to 18 percent below year earlier levels. The company also launched a tender for some 250 million shares. Home Depot stock was barely changed before the opening.
Sears Holdings, however, is seeing its stock take a hit on its lower profit forecast for the second quarter. The company said same-store sales for the first nine weeks of the current fiscal quarter fell 3.9 percent. Sears said its worst sales declines were in appliances, an area affected by housing. Sears also announced a new share buyback program for $1billion worth of stock.
Home builder DR Horton continues to suffer. The company said orders for new homes fell 40 percent last quarter and that it would write down assets leading to a third quarter loss.
Fed Chairman Ben Bernanke speaks at 1 pm New York time today before the National Bureau of Economic Research's Monetary Economics Summer Institute on Inflation. He will take questions from the audience. CNBC will air the event live and senior economic correspondent Steve Liesman will be there. Liesman said this crowd "will ask good and important questions and get good and important answers." So you know the markets will be watching carefully.
We asked CNBC contributor Jared Bernstein what he wants to hear from Bernanke. Bernstein, senior economist for the Economic Policy Institute, says he wants to know what the Fed's inflation target is.
"The inflation target is supposedly between one and two percent. Now you have some of their most preferred gauges coming in under two percent … Now that the core is within their comfort zone, why are they taking such a tough stance?"
"I think Bernanke is going to work real hard to protect the Street cred he's worked so carefully to build," he said.
Citigroup CEO Chuck Prince, in an interview with the Financial Times, dismissed fears that tighter credit is crimping the buyout boom. Prince said Citigroup is "still dancing."
Around the World
Pakistan's army stormed the Red Mosque in Islamabad, killing at least 50 militants.
China's trade surplus rose to a record $26.9 billion in June, well ahead of estimates. CNBC's Hampton Pearson will take a look at what the surplus means to the economy and to China-U.S. trade relations.
In another story from China today, the former head of China's drug regulator was executed for taking bribes. As the death was reported today, the government separately outlined a plan to improve drug and food safety, admitting the system is not strong enough and the trend is not "promising."