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Stocks Face Pressure, Oil Higher And Dollar Lower

Wednesday, 12 Sep 2007 | 6:46 PM ET

Stocks are under pressure ahead of the opening as the dollar touches new lows, oil edges higher and Texas Instruments earning forecast disappoints.

For now, stock futures are lower and European markets are mixed. Japan's stock market closed slightly lower, with the Nikkei sliding about a half percent after the resignation of unpopular Prime Minister Shinzo Abe.Abe's resignation was not unexpected but the timing was a surprise and creates a sense of uncertainty. Abe steps down after less than a year in office and six weeks after his Liberal Democratic Party was defeated in parliamentary elections.

Comments from Treasury Secretary Hank Paulson, reported by the Financial Times, are a bit troubling to the market. The FT front page stories quotes Paulson as saying the crisis of confidence in credit markets is likely to last longer than other financial shocks of the last two decades because of the complexity of the instruments involved.

Texas Instrumentsdisappointed with a third quarter earnings forecastin line with Wall Street's view. Remember, Intel bumped up its forecast earlier in the week, adding to the optimism that has brought buyers into tech. Texas Instrument, which makes chips for telephone handsets, said it expected its third quarter earnings to come in on the higher end of a range it had previously forecast. It also said revenue would fall between $3.56 and $3.72 billion.

Shrinking Dollar
The dollars wobbles again this morning after a slide of O.3% against the euro yesterday, taking it to yet another new low. The dollar was up 0.5% against the yen yesterday but it is sliding this morning on concerns Japanese investors will keep their money close to home during a period of political uncertainty.

"The world is convinced the Fed is about to embark on a series of rate cuts that will make the dollar less desirable since higher nominal rates are available in other currencies," said Scotsman Capital managing partner Vince Farrell, a CNBC contributor. I don't think it's the twin deficits so much at this point. The budget deficit is a rounding error to total GDP, although not likely to improve." Yesterday, the Dow rose 180, or 1.4% to 13,308, while the Nasdaq jumped 38 or 1.5% , and the S&P 500 was up 19, or 1.4%. "Don't read too much into this," Farrell said of yesterday's gain "Stock's are just as likely to decline by an equal amount tomorrow. Volatility will be continuous."

Today, CNBC's Matt Nesto will take a look at stocks that are helped by a weak dollar, like multi-nationals Procter and Gamble and McDonalds .

Oil Slick
Oil is slightly higher this morning ahead of inventory data due at 1030 a.m. New York Time. Oil finished yesterday 1% higher at a record $78.23, besting by two cents the record set July 31. Since the beginning of the month, crude has climbed 5.7% and is up 28.1% year-to-date.

Yesterday, OPEC agreed to raise its production quota by 500,000 barrels a day, making it clear it is worried about the U.S. economy.

Meanwhile, the International Energy Agency slightly trimmed its oil demand forecast for 2007 and 2008., citing concerns about growth in the U.S. The IEA said global oil demand in 2007 is now 85.9 million barrels, down from 86 million previously, and it cut 2008 to 88 million barrels per day from 88.2 million.

"It's the first time we've seen OPEC step up in a while. Given the fact the rest of us are staring down an economic slowdown, it's my opinion that they've taken one for the team for a change," said MF Global senior vice president John Kilduff, a CNBC contributor. Kilduff thinks oil will continue to rise in the near term. "I think we're going to see $80 a barrel here before the end of the month. I think after we this new high her you have to be defensive with regard to oil," he said.

I Spy!
The National Football League is considering punishing the New England Patriots for spying on the New York Jets. ESPN.com cited league sources in a report that said commissioner Roger Goodell determined the Patriots violated league rules Sunday when they videotaped defensive signals by the Jets coaches. CNBC's Darren Rovell is covering that story today.

Also in the News
Warren Buffett sold more PetroChina Inc stock, according to a regulatory filing. Reuters reports that Buffett's Berkshire Hathaway sold about 92.66 million shares of the Chinese oil producer in August for $136 million. The sale follows a July sale by Berkshire of 16.9 million PetroChina shares.(See CNBC.Com's Warren Buffett blog for more on Buffett's holdings)

Questions? Comments? marketinsider@cnbc.com

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