Stocks start the week on a weak note as investors await existing home sales data at 10 am New York time.
Merger Monday
A flurry of takeover headlines is getting attention, most importantly the revised deal by three private equity firms for Home Depot's service unit. The three buyers, Bain Capital, Carlyle Group and Clayton, Dubilier and Rice, agreed to buy the unit for $8.5 billion, 18% less than the original price agreed in June. Home Depot will retain 12.5% of the equity, according to the Wall Street Journal, and it will also guarantee some of the debt issued by banks.
The deal has been closely watched as a sign of what kind of pricing and financing deals might be cut in coming months in the deal world.
In a positive sign for stocks, a number of strategic buyers are in the news. Wal-Mart is on the prowl for U.S. acquisitions for the first time in 25 years, reports the Financial Times Monday. The FT says Wal-Mart, which has made international acquisitions, is looking for an executive to go shopping for smaller store properties in the U.S. market. The FT says the move is a response to the upcoming opening of Tesco's Fresh and Easy small-format markets.
Taiwan's Acer is buying Gateway for $710 million. Acer becomes the third-largest vendor of personal computers, surpassing Lenovo, which several years back bought IBM's PC unit. U.S. Steel is buying Stelco for $1.1 billion.
In a marriage of necessity, German bank Sachsen, over the weekend, was forced to sell itself to Landesbank Baden-Wurttemberg because of bad bets made in risky debt securities.
Housing Blues
July existing home sales are expected to show a more than 4% rise in July to about 5.78 million.
"It would be hard to believe it would be anything but disappointing," said Strategas Chief Investment Strategist Jason Trennert, of the number.
Important also for the real-estate market is the S&P Case Shiller Home Price Index for June, released tomorrow. The trend of falling home prices was reported in a front page story in the Sunday New York Times. The article said the U.S. will experience its first national decline in prices, previewing a government report set for release Thursday. CNBC's Diana Olick has been reporting that trend and will cover all the real estate news this week.
In Washington
The New York Times reports Monday that U.S. Attorney General Alberto Gonzales is resigning. An official announcement is expected to be made later today.
On the Campaign Trail
CNBC's Erin Burnett this weekend spoke with Republican Presidential hopeful Rudy Giuliani. The former New York mayor says he wants to get rid of the capital gains tax.
Around the World
European Central Bank President Jean-Claude Trichet speaks at 9 am New York time. Investors will be watching his comments carefully for any clues on interest rates.
European stock markets are firmer and Asian stock markets closed mostly higher the 10-year this morning is yielding 4.63% and there two year is 4.34%.
Debt Threat
Bad credit and the subprime tsunami are right now more worrisome to economists than terrorism as the biggest short-term threat to the U.S. economy. The National Association for Business Economists find that nearly a third of respondents to its survey put debt-related problems as their top worry. The effects of subprime loan defaults was the top concern of 18%, and 14% listed household or corporate debt as the biggest concern. Terrorism and defense concerns were top of the list for 20%.
Oil Pressure
Oil is edging higher this morning, just above $71 per barrel.
"Over the next week, the oil market will start focusing on the September 11 OPEC meeting," says Dan Yergin, CNBC Global Energy Expert and Chairman of Cambridge Energy Research Associates. "The specter of an economic slowdown was reminding the producers of the 'Jakarta Syndrome' from 1997, when they increased production just as the Asian financial crisis was beginning, accentuating the price collapse. At the very least, with a slowdown, which would slow demand growth, they will tighten up their discipline. At this point, the most likely outcome is that they won't make any major decisions at this meeting, given where prices are."
"But the exporters now have a second perspective," he says. "For they have built up such big financial reserves that, as investors, many of them have an enormous stake in how the overall world economy performs. The downturn in the financial markets has put a new focus on them as buyers of securities and assets around the world. Expect more attention to the sovereign wealth funds."
"We've seen how sensitive the oil market is now even to the prospect of hurricanes," he adds. "But there will be a new worry -- the debate around the Petraeus Report in September and whether the U.S. stays or begins to withdraw from Iraq."
Yergin heads next week to "Davos East" -- the World Economic Forum's inaugural meeting in Dalian, China and he promises to report from there on the challenges of China's growing oil demand.
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