CNBC's Domm: Today's Agenda in the Markets

Earnings news is helping set the tone as some big positive reports are countering weakness in stocks ahead of inflation data.

Markets in Europe are trading lower and Japan closed down after the earthquake there this week hit sentiment.

The weak dollar helped pump up Coca-Cola earnings, as predicted by CNBC's Jim Cramer. Coke this morning reported net profit of $1.85 billion for the quarter, up less than 1%, but higher than analysts expected on a per-share basis.

Merrill Lynch , though, was the big surprise, with earnings of $2.24 per share, well above analysts' estimates of $2.02 per share. Merrill quarterly revenues were $9.7 billion, up 19%. Merrill could help turn the tide for financial stocks which were knocked around yesterday on fresh subprime worries. Earnings reports today include a number of other financial stocks, including State Street , Wells Fargo and KeyCorp . After the bell, Intel and Yahoo report.

Merger Tuesday

Basell Holdings agreed to buy Lyondell Chemical for $12.66 billion, giving the chemical company's shareholders a 20% premium on the market price. News Corp , meanwhile reached a tentative pact to buy Dow Jones for $5 billion, says the Wall Street Journal. The controlling shareholders of Dow Jones, the Bancroft family, still must approve the deal.

Countdown to 14,000

The Dow rose 43 points yesterday to a record 13,950, after a day of flirting with the 14,000 level on the Dow. The market moved higher even though stocks declined on a two-to-one basis. The Nasdaq fell almost 10 points and the S&P gave up nearly three points, after hitting a new high of 1555.90.

"Big stocks are outperforming the market at this point," said CNBC's Bob Pisani. He said the move up in Dow stocks yesterday was fairly narrow. Telling was the way the S&P 500 moved last week, a much broader index than the Dow 30. He said just five stocks, Exxon, Chevron, Conoco, General Electric and Cisco, were responsible for 35% of last week's 1.4% move up in the index. The combined weight of those five stocks is about 10%.

Pisani said yesterday's move by the Dow Transports to a new record was a positive.

"Remember, it's the global play. You look at the movement of goods around the United States, and those stocks are key to that. The theory ... is that the second half of the year is going to see a nice uptick in GDP above what anyone anticipated."


The big piece of economic data due today is June's producer prices (PPI), expected to come in at 0.1% or 0.2%, excluding food and energy. Industrial production and capacity utilization are due at 9:15 am New York time. The National Association of Home Builders housing market index is also reported at 1 pm today.

Perhaps even more than the PPI, CNBC's Rick Santelli is watching for the Treasury international capital flows data, released at 9 am New York time. The data trails by two months and will show foreign investment in U.S. financial assets.

"I really think that global buying is going to be less intense and that is what we have to be on the lookout for in a weakening currency environment," he said. "What we might see is a shift. Foreigners may be buying more stocks and less bonds."

"It's not that foreign investors are going to alter what they currently own. It's what they're going to do as we move through time. The numbers that'll we'll see every month might start to trend smaller in fixed income products. It's just recently that the dollar is hitting levels that are getting attention. Maybe we'll have to wait another month or so before it shows up, but everybody's going to have to pay attention to it."

Santelli said the CPI tomorrow will be a more important number to traders than producer prices, but they are already looking beyond the numbers to Fed Chairman Ben Bernanke's two days of Congressional testimony on the economy Wednesday and Thursday.

"They're going to grill the chairman until he's well done," said Santelli of Bernanke. "He's not really forthcoming with what he's been thinking." Issues like inflation, high energy costs, income disparity, subprime mortgages and the weak real estate market will likely be on the minds of Congress, he said.

'Closeted' Debt Worries

Stocks were sensitive again yesterday to worries about subprime mortgage debt as the ABX indexes took another slide. Those mortgage indexes have taken on a new importance for stock traders.

Pisani said traders became anxious about subprime debt yesterday when an expected update from Bear Stearns on its two problem hedge funds never materialized during the trading day.

As an issue for traders, subprime, "is like the evil aunt in the closet in a horror movie. It keeps breaking the lock and coming out," he said. "They can't kill it and it's going to be here for the rest of the year."

From Washington

At 11 am New York time the Director of National Intelligence will release a long anticipated National Intelligence Estimate on "The Terror Threat to the Homeland." The NIE is expected to say that Al Qaeda and other extremists are using the tribal areas of western Pakistan to plot and plan attacks against the U.S.