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Why Traders Are Calmer--So Far

Although futures are down (we routinely move in 50 point ranges in the morning), there is a calmer, more even tone to trader talk this morning:

1) Libor rates, both overnight and the three-month rates, are declining.

2) oil is declining

3) corporate and municipal bond issuance seems to beginning to unfreeze:

--Calif. raises $5 billion.

--PG&E doubled the size of its planned bond sale, from $300 million to $600 million.

--Occidental Petroleum increases size of its bond offering from $750 m to $1 b, and priced at Treasury plus 437.5 basis points.

And while housing starts and building permits were well below expectations (we are at the lowest levels since 1991), that is good news--we want construction down and we want sales up. Unfortunately, with a few exceptions, we have not seen a notable uptick in sales.

Option expiration today, the key number is the first print of the S&P 500, because that is the settlement price.

Elsewhere, earnings are light, but three major companies reported earnings in line or above expectations. This follows the trend from yesterday, when several big financial firms also reported earnings roughly in line with expectations. Boring is good.

1) Oil services giant Schlumberger came in in line with expectations. Still, we are at peak earnings for this group; in their report they said "we expect a slowing in the rate of increase of customer spending." This is wishful thinking: there is great concern that capital expenditures in the energy sector will be DECREASING compared to 2008, and that is why the oil services sector has underperformed both the S&P 500 and the Amex Oil Index.

2) Honeywellreported earnings slightly above expectations ($0.97 vs. $0.95 expected), full year guidance was narrowed slightly, from $3.76-$3.80, versus prior estimates of $3.75-$3.85, and consensus of $3.81

3) AMD also reported earnings better than expected, in fact much better than expected, on strength in graphics chips. Shares up 10 percent pre-open.

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