SmallCap Pulse SUBMIT AN ARTICLE

The futures are indicating a lower opening this morning for the broader markets after a third consecutive day of gains posted yesterday, albeit a slight one. The Street has lifted stocks in the past few sessions on hopes that the incoming administration is going to have a better plan for the economy than the last one, and current signals that the financial sector will continue to get whatever support it needs to prevent collapse in the meanwhile. AIG (NYSE:AIG: Summary, Messages, Articles) announced this morning that it has received $40 billion from the Treasury Department in a bid to keep it in business. The markets will continue to focus on jobless data and retail numbers heading into the holidays.

Initial jobless claims came in at 529,000, lower than expected. Personal spending came in down 1%, the most in seven years, but in line with expectations. Durable goods came in down 6.2%, which is probably the worst news of the morning in terms of missing expectations.

The dollar is mixed this morning, and has been giving up ground lately against the euro, which stands at 1.2931 this morning and the British pound, at 1.528. The weakness lately has been caused by expectations of more massive infusions of cash from the government to try and keep the economy from slipping further into recession. It is still well off its lows of last June and July, but we expect the dollar to slide, and potentially buckle by this time next year as the weight of the massive debt the government has been adding to its balance sheet. Our recommendation on forecasting the dollar’s performance is to follow Jim Rogers, who has been buying the yen lately, and assets like sugar.

The softening dollar will help buoy oil prices, which are up $0.92 this morning to $51.69. Despite the universally accepted forecast of a recessing global economy, we think the adjustment in oil prices is overdone. To be sure, the U.S. which represents 25% of global oil consumption will see its appetite shrink in 2009, but China, which only represents 6% of global oil consumption, is still growing at 9% per year, and it is busy adding stimulus to get that growth back into double-digit territory. In China, only about 4 in 100 drive cars. In the U.S. about 70 in 100 drive cars. The simple fact that Chinese penetration will continue to move towards the same rate of penetration as in the U.S. should be enough to temper bearishness in oil.

In international markets, China cut its rates 1.08%, the largest rate cut in 11 years, to stimulate growth. Its economy is still expected to expand by at least 9% this year. The EU governments are discussing a €200 billion ($256.22 billion) stimulus package in a 2-year European Economic Recovery Plan. Poland’s jobless rate declined slightly to 8.8% in October, down 0.1% from September. The World Bank said this morning that Bangladesh will likely miss its 6.5% growth targets this year, with a worse-case scenario of 4.9% growth. Germany’s Chancellor Merkel said that the country is facing a tough year in 2009. Its growth forecast for next year ranges from 0.2% and into negative territory by most economists. Singapore’s manufacturing activity fell 13% in October on a Y/Y basis.

On the corporate front,

· John Deere (NYSE:DE: Summary, Messages, Articles) reported Q4 revenue of $7.41 billion, a 21% Y/Y increase, and earnings of $345 million, or $0.81 per share, compared with earnings of $422.1 million, or $0.94 per share in the same period last year;

· Fitch Ratings cut Toyota’s (NYSE:TM: Summary, Messages, Articles) rating to “AA” from “AAA” citing the slump in the global auto market, the surging yen and higher material costs;

In terms of what we expect in today’s session, light trading ahead of Thanksgiving and a lower close with traders left to ponder all of the negative consumer confidence, lower retail expectations, continued dour labor conditions and contemplate GDP forecasts for the Q4 and whether all of the stimulus that the government has been throwing at the economy will achieve its purpose.

We have been advising our readers to refrain from chasing stocks when the DJIA eclipses 8,500, and, as we saw last week the bottom got stretched to about 7,400. Yesterday we closed up 36.08 to 8,479, which is much closer to the top our ‘accumulation’ range than the bottom, so at this point, we would be taking defensive measures (protective puts and out of the money calls – though there probably won’t be enough strength in the markets today to maximize premiums in either case). At the least, we aren’t buyers in today’s session.