Pre Market

The markets in across Asia and Europe are very bullish.

The big news this morning is the Producer Price Index which is up sharply signaling inflationary pressures and thus treasuries are down and yields are rising in anticipation of a Fed rate hike sometime this year.

Losses in derivatives and widening credit spreads hits Freddie Mac hard.

Goldman Sachs reports increased profits though revenue in its trading and principal investment business was down considerably due to 'continued weakness in the subprime sector'. GS is down in pre market

Bear Stearns is reporting a 10% slump in profts as mounting home loan defaults reduced trading revenue. BSC is down in pre market.

Here is one to watch. Shares of Hoku Scientific HOKU are up over 60% in pre market as the company signs $678 million deal with Suntech Power STP. This small Hawaii based polysilicon maker already has $1 billion in contracts and its current market capitalization is around 75 million prior to todays jump.

Pre market futures are indicating a higher open. I would think the market sells of today as yields rise. Talk of rate hikes is not good for equities.

RECAP

Optimus Prime vs Megatron . Bulls vs Bears.

Like I expected, we closed in the green on the major indices. There was some concern over higher than expected PPI numbers and a weak Philly Fed Survey . To their credit the bulls held their ground and we were in the green for most of the day.

The mortgage lenders were on fire today . Stocks like LEND and NEWC were up over 60% and 90% respectively.

Old Alan expects subprime fallout to spread to broader economy. No shit. Here's a good article courtesy of Minyanville explaining how subprime affects us all.

Tomorrow is the all important CPI numbers. Based on the PPI, the CPI numbers will come in above consensus, showing us that inflation is still a problem and rate cuts will be harder to come by. Added to it being option expiration tomorrow, we could be in for a roller coaster in contrast to todays laborious action.