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The Philadelphia Fed Survey of Manufacturing in the tri-state area came in at -12.7. This was an improvement from the prior month's reading of -16.3, and slightly ahead of expectations. Initial unemployment claims were 432,000, which was also an improvement from the prior week's reading of 445,000, and better than expected.

Despite these improvements, these numbers are still quite negative. We may be in the process of forming a short-term bottom. Much of this will depend upon what happens to oil prices. If oil prices stabilize or continue to drop in the near future, this will offer some much needed relief to our consumer-driven economy. However, if the recent drop in oil is only a minor correction, the economic news will get worse.

• Even if oil stabilizes and if the economy starts to form a bottom, I do not believe that we will experience a substantial rebound. There are too many economic pressures which will not be resolved overnight:
  The housing crisis is very similar to the one experienced in the late 1980s and early 1990s. This took a decade to resolve.
• The current banking and credit crisis also resembles the Savings and Loan debacle of that earlier era. This eventually required massive intervention by the Federal government in the form of the Resolution Trust Corporation (RTC) to repair the financial system.

Those people expecting a quick recovery like 1998 will be sorely disappointed.

Doug Roberts is the Founder and Chief Investment Strategist for ChannelCapitalResearch.com, and is the author of Follow the Fed® to Investment Success: The Effortless Strategy for Beating Wall Street. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.

Even with some modest recovery in airline stocks, it may be too early to celebrate. The worst may not be over for the industry.

The International Air Transport Association says that global losses for airlines could top $6.1 billion this year. The Wall Street Journal quotes ATA Chief Executive and Managing Director Giovanni Bisignani as saying, "We are bracing for more situations of airlines collapsing" amid higher fuel prices and lower revenue.

The slowdown is apparently moving to Asia, a major destination for many large US and EU airlines.

United (NASDAQ: UAUA) is a good example of a US airline that many thought would be on the rebound. New fear of rising oil prices has spoiled that a bit. After falling from a 52-week high of $51.60, shares crashed to $2.80. They have recently made a minor recovery to $12.40. But, in the last two days, UAUA shares have been off sharply.

Oil is still just below $120. Even at that level, down from $143, airlines face huge increases in fuel prices over last year. A modest disruption in oil supply could send prices back up again.

The market sees US airline stocks as having potential for big returns. But, with the price of oil making a potential bottom, the carriers are still in too much trouble to have a real recovery. Buying shares in the companies still offers more risk than reward. The industry may still have operators that have valuations heading toward zero.

Douglas A. McIntyre is an editor at 247wallst.com.

Upset about paying $3.80 a gallon for gasoline? Hank Paulson, former Goldman Sachs Group (NYSE: GS) CEO, argued that it was all supply and demand so quit your bellyaching. I thought speculation was playing a big part -- traders who bought oil and sold the dollar to drive up the price. Indeed, a few months agao I found a source who thinks 60% of the volume was from speculators.

Seems even that was too low an estimate. The Washington Post reported Wednesday that the Commodities Futures Trading Commission (CFTC) has analyzed the books of oil traders and calculated that 81% of oil trading volume was conducted by speculators.

Guess who broke open the opportunity for oil speculators to trade oil in a loosely regulated fashion? Goldman. The Post reports that In 1991, its J. Aron unit argued that "it should be granted the same exemption given to commercial traders because its business of buying commodities on behalf of investors was similar to the middlemen who broker commodity transactions for commercial firms."

U.S. stock futures were lower this morning, pointing to a weaker start Thursday following a reprieve Wednesday. Concerns over financials toll center stage again as oil continued to swing higher. Some economic data released later today may affect trading as well: Philadelphia-area poll of activity for August, leading indicators for July and weekly jobless claims.

Investors continued to fear nationalization of mortgage finance giants Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), each of which declined 27% and 22% Wednesday respectively. FNM and FRE are declining about 4.5% and 9% respectively in premarket trading. Jim Cramer thinks trading in the shares should be stopped for fear of manipulation as the short-selling rules ended.

Staying with financials, Citi lowered its third-quarter earnings estimates for Goldman Sachs (NYSE: GS), Lehman Brothers (NYSE: LEH) and Morgan Stanley (NYSE: MS) as it fears further writedowns, and a weaker business flow in addition to the seasonal slowdown. It cut its price target on Lehman to $35 from $50, but kept as Buy. Citi forecasts write-downs of $2.9 billion for Lehman, $1.8 billion for Goldman and $1.7 billion for Morgan Stanley.

As if that wasn't enough to raise concerns, the Wall Street Journal reports that the Federal Reserve called Credit Suisse (NYSE: CS) last month to check a rumor that the bank was preparing to pull a line of credit for Lehman Brothers, which CS told the FED wasn't true. At least this shows the Fed is serious about taking and implementing the moral authority it should be.

As the housing market continues to struggle, there is further evidence today that things have yet to turn around as mortgage applications last week fell to lows not seen in nearly eight years.

Today's data came from the Mortgage Bankers Association, which showed that its application index dropped down to 419.3 last week, its lowest level since all the way back to December 2000. Just since this past February the index is down by 61%.

For those of us who are anxiously awaiting any positive signs for the housing market, this week has proven to be anything but hopeful. Today's news comes on the heels of data yesterday that showed new home construction during July was at its lowest levels in over the past 17 years.

U.S. stock futures were higher Wednesday morning, indicating markets could start on a positive note after two days of declines. Good results from Hewlett-Packard helped lift sentiment, overshadowing financial sector concerns, despite new worries over Fannie and Freddie. Oil remained steady ahead of inventory report later today.

Hewlett-Packard (NYSE: HPQ) shares are rising over 3% in premarket trading after the computer maker reported a 14% rise in fiscal third-quarter earnings and issues current-quarter earnings guidance that exceeded analyst estimates. Tech shares could get a boost from H-P.

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) remain in focus due to concerns that a government bailout of the two firms is inevitable and would mean wiping out investors. Freddie Mac on Tuesday was forced to pay its steepest borrowing premium in 10 years, which is raising fresh concerns about its ability to withstand the housing and credit crisis without government help.

eBay Inc. (NASDAQ: EBAY) is cutting fixed-price seller listing fees. eBay will now charge 35 cents to list any number of the same types of fixed-price items. This is a dramatic change from charging fees based on item price.

The Wall Street Journal (subscription required) reports that producer prices launched upward at a 1.2% monthly rate in July. The rise in the PPI -- which was 0.7 percentage points faster than the 0.5% rate economists expected -- was the result of rising wholesale prices for energy spreading to "automobiles, prescription drugs and capital equipment."

Since the price of oil has dropped 24% from $147 to $112, should we all be relieved that July's number is a temporary blip? Let's hope so, because if not, rising wholesale prices make it even harder for businesses to make a profit when consumer demand is weak.

These higher wholesale prices mean that businesses have two options to maintain profits: keep prices the same but cut costs in other areas by finding productivity improvements, cutting back on payrolls and salaries and the likes, or raise prices to offset those rising costs.

U.S. stock futures were lower Tuesday morning, indicating stocks would likely start the same. Investors' concerns about the financial sector dampened sentiment, but oil prices continued to decline and could offset some of the negative mood. Still, housing and inflation data are on tap before the market opens today. And of course earnings with The Home Depot already beating investors' expectations this morning but with Staples issuing a warning.

A day after smaller Lowe's (NYSE: LOW) reported a profit drop, The Home Depot (NYSE: HD) followed suit, reporting a 24% profit decline for the second quarter. It held onto its earnings outlook as second-quarter net fell 24% to $1.2 billion, or 71 cents per share. Sales declined 5.4% to $21 billion. Analysts had projected earnings per share of 61 cents on revenue of $20.58 billion. Home Depot shares rose 2% in premarket trading.

It's been over a year since I last posted on liar loans -- these are mortgages which the borrower obtains despite offering no documentation on their income, employment or assets. These liar loans were also known as Ninja loans -- which is short for no income, no job, and no assets. The Associated Press reports that such liar loans will add $100 billion to the losses our economy is already suffering thanks to $400 billion worth of losses from subprime mortgages.

The problem we face as an economy is that it's hard to see where the liar loans end and the collateralized debt obligations (CDOs) and other asset-backed securities begin. In a sense, they are all liar loans. In the case of the mortgages, borrowers created paperwork that was inconsistent with their actual financial condition so they could get the money. In the case of CDOs, the issuing investment bank bought a AAA rating from a rating agency which created the illusion that the security was safe. Conceptually, there is little difference -- both depended on essentially forged paperwork to make the loan go through.

Why did banks issue liar loans? They were afraid to lose market share. But that doesn't make it right. As my mother used to say to me, if the other kids jumped off the Empire State Building, would you do it too? AP brings this to life in an interview with David Zugheri, co-founder of Texas-based lender First Houston Mortgage who said, "Everybody drank the Kool-Aid. They knew if they didn't give the borrower the loan they wanted, the borrower could go down the street and get that loan somewhere else.''

The reduction in global economic growth and growth expectations is leading to one benefit: a sharp decline in commodity prices, creating hope inflation may be peaking in many parts of the world, The Wall Street Journal reported Monday (subscription required).

Rice and palm oil, two commodities critical for the developing world, are both down about 40% since May, while the world's most vital commodity, crude oil, is down abut 23%, The Journal reported.

An end to surging commodity prices?

Economist Glen Langan told BloggingStocks Monday that while the commodity price-lower trend is still young, continued commodity price declines would be a welcomed sight, provided they don't drop too much.

"The pullback is welcome because many commodities had reached prohibitive levels, hindering commerce and really hurting the modest budgets of the poor/working poor in developing countries," Langan said. "However, too much of a price slide in commodities would be a sign of a pronounced global economic slowdown, which is something we don't want."

Further, Langan said that while regulators in various nations probe 'speculator' activity and alleged price manipulation in commodity markets, he argues that many of the price rises are consistent with historical price booms in other asset classes / sectors.

U.S. stock futures turned higher Monday morning despite a dip in the dollar and oil prices rising somewhat. Investors may focus on the financial sector again following some news while they await housing data later today. More inflation data is due Tuesday.

UnionBanCal (NYSE: UB) accepted a sweetened bid from Mitsubishi UFJ Financial Group (NYSE: MTU). After rejecting two previous offers, UB accepted MTU's offer to pay $3.5 billion, or $73.50 a share, for the remaining 35% portion of the California bank that it doesn't already own. UB shares are trading 11.85% higher in premarket action.

Staying in financials, Lehman Brothers (NYSE: LEH) may see some action after The Wall Street Journal said some analysts believe it could lose $1.8 billion during the quarter. LEH shares are 2% lower in premarket trading. Meanwhile, Barron's said a government recapitalization of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) is almost inevitable, wiping out investors -- and management. Shares are 2% and 6% lower respectively in premarket trading.

Lowe's (NYSE: LOW), the home improvement retail chain, reported results this morning. Lowe's profit fell for the fourth straight quarter as the biggest U.S. housing slump since the Great Depression slowed spending. Net income declined 7.9% to $938 million, or 64 cents a share, exceeding analysts' estimates by 8 cents. Sales rose to $14.5 billion from $14.2 billion. Lowe's raised guidance, but stayed within estimates.

One way investors/readers could characterize the current environment is as a world filled with concerns.

Concern about the U.S. housing sector. Concern about declining U.S. disposable income. Concerning about slowing GDP growth in Europe and Asia. Concern about the Yankees not winning the American League pennant.

O.K., that last item was a purely subjective, parochial one, but you get the point: there's concern that global economic conditions are worsening, not improving.

Europe's GDP is latest focal point

Further, while emerging markets in Asia, led by China and India, have been the growth story of the decade, the region really sending a chill up economists' -- business executives' -- spines is Europe, so says economist Glen Langan.

"Up through July we had seen weakness in Italy, Greece, Spain, and Portugal, and the investment community's response was one of 'no big deal, they are not the major growth regions, anyway,'" Langan said. "But now there's signs of slowing in Germany, France, and the United Kingdom, and nearly every demand-side indicator is in retreat. It's a pronounced psychological shift, no question."

It is a perverse bit of news: Americans are spending more on gas than on cars. Bloomberg writes that "Gasoline accounted for about 4.4 percent of spending in June, compared with 3.9 percent for autos and motor parts, according to the U.S. Bureau of Economic Analysis."

This is a tragedy for the auto industry as much as it is the sign of a self-inflicted wound. It also says the car business is not likely to recover soon.

The domestic car industry may produce only about 14.5 million unit sales this year. That may mean that almost no individual company will have a profit. By some estimates, vehicles sales could drop to 13 million next year. If oil stays around $120, gas will probably not drop much below $3.50.

What the news says about the consumer is frightening and goes well beyond car sales. If a typical household cannot afford a new car and gas for a year, then many households are probably on the edge when it comes to mortgage and food costs, especially as home loans continue to reset to higher levels. As the economy loses jobs, more people will not be able to cover either car payments or gas.

The statistics on cars are more than a forecast for the industry. They are a harbinger for the broader economic health of the country.

Douglas A. McIntyre is an editor at 247wallst.com.

U.S. stock futures were higher Friday morning, indicating stock markets could possibly extend Thursday's rally as the dollar rose and oil prices fell further. The dollar continues to make gains on the back of growing evidence of global economic softness. Still, several economic readings are due out today, including the New York Empire State manufacturing index , capacity utilization and industrial production -- all before the opening bell.

Retail will be in focus today after two Kohl's Corp (NYSE: KSS) and Nordstrom (NYSE: JWN) reported late Thursday, and J.C. Penney (NYSE: JCP) and Abercrombie & Fitch (NYSE: ANF) are due to report before the opening bell.

Kohl's Corp shares could start higher as premarket indication has them trading 2.3% higher, while Nordstrom's are trading 4% lower in premarket action. Kohl's quarterly profit fell 12% from a year ago, but the retailer lifted its fiscal year profit forecast. Meanwhile, upper scale Nordstrom, reported a 21% drop in second-quarter profits and cut full year outlook.

ANF said second-quarter profit fell on lower sales of jeans and T-shirts and forecast full-year earnings per share that trailed some analysts' estimates. JCP also saw profit decline but beat estimates and issued lower guidance.

Autodesk (NASDAQ: ADSK) shares are trading 10% higher in premarket action after the design software maker reported stronger-than-forecast second-quarter earnings Thursday after the close.

Europe's economy contracted in Q2 for the first time since the euro was launched more than 10 years ago, as exports underperformed and energy costs cut into consumers' disposable income, Eurostat, the European Union's statistics office announced (PDF) Thursday.

Euro-zone Q2 GDP fell 0.2% and EU27 Q2 GDP -- which includes nations in the European Union but not formally a part of the euro currency system -- fell 0.1%, Eurostat said. In Q1, Euro-zone GDP rose 0.7%.

Further, on a year-over-year basis, euro-zone GDP increased 1.5%, with inflation running at about 4.0%, well above the European Central Bank's 2.0% annual limit.

Economist: 'Bad news for global economy'

Economist David H. Wang told BloggingStocks Thursday Europe's slowing economy "is bad news for the global economy."

"This is bad news because we need European growth to prevent a global economic slowing. But the economies in two major European economies are clearly slowing. Germany's GDP fell 0.5% in the first quarter, and France's fell 0.3% in the second quarter, so given their make-up in the euro-zone, Europe has experienced a pronounced slowing," Wang said.