Stocks are expected to open modestly higher on Wall Street after a losing week last week. On Friday, stocks fell for the third straight day after reports on new-home sales and durable goods proved weaker than expected, leading investors to believe the economy has not yet emerged from the recession.

Stocks to watch today include pharmaceutical giant Johnson & Johnson (NYSE: JNJ), which agreed Monday to buy an 18% stake in European drug maker Crucell (NASDAQ: CRXL) for 301.8 million euros ($440 million), as part of a deal to develop flu vaccines.

According to the Labor Department, initial claims for state unemployment benefits increased 12,000 last week. Last week's advance pushed the total number of claims (669,000) to the highest level since October 1982.

Moreover, the 669,000 claims are up 72% from the same period last year. The four-week average of initial claims increased 6,500 to 656,750; hitting its highest point since October 1982.

For the week ending March 21, the number of people collecting state unemployment benefits increased 161,000 to 5.73 million. Not only is this level 96% higher than a year ago, but it is also a new record (should we sound bells and whistles?).

U.S. stock markets are headed for a lower opening as investors await data on jobless claims and housing starts in December. Investors are also awaiting the expected confirmation of Timothy Geithner as Treasury Secretary, despite his admission that he failed to pay some taxes.

The housing market is expected to show little signs of improvement. Bloomberg News says "U.S. builders probably broke ground in December on the fewest houses since record-keeping began as sales and credit dried up, economists said before a government report today. "

Many economists had predicted that the housing market would bottom out this year. Others, such as the pessimistic Nouriel Roubini of NYU, are arguing that the economy is in much worse shape. He expects losses from U.S. financial institutions will hit $3.6 billion.

Shares of Apple Inc. (NASDAQ: AAPL) may jump after the maker of the iPod and iPhone reported better-than-expected quarterly results yesterday. Investors had been spooked by concerns about Chief Executive Steve Jobs' health and weakening consumer spending. The enthusiasm for the company may be tempered by an SEC investigation into how the company disclosed information about Jobs' health.

Conversely, eBay Inc. (NASDAQ:EBAY) posted disappointing results. Growth in the company's core auction business continues to slow as consumers show a preference for purchasing fixed-price items -- if they are in a mood to buy at all. The online auction giant, which already is in Wall Street's dog house, further angered investors by giving disappointing earnings guidance. Pressure may build on the company to boost its share price.

Minyanville contributor Andrew Jeffery dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.

Put on those rose-colored glasses, it's time again for the Existing Home Sales data:

• September sales came in 5.5% higher than the previous month, at 5.18 million (annualized) compared to estimates of 4.95 million.
• Sales were 1.4% higher than last year -- the first year-over-year increase in three years.
• Inventory shrank to 9.9 months worth, from 10.6 months.
• Median home price dropped to $191,400, the lowest since April 2004.
• Distressed sales made up 35-40% of sales, with 80% of those going to owner-occupiers (higher than the usual 75%).

Per normal, the National Association of Realtors chief economist Lawrence Yun is as optimistic as ever. He gets paid to obfuscate the truth.

Per normal, the National Association of Homebuilders chief economist David Seiders is as pessimistic as ever. The worse it is, the better chance his group gets on the government dole.

It's messy out there in housing land, but that's not exactly news. Keep in mind that the year-over-year numbers line up against this time last year, when credit markets first seized up and home buying all but evaporated for a couple months. Easy comparisons make for premature bottom call.

The U.S. market is driving the world -- whose stock indices plunged after yesterday's 345 Dow rout. But what does today bring? A chance for recovery or further devastation depending on whether reported economic statistics are better or worse than economists expect. Early reports are bad.

Here are the reports to watch, and what analysts had been expecting according to CNNMoney:

• Job cuts - Economists expected 75,000 lost jobs, but the 8:30am report was 84,000 lost jobs -- worse than expected.
• Unemployment rate - They had forecast the jobless rate to stay the same at 5.7%, but economists were wrong on this one too and unemployment rose to 6.1%.
• Hours worked - Economists anticipated the hour work week wouldn't change from July at 33.7, and they were right.
• Change in hourly earnings - Economists saw a 0.3% increase in the hourly wage, the same as July, but hourly wages rose 0.4%. Some may interpret this as inflationary pressure, but the increase is likely not enough to increase consumer spending either.

In general, these statistics suggest consumers are less able to spend money. Since initial numbers suggest things are worse than had been anticipated, stocks could plunge, causing policymakers to meet this weekend to try to hatch another plan to boost investor confidence for announcement on Sunday night.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

In an odd turn of events, consumers actually increased their spending in January by 0.3%. What's strange about this is that sales during the December holiday shopping period actually declined 0.4% as "retailers suffered through their worst Christmas shopping season in five years."

Perhaps after feeling they had been conscientious spenders during the holiday season, shoppers have decided it was time to make up for it. True, there are concerns about the economy, but it seems consumers are either less worried about it or don't feel the effects yet. While the January jobs data has shown a slowdown, it was the first drop in four years and may not be felt overall yet.

So sure, some of the increase in the retail numbers was to be expected as consumers paid higher prices at the pump, but there was also strong demand for new cars as auto sales increased by 0.6% in January. And while sales excluding automobiles and gasoline were unchanged, clothing stores saw an increase of 1.4%, suggesting consumers are holding up.

According to the National Retail Federation, there will be a buyer's strike this holiday season. Consumers are weary and low on cash. Fuel bills will be up and home values down. They want to buy those nice gifts for Christmas, but the cupboard is empty.

And so a survey of retailers says that holiday sales will only be up 3.7% this year, far short of the 7.2% improvement in 2006. "Shoppers will be a little more conservative with their spending as they become more aware of the softness in the economy," said NRF President and CEO Tracy Mullin in a statement, quoted by Reuters. That means that, if the consumer will be shopping at all, they will want a deal on price.

For the management at big retailers like Wal-Mart (NYSE: WMT), Best Buy (NYSE: BBY), and Target (NYSE: TGT), it is not exactly good news. After a generally weak year, they could have used some help.

Move over, Scrooge wants a place at the holiday table.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Gold dropped close to $20 an ounce in yesterday's trading as press reports increasingly circulated that the U.S. dollar/Euro exchange rate is unsustainable.

We blogged recently that Fed Chairman Bernanke has to test whether gold's recent price appreciation has to do with concerns over global inflation or investors seeking a safe haven as the dollar continued to weaken versus Euro.

While yesterday's appreciation versus the Euro was modest, it was a slight shift in direction and will likely get the support of both European and U.S. treasury secretaries. This is one trade I'd consider -- going long dollar and short the Euro.

Several major pieces of economic news were released this morning, and all were good. Personal Spending rose more than expected, the fastest growth in two years. The Chicago PMI report rose more than expected as well. The Michigan Consumer Sentiment report seemed to hold its own. In addition, the core inflation number came in within the Fed's target range.

This is a major contrast to the numbers earlier in the week. Durable Goods and Consumer Confidence reports were terrible, and both Existing and New Home Sales indicated that there appears to be no end in sight for the housing slump. The only good number was Second-Quarter GDP. However, this was prior to the turmoil created in the markets by the credit crisis.

Then, why did the stock market rally on the bad news and is going down today on these positive economic reports? It's the liquidity. The stock market is driven by money and credit. As there is greater availability and lower cost, the market performs better. Who is the ultimate gatekeeper for this? You guessed it: the Federal Reserve.

With gold going through the roof since mid-August, jumping from $660 to $743 per ounce, Mr. Bernanke has to be asking whether he is stepping too hard on the monetary gas peddle. Is gold heading higher due to concerns of global inflation or is it heading higher because the world's safe haven, the U.S. dollar, has been getting weaker and weaker?

Expect Mr. Bernanke, the U.S. Treasury secretary and central bankers around the world to find out. The U.S. dollar-Euro exchange rate has gotten completely out of hand with the euro approaching 140 to the dollar versus the 85 level in 2002. Since the dollar has been depreciating against the euro, gold has shot through the roof.

Historically, despite all the talk about comparative purchasing power and differing short-term interest rates determining fair values for currencies, currency values are determined by the trend-is-your-friend mentality of traders. They lever up and ride the trade until the treasury secretaries around the world get together and reverse that trend.

Expect the euro's appreciation versus the dollar to end the same way and expect it to happen soon. Bernanke has to determine if gold is going higher because too much money is chasing too few goods, or gold is trading higher because global investors would rather hold gold than an overvalued euro.

With sentiment so bearish on the dollar, it seems like a good time to go long the U.S. greenback.

The unemployment report came in as a shock to the market today as employers cut payrolls by 4,000 in August, the first drop in U.S. jobs in 4 years. The forecast was a payroll gain of 110,000.

This is a dramatic unexpected shift with large implications. The Fed's Beige Book Report had indicated that the housing slowdown had been relatively contained. Today's employment report is the first real indication that the credit crisis and housing slowdown is spreading to the broader economy.

Although the Fed relies on multiple data points, this report is the equivalent of an economic earthquake. Although the job losses were limited to government employers and private employers actually added jobs, this should cause some concern for the Fed.

Employment is a key number for the health of the economy. This is especially true in the case of a weak housing market. People will do anything to keep their homes as long as they have jobs. If unemployment increases, then, the housing crisis can worsen substantially and quite quickly. This can have a much broader effect on the economy.

The Fed realizes this and has watched the employment situation closely. I believe that this changes the Fed outlook. It will probably cut the Fed Funds rate by at least 0.25% and possibly by 0.50% depending upon what additional data indicates. This is beginning to look more like 1998. The unemployment report has just changed the entire economic outlook overnight.

Doug Roberts is the Founder and Chief Investment Strategist for FollowtheFed.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices.

I can't believe that CNBC is seriously debating the question about whether Democrats are "rooting for a recession." This is what happens when pundits run amuck on a slow news day.

Most of this "discussion" consisted of cranky Republican pundit Lawrence Kudlow yelling at the other panelists who pointed out the stupidity of the premise.

Here's a sample of his remarks:

• "If the Democrats ever discover the benefits of the investor class, they might win a national race," he said in a typical remark.
• "George W. Bush is not on the ballot."
• "The problem is that they don't have any pro-growth policies."
• "The public will not elect a Walter Mondale type-canditate."

John Bogle, the founder of Vanguard, pointed out on CNBC that that Bush and his allies in Congress have take on "staggering" additional expenses that have to be paid with actual money. Good point.

Plus, the Democrats aren't as anti-business as conservatives suggest. Remember, times were pretty good during the Clinton administration for CNBC's parent General Electric Co. (NYSE: GE) and lots of other businesses during the 1990s.

Businesses aren't oblivious to the President Bush's staggering unpopularity. They are making nice with the Democrats such as Hillary Clinton in a way that would have been unthinkable back in 2001. Investors better wake up to the fact that chances are good that a Democrat will win the White House in 2008.

If that happens, the world won't end.

The Fed along with the other central banks continued to infuse liquidity into the markets via the discount window and other means and has indicated that it will continue to do so until the credit situation stabilizes. Why the continuing concern in the financial markets?

The Fed has indicated the stability of the banking system and the health of the economy are its primary concerns. The survival of hedge funds, traders, and other financial players is only a problem if it affects these primary concerns. Through the Discount Window, the Fed has found a way to assist the banks only.

This has caused quite a panic among hedge funds who claim that this approach cannot work. In essence, they say that the hedge funds are too big to fail without ripple effects throughout the economy. This may not be quite the truth. In 1984, the Fed successfully took over and later sold the then seventh largest bank called Continental Illinois National Bank and Trust Company. It too was considered "too big to fail." The economy continued to prosper.

Remember the Fed has substantial reserves to implement monetary policy as they see fit. It does not pay to fight the Fed. It can persist in its course of action longer than you can remain solvent. Today, it appears determined that the non-bank players who took on too much risk bear the consequences of their actions. In its view, the downsizing of Wall Street bonuses does not constitute a valid reason for a rate cut.

For those financial market participants who believe that deterioration in the economy will force the Fed to cut the Federal Funds rate, I would not be so sure. The economic numbers thus far have held up. The initial unemployment claims numbers this morning were in line. The Fed will cut rates if the numbers deteriorate. However, those seeking a bailout like 1998 may be disappointed.

Doug Roberts is the Founder and Chief Investment Strategist for FollowtheFed.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices.

Two contrarian signs that a market bottom is approaching have raised their heads. The first is the always somber Marc Faber, the famed proprietor of the Gloom, Boom & Doom Report, who said late last week that the current down-drift in stocks is the beginning of a global bear market.

The second is the increasing chatter that the massive U.S. budget and trade deficits are going to come back to haunt the U.S. economy.

Mr. Faber's bearish pronouncements and the general call by economists and other pundits saying this is the time that the trade deficit is going to crush the U.S. economy almost always coincides with a bottom of the US market.

For the most part, virtually every indicator suggests the U.S. market is approaching a bottom. However, a good contrarian indicator, the AAII Index that measures individual investor sentiment, has stayed stubbornly high. Actually, bullish sentiment has been increasing during this market's decline.

With bond prices dropping and interest rates going higher on the 10-year bond, reports of inflation being too high are becoming more pervasive. Indications inflation has moved out of the Fed's targeted range of 1% to 2% suggest it must move aggressively to keep inflation in check.

However, the reality is there is little truth to that range. If you go back and look at periods of excellent economic prosperity, both domestically and internationally, such as from 1950 to 1968 and again during the 1990s, inflation averaged around 2.5%. For some reason, when U.S. inflation averages around this level, both the U.S. and international economies do very well.

What was inflation in April (the latest data point on the CPI webpage)? 2.6%. Right in line with periods of great prosperity.

However, historically, real interest rates can range from 3% to 4% for more long-dated bonds. What have real interest rates been recently, very low at 1.5% to 2.0%. Typically, adding inflation and real interest rates gives a range for long-term bonds. This would imply interest rates of 5.5% to 6.5%. Bonds have been expensive for a long time, providing little risk premia for fixed income investors.

Bonds are tremendously oversold and are worth trading for the short term. But more importantly, do not dump stocks because bond yields are going higher. Stocks are still very cheap relative to bonds. Bonds, historically speaking, are overvalued, not stocks.