- Traders are pushing the major indices higher in choppy trading after the Dow opened below the psychologically important 11000 line for a second day in a row. A sell-off in oil for the second straight session has helped stocks move to morning highs. August crude traded as low as $132 after weekly inventory data showed decent builds across all three products; CVX and XOM are the two largest decliners in the Dow. WFC's earnings report is providing some much needed relief for financial stocks after the troubled bank modestly increased EPS and boosted its dividend in a symbolic demonstration of its solid capital structure. On its conference call, the CEO noted that he believes the bank is adding market share. WFC is up more than 23%, helping financials recover from several frightening days of trading: WM+27%, BAC+10%, JPM+8.3% and LEH+10.2%. Commentators are also noting that SEC Chairman Cox's promise to outlaw short selling also seems to be aiding financials, while FRE and FNM are up 14% a piece thanks to bargain hunting and assertions of support from Washington. The June CPI data is sounding a cautionary note, with the index showing the cost of living up 1.1% m/m, well above forecasts. With y/y CPI running at 5%, the highest reading since April of 1991, the data pressured Treasury prices lower. Yields are ticking higher faster at the long end of the curve with 30-year back above 4.55% and 10-year at 3.90%. Despite the move higher in yields there has been little to no change in fed fund futures prices, which have been able to consolidate recent gains. INTC+2% has helped provide some clarity to the tech sector after beating expectations, the stock opened up a hair, before falling nearly 2%, then rising sharply. Intel's CFO says the firm is seeing "pretty strong" demand signals. Fellow tech name STX is faring much worse, down 17% after missing on earnings and guiding about half the expected number, due to its ongoing process of working off older products. Coal stocks are reacting variably to the announcement that CLF-8.4% is acquiring ANR+16% in a $10B cash and stock deal. MEE+6% is up, while BTU-4.6% and ACI-5% have fallen down a mineshaft after being up as much as 4% and 2%, respectively, at the open. Transports are being led by ODFL+25% which is up after guiding higher. CSX+6.5% after reporting inline and sustaining its FY guidance and noting it expects a minimum 6% growth in freight pricing in 2008, pulling UNP+3.3% along with it. American Airlines and Delta are both up more than 20%. DAL dramatically beat estimates, ex a $1B charge related to the NWA merger, while AMR only lost $1.13/shr, versus expectations of a $1.40/share loss. AMR also promised additional capacity reductions.

- The dollar is managing to eek out gains against the majors pairs in the New York morning after a subdued European session, with the weekly oil inventory data providing the necessary momentum to sustain upward price action. Fed Chairman Bernanke added upside to the USD's momentum when he noted that currency intervention should only be undertaken on "rare occasions," adding that conditions must warrant intervention, with conditions including "disorderly markets." The EUR/USD cross is trading at 1.5820 as the US morning draws to a close, up 100 pips from its opening levels seen in Asia.

- Prior to the oil inventory data, the USD struggle to find its footing as global equity markets retained a case of the jitters ahead of some prominent financial names to report quarterly earnings. Wells Fargo better earnings and dividend increase provided an initial floor for the USD against the European pairs. The USD showed little reaction to China's comment that it had concerns over the slowing Chinese export markets (but it did take oil initially lower by $2/bbl). Meanwhile, the Saudi Central Bank said it was unlikely to revalue the riyal on the Shura's request.

- The JPY was mildly firmer against most majors, despite cautious economic comments from the BoJ monthly report regarding Japan's economic outlook. JPY price movement appears to be more technical as EUR/JPY continues to retreat from recent all-time highs made earlier in the week in a technical rebound. As noted in the European market update, FX dealers are noting that additional downside momentum in JPY-related pairs (stronger JPY) appears highly probable with some chatter of ripening conditions for the BoJ to increase verbal intervention (or more). Bernanke's comments were seen as adding more credibility to such inter-bank thinking regarding potential currency intervention. The EUR/JPY cross has been cited as the initial intervention in chatter late last week. EUR/JPY at 165.95, lower by 85 pips and USD/JPY bouncing off its 100 day moving average of 103.95 to retest 105.

- In other FX news, Moody's upgraded the Russian government's sovereign rating to Baa1 from Baa2, outlook positive. China's legislature noted it is concerned about export slowdown, promising to prevent any negative impact on exporters.