- Both the Dow and Nasdaq extended last week's rally in the pre-market as Bank of America released positive earnings, but both indicies have given up much of those gains in early trading. BAC+12 is a big winner this morning, becoming the latest major bank to surprise markets with positive earnings reports. The bank soundly beat earnings and revenue estimates, noting it plans to maintain its dividend. The CEO said that he does not see the US economy sliding into a negative growth for a long time, and that the CFC acquisition on track, although he also said that credit losses are still rising. Most of the financials were strong early on thanks to BAC, with FRE+10% and FNM+24% also rising after CNBC reported that Freddie would not likely have to raise more capital before its August earnings report. Stocks are moving to news low though, as financials give back early gains led by weakness is several of the investment banks. In what could be an end to the Yahoo/Icahn saga (or just a temporary truce), YHOO-2.5% said it had cut a deal with Icahn appointing him to the company's board and giving him two other seats to fill from his previous slate of directors. Icahn reiterated that he still thought that Yahoo should consider selling itself or its search business. Shares of WCI+16% are surging after a local paper in Florida reported that the company was possibly being bought for $220M by an unnamed firm. Later in the morning WCI published a statement denying the "false media report." Multiple healthcare stories are in the headlines today. DNA+14 jumped after Roche tendered to buy the rest of the firm for $89/shr, in a deal valued at $43.7B. Roche, which already owns 55.9% of DNA, noted that the weakness of the USD is helping to make the acquisition more attractive. Both MRK-3.5% and SGP-9.7% are down after canceling their pre-market earnings reports thanks to a Norwegian researcher saying he would update on progress of a trial of the companies cholesterol drug Vytorin mid day. Medical device company ARTC-38% is taking a big hit after announcing it would restate its financial results from 2006 to 2008, resulting in material reductions in income from the period.

- Treasury markets are little changed with yields continuing drift higher consolidating the gains made last week. The curve is a bit flatter as the selling is more pronounced at the short end after the Treasury announced small increases to the two- and five-year note auctions expected later this week. The two-year yields stands at 2.67% while the five-year offers 3.43%. September crude remains marginally higher as the energy complex tries to find some footing. Prices are more than $2 off of earlier highs as trades continue to monitor tropical storm weather patterns, although it appears Dolly will miss most of the major oil installations in the Gulf of Mexico.

- The dollar is calm against the major currency pairs, making up for earlier losses in the wake of the better-than-expected results from BAC. Dealers are noting that geopolitical concerns remain on the back burner following the weekend's six-party talks with Iran, although an Iranian nuclear delegate had noted that there is "no chance" Iran would suspend its uranium enrichment program. Gold is slipping from its overnight highs of $968.50, but remained in positive territory as the US morning wrapped up. Overall the EUR/USD continues to consolidate in its 1.58 to 1.59 range that has held since last Wednesday.

- The EUR/JPY cross hit fresh all-time highs as it tried to tackle the 170 level. Session highs were 169.92. Dealer chatter is circulating about an option barrier at the 170 level, but lacks specific details regarding expiration. Overall the JPY continues to probe technical levels as USD/JPY continues to tests its 200-day moving average, currently at 107.08. The yen is softer following the BAC earnings, allowing appetite for risk to creep back into the market.