Market Update Wednesday August 18, 2010

Market Update
Wednesday, August 18, 2010

Economic depression cannot be cured by legislative action or executive pronouncement. Economic wounds must be healed by the action of the cells of the economic body — the producers and consumers themselves.

~ Herbert Hoover (1874-1964)

Market Summary:

Stocks:

Dow Jones	10,415.54	+9.69
S&P 500	1,094.16	+6.25
Nasdaq	2,215.69	+1.62

The Dow Jones Industrial Average rose Wednesday after another very low volume trading day. US Market opened lower. Crude oil is now reported at a slight decline reflecting the latest DOE report that inventory has showed a slight decline.

Five of the six major commodity groups closed near the neutral line - only livestock made a strong move as it rallied 2.4% amid a 3.3% climb in lean hogs - so the CRB Commodity Index settled with a slight loss of just 0.1%. It had been down as much as 1.1%.

September crude oil futures prices closed lower by 0.5% at $75.42 per barrel. Though that marked oil’s sixth slide in seven days, the loss wasn’t nearly as severe as what had appeared to be taking shape in the early going, when prices were down more than 2%.

Oil prices improved their position following the release of oil inventory data for the week ending August 13. The data showed a smaller-than-expected draw of 818,000 barrels.

Before the DOE report, crude futures dropped below $73.94 Wednesday, hitting five-week lows as equities fell and data from an industry trade group showed large builds in already high U.S. oil inventories.

Natural gas prices never found much support. Instead, the commodity closed with a 0.8% loss at $4.24 per MMBtu.

Inventories of crude oil and petroleum products remain at unusually high levels for this time of the year, a problem that has persisted since demand fell sharply during the recession.

Washington-based trade group American Petroleum Institute on Tuesday reported a surprise increase in oil and energy products inventories. The API said oil stockpiles increased by 5.86 million barrels on the week ended Aug. 13. Stocks of gasoline rose by 2 million, while stocks of distillates, which include diesel and heating oil, rose by another 2 million.

Analysts polled by Platts had expected crude-oil inventories to decline by 2.25 million barrels in the latest week.

The analysts also forecast a decline of 1.6 million barrels for gasoline stockpiles and an increase of 1.4 million barrels for inventories of distillates. More closely watched government data is scheduled for Wednesday at 10:30 a.m. Eastern.

Among precious metals plays, December gold futures rebounded from session lows of $1218 per ounce to settle with a 0.3% gain at $1231.40 per ounce. September silver tried to stage a swing, but it still logged a 1.1% loss as it settled at $18.40 per ounce.

The dollar is lower and bond markets across the globe are stronger on speculation. Toronto Indexes, Volume; 10 AM EDT Composite Down 42.80

Global markets continue their bearish consolidation, despite encouraging signs from China, with the Hang Seng in a new primary up-trend and mainland indexes rallying. Of the big five markets, however, only the DAX remains in a primary up-trend.

Watch the bellwether transport stocks: a primary down-trend often leads other sectors into a reversal. The Dow Transport Index, together with major components Fedex and UPS, is headed for a test of support at 3900.

October is the usually the most bearish month in the year, with many major recorded crashes (1929, 1987). We are likely to see consolidation until the end of the quarter.




Canada Dollar Extends Gains

These are the exchange rates at 3:00 p.m. EDT (1900 GMT), 8:00 a.m. EDT (1200 GMT), and late Tuesday.

USD/CAD 1.0276 1.0375 1.0333
EUR/CAD 1.3221 1.3337 1.3312
CAD/JPY 83.19 82.95 82.73

On Thursday, Canada will see its wholesale trade figures for June and leading indicators for July.
The significant data point of the week, July consumer price index, is due out Friday.

10 AM EDT Toronto Indexes

S&P/TSX Composite 11685.84 off 42.80 or 0.4%
S&P/TSX 60 Index 681.17 off 2.47 or 0.4%
Financials 167.21 off 0.73 or 0.4%
Materials 358.98 up 0.67 or 0.2%
Energy 273.51 off 3.27 or 1.2%
Industrials 98.68 off 0.40 or 0.4%
IT 26.70 up 0.04 or 0.2%

European shares slip; oil majors, miners fall. The FTSE falls as bank shares are being hit by recovery doubts.

More than one million South African state workers went on strike for more pay on Wednesday.

Russian Grain Yield Plunges 23%; Sugar Beet Yield Sweeter:

Russia's grain yield has tumbled 23% when compared with a year earlier, while the harvest so far is 29% less than at the same time last year amid severe heat and drought, according to data released by the Agriculture Ministry Wednesday.

As of Wednesday, Russian farmers have threshed 40.1 million metric tons of grain harvested from 19.2 hectares, compared with 56.5 million tons from 20.9 million hectares as of Aug. 19, 2009, according to statements from the ministry.

The grain, mostly wheat, has been gathered from 54% of crop area that wasn't destroyed by the elements, compared with a harvest of 44% of the crop area a year earlier. Russia's sugar beet crop fared better than last year, however, with 811,000 tons dug up at a yield of 35.7 tons a hectare.

Mexico's stocks and the peso firmed in volatile trading early Wednesday, as local markets searched for direction in the absence of major economic news and earnings reports.

Chile's gross domestic product in the second quarter surged 6.5% from the same period a year ago, the central bank said Wednesday.

Shanghai	2,666.30	-5.59 (-0.21%)
Nikkei 225	9,240.54	+78.86 (0.86%)
Hang Seng Index	21,022.73	-114.70 (-0.54%)
TSEC	7,924.10	-6.99 (-0.09%)
FTSE 100	5,327.29	-23.26 (-0.43%)
CAC 40	3,664.23	+1.10 (0.03%)
S&P TSX	11,728.64	0.00 (0.00%)
S&P/ASX 200	4,474.90	-2.10 (-0.05%)
BSE Sensex	18,257.12	+208.27 (1.15%)

Treasurys:

Treasury 10-year notes rose, pushing yields near a 17-month low.

The Treasury market suffered a bout of selling Tuesday as better-than-forecast housing starts and industrial production reports eased worries about the economic outlook. Bonds gave up part of Monday's strong rally as investors sought better returns in riskier assets including U.S. stocks.

Forex:

Wednesday morning the Canada's dollar rose for a second day versus its US counterpart.

In early trading the Dollar index was off 0.26 to 82.28 at 7:32 am ET. Action Economics said there was a rumor circulating the another Fed balance sheet vehicle was in the works on small business lending. Awaiting reports on the July Headlne PPI, core PPI, July Housing Starts, July Industrial Production. U.S. Treasury Conference on Future of Housing Finance will seek input from experts on the fate of Freddie Mac and Fannie mae.

The euro was up at $1.2862 even though the German Aug. ZEW economic confidence index dropped to 14.from 21.2 but current conditions shot up to 44.3 from 14.6. Sterling was off at $1.5621 as U.K. July CPI decelerated to 3.1% y/y from 3.2%. The dollar was off at 85.30 yen

The US Dollar Index Futures (NYBOT: DXY.NYB) Day's Range: 81.99 - 82.51, now $82.25

Commodities
Crude Oil	75.03	- 0.98%
Natural Gas	4.26	-
Gasoline	1.93	- 1.22%
Heating Oil	2.01	- 0.63%
Gold	1225.20	+ 0.03%
Silver	18.41	- 0.54%
Copper	3.34	+ 1.83%

Wednesday's US Economic Calendar:

7:00 a.m.
August 13 MBA Weekly Mortgage Applications Survey Market Composite Index (previous 734.3), Market Composite Index Cur Chg (previous +0.6%), Purchase Index (S.A.) (previous 175.4), Cur Chg (previous +0.3%), Refinance Index (previous 3993), Cur Chg (previous +0.6%)

10:30 a.m.
August 13 EIA Weekly Petroleum Status Report Crude Oil Stocks (previous 354.99M), (Net Change) (expected -1.4M), Gasoline Stocks (previous 223.38M), (Net Change) (expected -500K), Distillate Stocks (previous 173.14M), (Net Change) (expected +700K), Refinery Usage (expected 87.4%)