Stock Market Update - Thursday, August 19, 2010

Market Update
Thursday, August 19, 2010

Market Summary:

Stocks:

U.S. stocks slid and the DJIA was off 193 points after the Philadelphia Fed August business index unexpectedly dropped and an index of leading indicators rose less than predicted, adding to mounting concerns over the stagnant labor market. US Imports fell for 81% as US goods are being hit by tariffs.

U.S. commercial real estate prices declined 4% in June from a month earlier after two months of increases as the segment remains "choppy," though transaction volume continues to climb, Moody's Investors Service said.

Prices in the sector have stabilized after dropping 40% from the highs of several years ago as credit tightened and landlords had trouble making mortgage payments amid falling occupancy rates. Demand for space in offices and malls and rooms in hotels and apartment complexes remains far below pre-recession levels.

The Dow Jones Industrial Average fell 145 points, or 1.4% to 10271. The Nasdaq Composite fell 1.3% to 2187. The Standard & Poor's 500-share index fell 1.5% to 1078.

Economic data released Thursday darkened the outlook for the economic recovery. The Philadelphia Fed index came in at negative 7.7, rather than the positive 7.0 reading economists were expecting.

Separately, an index of leading indicators rose 0.1% in July, less than the 0.2% gain expected. The index's June decline was also revised down 0.3%, which had first been reported as a 0.2% drop, the Conference Board said Thursday. In July, five of the ten leading indicators increased, led by improvements in the interest rate spread and the factory workweek.

The Dow Jones-Bank of Tokyo-Mitsubishi-UFJ weekly business barometer dropped again in the latest week as the production side of the index continued to weaken, according to data released Thursday.

The barometer fell 0.2% in the Aug. 7 week on top of an unrevised 0.1% slip in the prior week. The Aug. 7 index was up 5.2% from its year-ago reading.

For the full report and revisions, please see: https://reports.us.bk.mufg.jp/portal/site


US Deficit Broadens:

The Congressional Budget Office released a new projection of the deficit, reflecting a worsening of the deficit picture for fiscal 2011, but little change in other years since its last estimate in January.

A new projection from the Congressional Budget Office forecast the federal government's budget deficit for fiscal 2010 would total $1.34 trillion, improving to just over $1 trillion in fiscal 2011, which begins on Oct. 1.

If the CBO's figures are reached, the deficit in the current fiscal year would be equal to 9.1% of U.S. gross domestic product, compared with fiscal 2009's mark of 9.9%.

The latest figures from the nonpartisan agency portray a dreary picture of the U.S. economy, predicting U.S gross domestic product would only grow by 2% between the fourth quarter of 2010 and the same period next year.

The CBO report "shows the continuing impact of the economic downturn on the near-term deficit picture," Senate Budget Committee Chairman Kent Conrad (D., N.D.) said. "But as disturbing as these near-term deficits are, the real concern is the nation's long-term budget outlook."



US Jobless Claims Rose to Highest Since November 2010

Applications for unemployment benefits in the U.S. unexpectedly increased last week to the highest level since November, showing companies are stepping up the pace of firings as the economy slows.

Initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14, Labor Department figures showed today in Washington. Claims exceeded all 42 estimates of economists surveyed by Bloomberg News and compared with the median forecast of 478,000. The number of people receiving unemployment insurance fell, while those getting extended benefits increased.

A cooling economy may be discouraging employers from adding staff and prompting some to step up dismissals, raising the risk consumer spending will weaken more. The Federal Reserve said last week that the recovery would probably be “more modest” than anticipated, reflecting in part a jobless rate that’s restraining incomes.

“We’re seeing a renewed pickup in layoffs,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “If firms aren’t hiring it’s probably because they’re not producing. Demand will slow in the third quarter.”


Crude Oil:

The price of crude oil dropped to $74 pb Thursday amid economic news and OPECs outlook.

OPEC Sees -240,000 B/D In 4 Weeks To Sept 4-Tracker

Oil exports from the Organization of Petroleum Exporting Countries, excluding Angola and Ecuador, are forecast to drop by 240,000 barrels a day in the four weeks to Sept. 4, tanker tracker Oil Movements said Thursday.

Exports from the 10 OPEC members tracked by Oil Movements are expected to drop to 23.24 million barrels a day in the one-month period from 23.48 million barrels a day exported in the four weeks to Aug 7.

Stock-index futures fell after the report, erasing earlier gains. Futures on the Standard & Poor’s 500 Index expiring next month dropped 0.3 percent to 1,083.6 at 8:43 a.m. in New York.


The Euro:

The Euro lower against the US dollar at $1.2813. European Shares seen up as Germany's Bundesbank lifts growth target. Japan Considers Stimulus Spending. Worried by a sharp slowdown in the economy and a strong yen, Japan's government is considering another round of stimulus spending to bolster their economy. China tries to soothe fears about local debt. Banks, miners lift FTSE after UK borrowing data.

European stocks sank and confidence slipped following worse-than-expected U.S. economic data, which offset earlier positive sentiment regarding mergers and acquisition news. Safer investments, such as German bunds and gold, both rose.

The Stoxx Europe 600 index ended down 1.4% at 253.90. The U.K.'s FTSE 100 closed down 1.7% at 5211.29, Germany's DAX lost 1.8% to 6075.13 and France's CAC-40 closed 2.1% lower at 3572.40. By 1550 GMT, the Dow Jones Industrial Average was down 1.9%.


Canadian Stock Market:

The stock market was lower at midday Thursday as the latest U.S. economic data gave investors more reason to fret over the growth outlook.

At 11:45 a.m. EDT (1545 GMT), the S&P/TSX Composite Index was down 98.23 points, or 0.83%, at 11682.85 and declines led advances 712 to 504. Trading volume was 168.80 million shares. The S&P/TSX 60 Index was down 6.61 points, or 0.96%, to 680.07 points.

Overall, nine of Toronto's 10 sectoral indexes were lower with the financials down 1.36%, as some analysts suggest the upcoming release of third-quarter earnings from the Canadian banks could disappoint in part because of weak revenue from their trading operations.

Royal Bank was down 51 Canadian cents to C$51.18 and Toronto-Dominion had declined 1.14 to 70.14. Elsewhere in the group, life insurer Manulife had fallen 0.37 to 12.23. Manulife's earnings are closely tied to the performance of the overall equity market.

The industrials group was down 1.27%, with the economically sensitive railway stocks trading lower. Canadian National Railway was down 1.21 to 63.05 and rival Canadian Pacific had declined 1.29 to 58.97.

1 PM EDT Toronto Indexes

S&P/TSX Composite 11707.63 off 73.45 or 0.6%
S&P/TSX 60 Index 681.86 off 4.82 or 0.7%
Financials 167.08 off 1.52 or 0.9%
Materials 364.60 off 0.34 or 0.1%
Energy 272.40 off 2.29 or 0.8%
Industrials 98.20 off 1.07 or 1.1%
IT 27.46 up 0.75 or 2.8%


Argentina August Consumer Confidence +23.8% On Year

Consumer confidence rose in Argentina in August from the previous month, as a booming economy continued to improve expectations.

The consumer confidence index compiled by Torcuato di Tella University, or UTDT, surged 23.8% from the previous year and rose 4.6% from July, the university reported Thursday.

"In August, consumer confidence rose regardless of income level," Di Tella researcher Guido Sandleris said in a statement. Confidence rose at a faster pace for lower-income earners (5.5% on the month) than it did for upper-income individuals (1.9%), according to the survey.





Wednesday, August 18, 2010 - Summary:

U.S. stocks gained Wednesday as a strong showing by retailers offset the impact of high oil inventories that's weighed on major energy stocks. Volume was relatively light. The energy sector was the worst performer on the S&P 500 after oil prices hit five-week lows early in the session.

For the second straight session the 1100 line kept a cap on the S&P 500, but the benchmark index still managed to make a modest gain.

World market snapshot:

Shanghai 2,687.98 +21.68 (0.81%)
Nikkei 225 9,362.68 +122.14 (1.32%)
Hang Seng Index 21,072.46 +49.73 (0.24%)
TSEC 7,928.94 +4.84 (0.06%)
FTSE 100 5,313.64 +10.77 (0.20%)
CAC 40 3,673.80 +25.87 (0.71%)
S&P TSX 11,781.08 +52.44 (0.45%)
S&P/ASX 200 4,479.00 +4.10 (0.09%)
BSE Sensex 18,454.94 +197.82 (1.08%)

Treasurys:

The rebound in US stocks pushed most Treasurys to give up gains. The 30-year Treasury was the best performer as economic-growth anxiety lingered while shorter-dated notes were little changed ahead of new supply announcement due Thursday morning.

Forex:

The U.K. pound rose against the dollar after minutes from the Bank of England's rate-setting committee painted a more positive economic picture than had been expected. Some analysts had expected the BOE's Monetary Policy Committee to have discussed an expansion of so-called quantitative easing, the government bond-buying program intended to stimulate a sagging economy. The minutes released Wednesday showed the committee considered arguments for easing and for tightening policy at the August meeting, but eight of its members ultimately decided to leave policy on hold, with one dissenter who wanted to increase key rates.

Currencies:

Euro - USD 1.2835 -0.0028 (-0.22%)
USD - JPY 85.5600 +0.1000 (0.12%)
GBP - USD 1.5640 +0.0034 (0.22%)
CAD - USD 0.9737 +0.0005 (0.05%)
USD - HKD 7.7709 +0.0013 (0.02%)
USD - CNY 6.7903 -0.0008 (-0.01%)
AUD - USD 0.9003 +0.0013 (0.14%)

Commodities
Crude Oil	74.76	- 1.33%
Natural Gas	4.23	- 0.84%
Gasoline	1.94	- 0.66%
Heating Oil	2.01	- 0.69%
Gold	1231.62	+ 0.56%
Silver	18.46	- 0.27%
Copper	3.34	-
Quotes delayed 15 min.

Thursday's US Economic Calendar:

8:30 a.m. EST
Aug 14 Unemployment Insurance Weekly Claims Report - Initial Claims Weekly Jobless Claims (expected 480K), Net Change (expected -4K), (prior week) (previous 4452000), (prior week) (previous -118K)

10:00 a.m.
Aug 7 DJ-BTMU Business Barometer (previous -0.1%), (52 Wk) (previous +5.3%)

10:00 a.m.
July Leading Indicators Leading Index (expected +0.2%), Coincident Index (previous 0%), Lagging Index (previous +0.1%)

10:00 a.m.
Aug Philadelphia Fed Business Outlook Survey Business Activity (expected 7), Prices Paid (previous 13.1), Employment (previous 4), New Orders (previous -4.3), Prices Received (previous -8.4), Delivery Times (previous -8.1), Inventories (previous 4.5), Shipments (previous 4)

10:30 a.m.
Aug 13 EIA Weekly Natural Gas Storage Report Total Working Gas in Storage (previous 2985B), (Net Change) (previous +37B)

1:30 p.m.
Federal Reserve Bank of St. Louis - Federal Reserve Bank of St. Louis President James Bullard in Arkansas

4:30 p.m.
Aug 18 Foreign Central Bank Holdings Foreign US Debt Holdings (previous 3.17T), US Foreign Agency Holdings (previous 832.74B), Foreign Treasury Holdings (previous 2.34T)

4:30 p.m.
Aug 18 Federal Discount Window Borrowings Primary Credit Borrowings (previous 1M), W/E Daily Avg (previous 14M), Discount Window Borrowings (previous 62.23B), W/E Daily Avg (previous 62.37B)

4:30 p.m.
Aug 9 Money Stock Measures

N/A
Chicago Fed Evans speaks in Chicago

N/A
St. Louis Fed Pres Bullard speaks on the economic outlook and monetary policy in Rogers, Ark.