Stock Market Update - Thursday, August 26, 2010

Stock Market Update
Thursday, August 26, 2010

Latest News Headlines:

DJIA Off Highs, But Held 9,985, The 10,000 Range

Dow Jones	9,985.81	-74.25	(-0.74%)
S&P 500	1,047.22	-8.11	(-0.77%)
Nasdaq	2,118.69	-22.85	(-1.07%)

US Blue-Chip Stocks Turn Negative After Manufacturing Data. The Dow dropped more than 80 points but is holding the intraday average of about 10,000. Market sentiment has been gloomy this week amid lingering fears that the U.S. economy is in the midst of a protracted recovery, or further decline ahead.

U.S. stocks slipped Thursday as fresh hints of a slowdown in manufacturing renewed concerns about the pace of the U.S. economic recovery. Volume (NYSE) is now running 20% lower than yesterday. Internals are languishing.

US stocks bounced around in jumpy trading. but declined after the US Manufacturing data was released.U.S. stocks wavered Thursday as mixed data on manufacturing and employment left investors seeking direction.

The Dow Jones Industrial Average erased its earlier gains, slipping 11 points recently to 10049 and bouncing around the flatline in choppy trading.

U.S. stocks turned negative Thursday after a survey showed manufacturing activity in the Kansas City region stalled in August.

The Dow Jones Industrial Average wiped out its earlier gains, falling 83 points in recent trading. The Standard & Poor's 500-share index was flat at 1055 and the Nasdaq Composite shed 0.1% to 2139.

The dollar and the yen were under pressure Thursday due to speculation that Japan and the U.S. might reveal plans for more monetary easing at the central bankers' symposium in Jackson Hole. At 1:25 ET the Yen hits intraday high U.S. investors will be closely focused on Federal Reserve Chairman Ben Bernanke's keynote speech on Friday.

Commodity prices moved higher, with oil futures rising above $73 a barrel as the market continued to look past record-high U.S. oil stockpiles.

Futures Hit 11-Month Low On Storage Build, Weak Demand
Natural gas futures fell to their lowest level in 11 months Thursday on a larger-than-expected increase in U.S. gas storage as summer weather comes to an end.

Natural gas for September delivery settled down 5.4 cents, or 1.4%, at $3.817 a million British thermal units on the New York Mercantile Exchange, the lowest settlement price since Sept. 28. Futures touched as low as $3.791/MMBtu in intraday trading as the market posted its seventh consecutive day of losses.

U.S. gas inventories grew by 40 billion cubic feet in the week ended Aug. 20, the federal Energy Information Administration said Thursday, slightly more than analysts and traders had forecast. Driving the higher-than-expected injection was the first signs of fall weather in the eastern U.S.

Copper is hanging on to 2% gain. Gold futures declined. Demand for Treasurys edged up, pushing yield on the 10-year note down to 2.54%.

NYSE Common Stock Index
NYSE Composite 6707.70 UP 11.58
NYSE World Ldrs 4773.80 UP 6.31
NYSE US 100 4765.58 DN 4.28
International 100 4609.54 UP 19.60
NYSE TMT 5020.15 UP 8.78
Financial 4398.28 UP 7.84
Energy 9732.10 UP 9.24
Health Care 5839.45 DN 5.28


US Fed Issues Enforcement Actions To US Banks

The U.S. Federal Reserve said Thursday it has restricted dividend payments by three private banks, one of which received a $2.4 million taxpayer bailout. The Fed ordered CSRA Bank Corp., based in Wrens, Ga., not to declare or pay dividends without its prior approval.

The bank, which received money from the government's financial sector bailout and is the subject of a separate enforcement action by the Federal Deposit Insurance Corp., also is being required to provide regular progress reports to the Fed.

The Fed entered similar agreements with First Bancshares Inc.--the holding company for First National Bank of Cold Spring, Minn.--and Guaranty Development Co., based in Livingston, Mont. Guaranty, which operates the Bozeman, Mont.-based American Bank, also is being told to strengthen its capital position and credit risk management practices.


US Stocks Climb After Jobless Claims Fall
US Jobless Claims Dropped 31,000

The U.S. Labor Department reported that new jobless claims dropped 31,000 to 473,000 in the week ended Aug. 21, far exceeding the average forecast for a 10,000 decline predicted by economists.

U.S. stocks bounced around in jumpy trading, but clung to modest gains Thursday as a drop in jobless claims took some of the edge off concerns over a slowing U.S. economic recovery.

"Initial jobless claims still weren't anything to write home about," said Gene McGillian, an analyst with Tradition Energy in Stamford, Conn. "The fundamental picture continues to remain really weak."

Claims had risen to 504,000 in the previous week, according to revised figures released Thursday, well above expectations. The steady rise in unemployment claims in recent weeks had undermined confidence in the economic recovery.



Petroleum and Crude Oil:

Crude Rises as high as $73.76

Crude futures rose Thursday as a large drop in new U.S. jobless claims provided a counter to the negative economic indicators that had earlier sent oil prices toward a two-month low.

Light, sweet crude for October delivery traded 28 cents, or 0.4%, higher at $72.80 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $1.05, or 1.4%, higher at $74.53 a barrel.

U.S. refiners are swimming in oil and refined products, with the Energy Information Administration on Wednesday reporting an increase in stockpiles that were already at a 27-year high. Oil inventories shot up 4.1 million barrels, while gasoline stocks grew by 2.3 million barrels. Analysts had anticipated declines of 200,000 barrels and 500,000 barrels, respectively.

US GAS: Futures Fall On Larger-Than-Expected Storage Build
Natural gas futures fell Thursday as traders here of stockpile increase. Natural gas for September delivery recently traded up 1.4 cent, or 0.4%, at $3.885 a million British thermal units on the New York Mercantile Exchange. Futures have fallen about 20% in August prompting some bargaining buying ahead of the release of the U.S. Energy Information Administration report at 10:30 a.m. EDT.

Gold

Investors helped push global gold demand in the second quarter to a record of more than $40 billion.

During the second quarter--when worries about the European debt crisis helped push the metal to an all-time high above $1,260 an ounce--total gold demand rose by 36% to 1,050 metric tons, the World Gold Council said in the mining marketing group's quarterly Gold Demand Trends report.

That amount is surpassed only by the 1,207 tons bought in the third quarter of 2008 and the 1,073 tons purchased in the fourth quarter of that year.

But in U.S. dollar terms, the total demand figure increased 77% to $40.4 billion, topping the previous high of $33.8 billion in the third quarter of 2008.

The gains reflected increased investment demand, which more than doubled to 534.4 tons compared with 245.4 tons the year before. The data, available to the World Gold Council since the first quarter of 2001, are provided by U.K. consultancy GFMS Ltd.

Spot gold is currently trading at $1236, silver 19.08 per troy ounce.


Canadian Market:

The stock market was higher at midday Thursday as rebounding oils and gold gains offset weakness in banks.

At 11:45 a.m. EDT (1545 GMT), the S&P/TSX Composite Index was up 35.47 points, or 0.30%, at 11683.59. Advances led declines 743 to 511. Trading volume was 163.0 million shares. The S&P/TSX 60 Index was up 1.04 points, or 0.15%, to 679.37.

The Canadian two-year bonds declined on Thursday, while their longer-dated counterparts moved higher.

Canada's two-year bond yielded 1.238%, up from 1.212% late Wednesday. The 10-year bond yield was at 2.804%, down from 2.835%. Bond yields and prices move in opposite directions.

Canada Finance Minister: Most Of G-20 Taking "Necessary" Steps

Canadian Finance Minister Jim Flaherty said Thursday that most of the members of the Group of 20 industrial and developing countries are taking the necessary measures to deal with the global economic crisis.

"The necessary measures have been taken in most of the country's in the G20...The corresponding in respect of the financial institutions is being managed internationally," Flaherty said, speaking at a lunch in Dublin.

Flaherty reiterated that the Canadian economy is "doing relatively well" and will probably see moderate growth during this year and into 2011.


TSX bounces back on bargain hunters

North American stock-market investors on Wednesday seemingly went from being preoccupied with the sorry state of the US economy to having a penchant for bargain shopping. The Toronto Stock Exchange's S&P/TSX composite index closed up 90.77 points, or 0.79%, to 11,648.12

Canada To Auction C$2.4B Of 11-Day T-Bills On Friday

The Canadian government said it will auction on Friday C$2.4 billion (US$2.3 billion) of 11-day treasury bills. The bills will be dated and issued Aug. 27 and will mature Sept. 7.

Tenders must be received no later than 10:30 a.m. EDT (1430 GMT) Friday and results are to be announced by 10:35 a.m. EDT (1435 GMT).

DJ Toronto Indexes, Volume; 10 AM EDT Composite Up 20.58

10 AM EDT Toronto Indexes

S&P/TSX Composite 11668.70 up 20.58 or 0.2%
S&P/TSX 60 Index 678.80 up 0.47 or 0.1%
Financials 163.61 off 1.13 or 0.7%
Materials 370.92 up 2.41 or 0.7%
Energy 267.79 up 1.64 or 0.6%
Industrials 98.06 up 0.54 or 0.6%
IT 27.28 up 0.02 or 0.1%


South America:

Mexico

Mexico's stocks fell and the peso slumped against the dollar less than an hour from the close of trading on Thursday.

Mexico's benchmark IPC index of most-traded issues was trading 0.6% lower at 31280.04 points at 3:23 p.m. EDT. Volume was 115.8 million shares worth 3.13 billion pesos ($239.7 million).

The L shares of mobile operator America Movil (AMX) were down 0.4% at MXN30.35; the CPO shares of cement maker Cemex (CX) were off 1.2% at MXN10.23; and the V shares of retail giant Wal-Mart de Mexico (WALMEX.MX) were down 0.9% at MXN28.77.

Mexico's economic fortunes are closely linked to its northern neighbor, which buys about 80% of Mexico's exports and employs millions of Mexican migrant workers.

Early gains in the peso evaporated as negative sentiment toward Mexican assets in the face of a U.S. slowdown sent the local currency soaring above the MXN13 level. The peso was recently quoted in Mexico City trading at MXN13.0520 to the dollar, after closing at MXN12.9985 on Wednesday.

Mexican government bonds were also hit by a wave of selling as investors pocketed gains from a two-and-a-half month rally that pushed yields on some tenures to record lows in recent weeks. The yield on bonds maturing in 2018 was up 15 basis points at 6.12%, while the yield on 2024 bonds was 20 basis points higher at 6.65%. Yields move inversely to bond prices.


Brazil

Brazil's central government posted a lower-than-expected surplus in July due to diminished tax receipts and elevated spending on social security, the government reported Wednesday.

Brazil's federal treasury said the central government, which includes the treasury, the publicly administered social security system and the central bank, posted a 770 million Brazilian real ($437.5 million) primary budget surplus in July.

The July result, which came in well below a median market forecast of a surplus around BRL2.4 billion, was larger than the BRL631 million surplus in June but smaller than a BRL1.51 billion surplus in July 2009.

The latest central government monthly surplus included a federal treasury surplus of BRL3.38 billion, a social security administration deficit of BRL2.56 billion and a central bank deficit of BRL46.1 million.

According to the treasury, Brazilian government revenues increased by 16.4% in the first seven months of the year compared to 2009, while spending rose by 17.8%. Government investments, meanwhile, rose 67% during the period to BRL25.1 billion.

Brazil's Sugar Industry Trims 2010-11 Estimates

Brazil's sugar cane industry has trimmed its forecast for sugar cane crushing and sugar production in the 2010-2011 season because of a dry spell, but output is still likely to be up on the year.

The main center-south sugar cane crush should reach 573.8 million metric tons from the ongoing 2010-2011 crop season, Brazil's sugar cane industry association, Unica, said Thursday.

Unica said in its second crop estimate for the season that the crush volume is 3.7% below its previous estimate in April of 595.9 million tons. The estimate, however, is 5.9% above the 542 million tons crushed in the last crop season.

The reduction of the crush estimate is related to the dry weather since April, said Unica's technical director, Antonio De Padua Rodrigues. Brazil is the world's leading sugar producer and the center-south region accounts for around 90% of the country's sugarcane.

Unica said that the center-south region should also produce 33.7 million tons of sugar in this crop season, down 1% from its estimate in April, but up 17.8% from the previous crop season. Unica also said that mills in the region should produce 26.4 billion liters of ethanol, a decrease of 3.7% in relation to its April estimate, but up 11.4% from the previous year's harvest.

The sugar cane association also said that the region's mills had crushed 337.9 million tons of sugar cane as of Aug. 15, up 17% versus the same period a year ago. The center-south sugar cane harvest traditionally runs from March-April through to October or November.


Chile:

Chile Finance Minister: GDP To Grow 5% In 2010

Chile's gross domestic product will likely grow 5% on the year in 2010, fueled by significant investments, Finance Minister Felipe Larrain said Thursday.

The country is quickly recovering from a recession last year and a devastating earthquake in February. Next year, GDP will likely gain 6% on the year, "I can confidently say," Larrain told reporters.

"The economy is frankly recovering and will grow 5% this year, besting expectations such as the International Monetary Fund´s outlook of a 4.2% gain," Larrain said.

Chile's gross domestic product will likely grow 5% on the year in 2010, fueled by significant investments, Finance Minister Felipe Larrain said Thursday. The country is quickly recovering from a recession last year and a devastating earthquake in February. Next year, GDP will likely gain 6% on the year, "I can confidently say," Larrain told reporters.


European Markets:

European stocks rose Thursday, as upbeat corporate results and some long-awaited good news on the U.S. jobs front underpinned investor sentiment. The euro gained against the dollar, while oil prices rose and gold was little changed.

The Stoxx Europe 600 index closed up 0.9% at 249.65. The U.K.'s FTSE 100 index rose 0.9% to 5155.84, France's CAC-40 index ended up 0.7% at 3475.03 and Germany's DAX added 0.2% to 5912.58.

Basic resource shares put in the best performance, closely followed by banking stocks. Kazakhmys led the miners higher, rising 5.2% after it posted an 11% rise in its first-half net profit due to higher sales prices and expressed optimism over the outlook for copper demand. The Stoxx Europe 600 index for resources closed up 2.1%.

At the time of the European stock markets' close, the euro was at $1.2694, up from $1.2655 late Wednesday in New York, and sterling last traded at $1.5551, up from $1.5450. The dollar was at 84.57 yen, down from Y84.78 and at 1.0256 Swiss francs, down from CHF1.0291.

Late in Europe, light, sweet crude for October delivery was up 96 cents at $73.48 on the New York Mercantile exchange. Gold for December delivery was little changed at $1238.50 per troy ounce late in Europe on the Comex division of Nymex.

UK Treasury To Prove It Complied With Equalities Laws On Budget

The U.K. coalition government faces the prospect of further embarrassment over its emergency budget after the equalities watchdog ordered the Treasury to prove it complied with legislation requiring it to assess the impact of its measures on vulnerable groups.

The Equality and Human Rights Commission, a statutory body that enforces equality legislation, said if the treasury cannot do so, it will take "appropriate enforcement action."

The commission's announcement comes after influential think tank the Institute for Fiscal Studies Wednesday said the budget failed to live up to its claim to be "progressive," and instead placed much of the burden of cutting the fiscal deficit on poorer households.

"Under equality legislation, the treasury, like all public bodies, has a legal duty to pay 'due regard' to equality and consider any disproportionate impact on vulnerable groups when making decisions, including decisions about the budget," Neil Kinghan, the commission's director general, said.

Kinghan said when the government announced its spending review in June the commission wrote to government departments, including the treasury, asking for reassurance that they would comply with legislation.

"We have pressed the point in person with a number of cabinet ministers, including the Chief Secretary to the Treasury," he said.

Financial Secretary to the Treasury Mark Hoban appeared on BBC Radio 4's Today program Wednesday and was asked several times whether the government had completed equality impact assessments on the budget, as it is legally required to do. Hoban failed to give a direct answer to the questions.

If the treasury does not demonstrate that it complied with legislation, the commission can take enforcement action including opening a formal inquiry or issuing a compliance notice, which would give the treasury 28 days to provide a written proposal showing the steps it would take to ensure compliance.

A treasury spokesman said government departments consider the impact of the budget measures on gender, race and disability as they develop and implement the policies, which was in line with their legal obligations.

The government already faces legal action from women's rights group the Fawcett Society, which is seeking a judicial review of the emergency budget. The group says the government has not provided any evidence that it assessed how its proposals would impact on inequality between women and men, as it is required to do under equality laws.


France:

French Prime Minister Francois Fillon Thursday gave the go-ahead to parliamentary work aimed at enshrining rules of fiscal prudence in the French constitution. Fillon wants to include in the constitution a rule compelling the government to reduce public deficits over a set time frame, with a view to reaching a balanced structural budget, he said in a letter sent to members of parliament and released Thursday by his office.

Fillon said he would start consulting parliament in September to reach a consensus on reform of the constitution by the year's end. He called for more coherence in French fiscal law, as well as for greater involvement of parliament in devising the country's public finances stability program which has to be approved by the European Commission.

Dublin Stocks: ISEQ Ends +1% At 2,662; Bank Of Ireland +1.3%


Russian Meat Industry To Increase World Wheat Deficit

The International Grains Council Thursday slashed its forecast for world wheat production and warned of a widening deficit as Russia's livestock industry boosts consumption to record levels.

Global wheat production in 2010-11 is expected to hit 644 million metric tons, the IGC said, down 7 million tons from its July estimate and 4.9% lower than last year.

World wheat consumption is expected to rise by 2 million tons compared with its previous forecast to a record 657 million tons due to surging consumption in Russia, leaving the market with a deficit of 13 million tons.

Falling expectations for world wheat production come after severe drought in Russia, the world's third-largest wheat exporter, devastated the country's crop and prompted the government to ban grain exports for the rest of the year.

Global wheat prices rocketed more than 60% to two-year highs earlier this month in response to the ban, but have since pulled back due to improving prospects for crops from other exporters, such as the U.S.

The steep increase in prices is expected to reduce world wheat trade in 2010-11 due to lower demand for feed wheat, the IGC said. Global trade is expected to fall by 3.4 million tons to 117 million tons, the council said, down 7.7% from last year as buyers in the European Union and Asia switch to cheaper options to feed livestock, such as barley or corn.

The IGC expects global wheat consumption to increase overall due to growing demand from Russian farmers, who are unable to turn to other sources to feed the country's rapidly expanding livestock industry.

"Although recent high prices have reduced projected feed use of wheat in parts of Asia and the EU, this is more than outweighed by an increased forecast for Russia, where bigger livestock inventories and limited supplies of other feed ingredients, including barley, lift the wheat feed use forecast by 6 million tons, to 24 million tons," the IGC said.

The fall in global production is also expected to reduce stock levels by 8 million tons as higher exports from the U.S. and EU eat into inventories, the IGC said.

World wheat stocks are predicted to fall to 184 million tons by the end of 2010-11, down from 394 million tons in 2009-10, leaving inventories at their lowest level in two years.

Asian Pacific:

Japan Earthquake:
A moderate 5.4-magnitude earthquake struck near the west coast of Japan early Friday, the U.S. Geological Survey (USGS) said. The earthquake hit at 12:08 a.m. on Friday local time (1508 GMT Thursday), at a depth of 283.5 kilometers (176 miles).

The epicentre was 50 kilometers east of Fukui, Honshu, the USGS statement said.

Most Asian equity markets advanced on Thursday, with Japan's Nikkei Stock Average index rising 0.7%.


World Markets Snapshot:

Shanghai 2,603.48 +6.90 (0.27%)
Nikkei 225 8,906.48 +61.09 (0.69%)
Hang Seng Index 20,612.06 -22.92 (-0.11%)
TSEC 7,689.74 -47.24 (-0.61%)
FTSE 100 5,141.05 +31.65 (0.62%)
CAC 40 3,471.80 +21.61 (0.63%)
S&P TSX 11,668.21 +20.09 (0.17%)
S&P/ASX 200 4,356.00 +35.90 (0.83%)
BSE Sensex 18,226.35 +46.71 (0.26%)

Market Summary:

Stocks:

Stock market bulls battled back from a triple-digit loss after a four-day skid, though disappointing economic data continued to weigh on investors' minds. The turnaround came after a two-week slide that's seen some 7% shaved off the major stock indexes Companies are getting cheaper every day, and there's lots of cash on the sidelines that wants to invest," said Zahid Siddique, associate portfolio manager of the Gabelli Equity Trust. "As people see opportunities, they want to get in there and buy."

Treasurys:

An auction of $36 billion in five-year notes resulted in a record low yield of 1.374% as worries about the economy boosted the allure of safe assets.

Treasury securities fell, pushing up the benchmark 10-year note's yield from a 19-month low, as the bond market took a breather from the recent rally. Bonds rose early in the session as investors sought safe assets from growing worries about the economic outlook. The anxiety was fueled by a weaker-than-forecast durable goods report and a drop in new home sales to a record low.

Forex:

The dollar gained against the yen as investors weighed their concerns about the U.S. recovery against rising speculation that Japanese authorities will take action to counter yen strength. Following the release of dismal U.S. housing data, the Swiss franc hit an all-time high against the euro for the second-straight day. Investors hold a "more cautious stance on the yen prompted by the latest currency related comments from Japan," making the Swiss franc the most attractive of the three traditional safe havens, said Vassili Serebriakov, foreign exchange strategist at Wells Fargo.

ommodities
Crude Oil	73.16	+ 0.88%
Natural Gas	3.88	+ 0.36%
Gasoline	1.89	+ 1.66%
Heating Oil	2.00	+ 1.71%
Gold	1238.03	- 0.16%
Silver	19.12	+ 1.00%
Copper	3.28	+ 2.31%
Quotes delayed 15 min.		» Add to your site

Thursday's US Economic Calendar:

11:00 a.m.
August 20 MBA Mortgage Applications Survey: Market Composite Index (previous 829.7); Market Composite Index Cur Chg (previous +13%); Purchase Index (S.A.) (previous 169.4); Purchase Index (S.A.) Cur Chg (previous -3.4%); Refinance Index (previous 4676.7); Refinance Index Cur Chg (previous +17.1%)

12:30 p.m.
July Durable Goods: Total Orders (expected +2.8%); Orders, Ex-Defense (previous -0.7%); Orders, Ex-Transportation (previous -0.6%)

2:00 p.m.
July New Residential Sales: Overall Sales (expected 333K); Percent Change (expected +0.9%); Months' Supply (previous 7.6)

2:30 p.m.
Aug 20 EIA Petroleum Status Report: Crude Oil Stocks (previous 354.17M); Crude Oil Stocks (Net Change) (expected -200K); Gasoline Stocks (previous 223.34M); Gasoline Stocks (Net Change) (expected -500K); Distillate Stocks (previous 174.21M); Distillate Stocks (Net Change) (expected +900K); Refinery Usage (expected 89.4%)