Stock Market Update - Tuesday, August 24, 2010

Stock Market Update
Tuesday, August 24, 2010


Latest News Headlines:
US Stocks Fall Broadly. DJIA Off 180. US July Existing Home Sales Plunge 27.2% To 3.83 Mln Rate. US stocks tumbled after a report on home sales last month came in much worse than expected, falling to its lowest level in 15 years.

Bonds and US Treasuries advanced on Tuesday, sending yields to new lows as another sharp drop in home sales generated a growing fear among investors. Total volume at the NYSE was 1.1 billion. Another low volume day.

Record Auction Yield On 2-Year Note

The Treasury sold $37 billion of two-year notes at a record low yield of 0.498% Tuesday as worries about the global economic outlook bolstered demand for safe assets.

The yield smashed the previous low of 0.67% from the July auction and marked the fourth straight monthly sale that was offered at record-low yield. That is a boon to the U.S. government as it continued to borrow at historically low interest rates to fund a budget deficit well over $1 trillion.

Market Summary:

Stocks:

World stocks slide on economic worries.
DJIA Drops Below 10000, Off 1.8% At 9996 as US Stocks fall further, before moving back to 10064. Bonds are climbing. precious metals and the US dollar make gains as oil holds at $71.64.

Dow Jones 10,040.45 -133.96 (-1.32%)
S&P 500 1,051.87 -15.49 (-1.45%)
Nasdaq 2,123.76 -35.87 (-1.66%)
US Dollar Index Futures DXY Day's Range: 82.86 - 83.56, now 83.32.
Crude Oil 71.56 - 0.10%
Natural Gas 4.05 + 0.22%
Gasoline 1.85 -
Heating Oil 1.93 -
Gold 1230.22 + 0.38%
Silver 18.36 + 2.06%
Copper 3.24 - 1.64%


Bearish Sentiment Abounds.

S&P 500 reversal below its former primary support level at 1050 would confirm the primary down-trend. The Dow encountered resistance at 10400 and is retracing to find support. Reversal below the former primary support level at 9900 would indicate another down-swing, with a target of 8700. The FTSE 100 is retracing to test the former primary support level at 5000. Failure would confirm the primary down-trend.

The DAX is headed for a test of primary support. Failure of support would mean that the big six markets, US, Japan, China, UK, Germany and France are all in a primary down-trend. October is 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, followed by a breach of support. The breach, however, may either resolve into a primary down-trend or rally sharply to complete a
bear trap.

For a comprehensive technical analysis visit:
http://www.incrediblecharts.com/tradingdiary/trading_diary.php


US July Existing Home Sales Plunge 27.2% To 3.83 Mln Rate
Existing home sales plunged to their lowest level in 15 years in July as inventories soared, painting a grim picture for the housing market absent government support in a stubbornly sluggish economy.

Home resales dropped a record 27.2% -- nearly twice as much as analysts had expected -- to an annual rate of 3.83 million in July, the National Association of Realtors said Tuesday. Meanwhile, inventories rose to 12.5 months from 8.9 months in June, pressuring already depressed home prices. Inventories are at their highest level in more than a decade.

"Historically July is the peak inventory month in any given year," NAR Chief Economist Lawrence Yun said. Economists surveyed by Dow Jones Newswires had expected existing home sales to fall by 14.3% to an annual rate of 4.6 million.

The realtors revised their existing home sales figures for June downward, saying existing home sales dropped to a 5.26 million annual rate instead of the initially estimated 5.37 million annual rate. "The question is whether this pause is a temporary pause," NAR Chief Economist Lawrence Yun said. The National Association of Realtors is expecting sales to remain soft for much of the rest of the year.

The steep decline in sales in July reflects both a souring in the U.S. economic recovery and the expiration of a government tax credit program that has been supporting the housing market for more than a year. The tax credits offered certain buyers up to $8,000 to sign a contract by April 30. Deals originally needed to close by June 30, but lawmakers pushed that deadline to Sept. 30.

Still, the tax credit's expiration drove pending home sales down 30% in May and caused a double-digit dive in mortgage application volumes even as interest rates hovered near their lowest levels in generations. July's existing home sales data reflects the May plunge in pending sales, which typically become existing sales within a couple of months.

Mortgage rates remain low, but lingering troubles in the labor market continue to restrain the nation's housing recovery. That trend likely will continue for some time. The Federal Reserve in its latest forecast scaled back its growth projections, saying it expects the soft job market to continue holding back economic progress.

In July, existing home sales dropped 29.5% in the Northeast, dropped 22.6% in the South, dropped 25% in the West and dropped 35% in the Midwest. On a year-over-year basis, July existing home sales were down 25.5% from an annual rate of 5.14 million in July 2009. A growing number of the existing homes sold across the U.S. in July were distressed properties.

U.S. stocks fell Tuesday as investors, continuing to fret over recent economic weakness, moved to the safety of the dollar and Treasurys ahead of key housing data. The broad decline, which puts stocks on track for their fourth-straight day in the red, comes as investors have gotten increasingly concerned about the global economy. Despite strong second-quarter earnings and a recent uptick in merger-and-acquisition activity, economic data have been disappointing.


US Savings Interest rate plummets

The national average rate on checking, savings and other deposit accounts has dipped below the 1% mark for the first time in at least 10 years--and doesn't appear headed higher anytime soon, according to an analysis by Market Rates Insight.

As a barometer of economic activity, the unemployment rate typically reflects credit and lending activities. In this recession, the relationship is marked by the tightened state of credit markets.

The study found that a whopping 65% of the swing in deposit interest rates, also linked to money-market and certificate-of-deposit accounts, since 2001 is tied to the ebb and flow in the nation's jobless rate, which stood at 9.5% in July.

"Clearly the unemployment rate is a major factor in deposit rates," said Dan Geller, executive vice president at MRI and author of the study.

The gap between the national average of deposit rates and unemployment has widened considerably since the middle of 2007. The national average interest rates fell to 0.99% in July.

US Government Bonds Open Higher, Pushing 10-Year Bund Yield Down to 2.27%.


Oil and Petroleum:

Oil futures fell for the fifth consecutive day, hitting fresh seven-week lows as investors sought safe havens. US Crude is now $71.64 per barrel.

Growth-sensitive commodities such as crude oil and copper frequently follow the lead of equities markets as a proxy for demand expectations. The front-month October oil futures contract fell below $72 a barrel for the first time since early July, while copper futures fell as much as 2% to a four-week low.

Oil fell $71.90 in Asia on economic fears. Oils, miners and banks lead European shares lower.

Crude futures extended a four-day slide Tuesday, falling below $72 on weakening equities markets and housing data that offer additional signs of a slowing economy.

Light, sweet crude for October delivery recently traded $1.11, or 1.5%, lower at $71.99 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $1.02 lower at $72.60 a barrel.

After a relatively quiet week for economic reports that still saw crude futures fall 2.6%, traders awaiting signs on the economy met with disappointing data Tuesday. Consumers have cut trips and other expenses, leaving the market saturated with gasoline in the midst of the important summer driving season. The high inventories helped send gasoline futures to the lowest level in eight months Monday, and front-month September reformulated gasoline blendstock, or RBOB, recently traded 2.28 cents, or 1.2%, lower at $1.8582 a gallon.

Investors are focused on the U.S. inventory report from the Department of Energy's Energy Information Administration due 10:30 a.m. Wednesday.

Natural gas futures edged lower Tuesday as traders anticipated a drop off in weather-related gas demand and saw no immediate storm threats to supplies in the U.S. Gulf of Mexico.

Natural gas for September delivery on the New York Mercantile Exchange recently traded down 2.9 cents, or 0.71%, at $4.037 a million British thermal units. The front-month contract fell to a low of $4.027/MMBtu in earlier trading and remained confined to about a 6-cent trading range.


Precious Metals:

US Gold and Silver prices rose to gold trading at $1230, while silver spot prices were at $18.38 per troy ounce.



Canadian Market:

Toronto Indexes, Volume; 10 AM EDT Composite Down 162.44

10 AM EDT Toronto Indexes

S&P/TSX Composite 11556.19 off 162.44 or 1.4%
S&P/TSX 60 Index 673.05 off 9.99 or 1.5%
Financials 163.70 off 4.27 or 2.5%
Materials 361.29 off 2.58 or 0.7%
Energy 266.81 off 3.69 or 1.4%
Industrials 96.62 off 0.92 or 0.9%
IT 26.98 off 0.42 or 1.5%

Canadian monthly retail sales accelerated at a slower-than-expected pace in June, following two months of declines, as gains at motor vehicle and parts dealers were offset by lower gas prices.

Retail sales rose 0.1% to C$35.93 billion (US$34.14 billion) after a 0.4% decline in May, revised down from a previously estimated 0.3% decline, Statistics Canada said Tuesday. Sales volumes were up 0.9%.

Bank Of Canada To Offer C$7.4B Of 98-Day Bills On Aug 31.

Toronto Stocks Lower

A poor start to third-quarter bank earnings helped push the stock market lower at midday Tuesday.At 11:45 a.m. EDT (1545 GMT), the S&P/TSX Composite Index was down 112.87 points, or 1.0%, at 11605.76. Decliners more than doubled advancers 859 to 401. Trading volume was 176.3 million shares. The S&P/TSX 60 Index was down 7.28 points, or 1.1%, to 675.74 points.

Bank of Montreal kicked off the third-quarter earnings season with a big miss. Although its net earnings rose 20% from a year earlier, results were far short of analyst expectations on weaker trading revenues and banking fees. Its shares were down C$3.18 to C$55.88 at midday, leading a broad sell-off in financial services. The financial-services subindex was off 2.6%.

Royal Bank of Canada was down 1.44 to 50.25 and Toronto-Dominion Bank had lost 0.92 to 69.70. Manulife Financial was 0.67 lower to 11.71.

Another six industry groups on the TSX were losing ground Tuesday, including the energy sector, which was off 1.06% as oil prices softened. The materials group was down 0.22% on weaker prices for most commodities, including copper. The industrials group was down 0.84%.


South America Markets:

Mexico's Stocks Open Lower, Following US; Peso Weaker Vs Dollar

Mexico's stocks opened sharply lower Tuesday, following losses in the U.S. where investors continued to worry about the strength of the economic recovery. The market's IPC index of leading issues was down 1.2% around 9:55 a.m. EDT at 31,770 points. Volume was 34.9 million shares worth 536.8 million pesos ($41.3 million).

Mexican government bonds were gaining ground, pushing yields down. The yield on 10-year bonds due 2020 was off 2 basis points to 5.93%. Mexico posted a $1.04 million trade deficit in July, its largest in a year as exports and imports continued to see strong growth, the National Statistics Institute, or Inegi, said Tuesday.

The deficit was bigger than the $341 million gap in June, but smaller than the $1.24 billion deficit in July 2009. The market had expected a deficit of $809 million, according to the median estimate in a Dow Jones Newswires survey of 10 economists.

Annual growth in exports and imports remained strong with exports up 30% from July 2009 to $23.33 billion and imports up 27% to $24.36 billion.

Manufacturing exports, most of which head to the U.S., rose 32% to $19.23 billion, led by the auto sector as it gains market share in the U.S.

Petroleum exports--mostly crude oil--rose 17% to $3.39 billion thanks to higher prices and crude export volume, while Petroleum imports, mostly gasoline, rose 27% to $2.59 billion. Mining exports jumped 47% to $182.9 million and agricultural exports grew 19% to $518.8 million.


Brazil

Brazil's blue-chip shares narrowed earlier losses midday after positive local data smoothed the shock of disappointing U.S. indicators that brought down opening prices.

At 1:20 p.m. local time, the benchmark IBovespa index stood at 65488 points, down 0.75% from Monday's close of 65982 points. The index had opened 1.14% lower at 65946 points.

The Brazilian real moved into positive territory mid-morning, strengthening to BRL1.7635 to the U.S. dollar, after opening weaker at BRL1.7810.

Brazil's markets responded well to a report released mid-morning by the Getulio Vargas Foundation, an economic institute, that showed Brazilian consumer confidence reached a record high after rising 0.7% in August, the sixth consecutive monthly increase. Almost 26% of 2,000 consumers surveyed described their household financial conditions as positive, up from 24.1% in July.

Brazil Credit Volume Up 1.2% In July; Credit Rates Rise

Brazil's credit volume continued to expand in July, but interest rates trended higher as consumers and businesses were pinched by tighter local monetary policy, the central bank reported Tuesday.

According to central bank data, total available credit in Brazil, including government-directed and non-directed credit, rose 1.2% to 1.55 trillion Brazilian reals ($873 billion) in July, or the equivalent of 45.9% of gross domestic product. Compared with July 2009, total credit supply in Brazil has expanded 18.4%.

Ecuador July Business Confidence Down 5% On Year

Business confidence in Ecuador fell 5% in July compared with the same month in 2009, according to a report by Deloitte & Touche.

Ecuador's Deloitte's July Business Confidence Index was 93.2 points out of a possible 250 points. In its monthly report, Deloitte said that although high oil prices heartened businesspeople, the new hydrocarbons law enacted by President Rafael Correa's government in July had negatively affected the outlook.

The law facilitates the expropriation of private oil operations if companies refuse to sign new services-based contracts, which replace current production-sharing deals. Under the new service contracts, private oil companies will be paid a production fee while the government would own 100% of the oil and gas produced.

Those interviewed said that among other consequences of the new law, foreign investment from petroleum companies may fall and the country could see reduced oil production. The law could also spark a rise in unemployment and jitters among investors concerned about legal security, they said.

According the Deloitte survey, about 95% of business leaders said the country's socioeconomic situation makes it difficult to attract foreign investment.


Chile

Chile's peso ended slightly stronger Tuesday against the dollar, as central bank President Jose De Gregorio said the Chilean currency in real terms is still in line with its fundamentals, easing speculation of imminent intervention.

Paring back earlier losses, the peso ended at CLP504.00 to the dollar, compared with Monday's close of CLP504.40, while trading in a narrow range of CLP504.00 to CLP509.00.

Chile's economy has been recovering quickly following the global financial crisis and February's devastating earthquake, leading the central bank to raise interest rates for a third consecutive month earlier in August, to 2%.

Chilean government environmental authorities on Tuesday gave GDF Suez's (GSZ.FR) $1.1 billion Barrancones thermal power plant the green light. The coal-fired, 540-megawatt power plant will likely come on line in 2012.

Barrancones will supply the country's Central Interconnected System, or SIC, grid, which runs from Tal-Tal in northern Chile to the island of Chiloe in the south.

In Chile, Suez controls the E-CL SA (ECL.SN) power generator, formerly known as Edelnor, several other generating projects and has a stake in the Mejillones liquified natural gas resgassification plant.



European Markets:

Stock markets across Europe fell sharply Tuesday, with Ireland's benchmark index dropping more than 5%, as worries over the strength and sustainability of the economic recovery continued to unsettle investors.

The Stoxx Europe 600 index closed down 1.7% at 249.44. The U.K.'s FTSE 100 index fell 1.5% at 5155.95, France's CAC-40 index ended down 1.7% at 3491.11 and Germany's DAX fell 1.3% to 5935.44.

The Stoxx Europe 600 index declined 1.7%, or 4.31 points, to 249.45.

Equities in Ireland and Greece posted the steepest losses.

"Concern over the global economic recovery continues to dominate traders' sentiment, and as risk appetite ebbs away, equity prices seem to be in danger of going into freefall," said Ben Critchley, sales trader at IG Index, in a note.

Among the main regional indexes, France's CAC 40 index slipped 1.8% to 3,491.11 and the U.K. FTSE 100 index fell 1.5% to 5,155.95.

Germany's DAX 30 index declined 1.3% to 5,935.44.

Stocks in the region traded sharply lower throughout the day, but losses deepened further in afternoon trading after U.S. data showed existing home sales plunged over 27% in July--the biggest one-month fall ever.

Richard Batty, investment director at Standard Life Investments, said European markets have been very sensitive to weakness in U.S. housing and employment data in recent months amid uncertainty about the sustainability of the recovery.

The data coming out of the U.S. has generally been weak since stimulus packages in housing and the auto industry came to an end, he said.

Batty said Standard Life is underweight in European securities and added that he is expecting a slowdown in the recovery, but not a double-dip recession.

"Overall, markets are not yet cheap enough to buy with your eyes closed," he added.

Most of Tuesday's earnings news came out of the U.K., where shares in copper miner Antofagasta dropped 1.5% after the group announced a 91% jump in first-half profit to $451.2 million, but also said copper production would be below its original forecast for the year.

Mining stocks also lost ground, with Rio Tinto dropping 4.3% and Anglo American falling 1.8%.

Dublin Stocks: ISEQ Ending -5.6% At 2,624; CRH -16.5%

Another big decliner was Irish building-materials group CRH, which slumped 17% in Dublin after announcing a 77% drop in first-half profit and saying it is unlikely to achieve its earlier forecast for the second half because of weak U.S. markets.

"European economic indicators have been more encouraging although uncertainties remain; however, concerns relating to the recovery in the U.S. have increased with a continuing flow of disappointing economic data," said CRH Chief Executive Myles Lee, according to a statement.

Moreover, uncertainties on pricing in the sector imply downside risk for all players," the broker said.

In Germany, shares of Heidelberg Cement AG fell 4.9%, making the firm the biggest decliner in the DAX stock index.

As the biggest company on Ireland's ISEQ stock index, the sharp fall for CRH helped push the benchmark index down 5.4%.

Indexes in some other smaller European nations were also under heavy pressure, with the Greek ASE Composite index falling 3.4%.

The latest economic announcement from Germany Tuesday confirmed an earlier estimate that the country's economy grew 2.2% in the second quarter--the strongest quarterly growth since reunification in 1990.


World markets Snapshot:

Shanghai 2,650.31 +10.94 (0.41%)
Nikkei 225 8,995.14 -121.55 (-1.33%)
Hang Seng Index 20,658.71 -230.30 (-1.10%)
TSEC 7,940.64 -35.29 (-0.44%)
FTSE 100 5,151.06 -83.78 (-1.60%)
DJ EURO STOXX 50 2,613.08 -30.90 (-1.17%)
CAC 40 3,489.44 -63.79 (-1.80%)
S&P TSX 11,718.63 0.00 (0.00%)
S&P/ASX 200 4,381.30 -47.70 (-1.08%)
BSE Sensex 18,311.59 -97.76 (-0.53%)

U.S. stocks sank into the red in late trading Monday after an early rally as continuing economic fears led to broad indexes third straight decline. The fluctuations came as the market weighed acquisition offers from companies including Hewlett-Packard and HSBC Holdings, that came on the back of a strong week for deal activity. Investors were initially encouraged by the deal activity but the exuberance was short-lived.

The growth in high-yield ETFs is part of a wider rush to bonds as investors look for income while economic uncertainty causes gut-wrenching swings in the stock market. For example, more than $5 billion flowed into iBoxx $ Investment Grade Corporate Bond Fund (LQD) year to date through July 31. The ETF has a yield of 4%.

Two high-yield ETFs with large asset bases--iShares iBoxx $ High Yield Corporate Bond Fund (HYG) and SPDR Barclays Capital High Yield Bond ETF (JNK)--both saw year-to-date inflows of more than $1.2 billion through July, according to data from the National Stock Exchange. More cash likely moved in the door this month amid a surge in bond issuance from corporate America.

Treasurys:

Treasury prices are rallying, with the benchmark 10-year note's yield touching its lowest level since March 19, 2009. Price and yield move in opposite directions. The government bond market is merely a monetary tool that the central bank utilizes to control the cost (or supply) of money by controlling the level of reserves in the system.

Looking for a way to gauge investor uncertainty and economic trends? Keep an eye on the iShares Barclays 20+ Year Treasury Bond ETF.Last Price (USD) $106.04, Days Range: 105.84 - 106.83

The government bond market drifted to the finish line with very small gains for short-dated securities, while the 30-year bond lost a minimal amount of ground after strong demand surfaced for a $7 billion sale of 30-year inflation-indexed. The reopened securities, commonly referred to as TIPS, came at a yield of 1.768%. Its bid-to-cover ratio, a measure of investor interest, was 2.78, a record high.

Forex:

Tuesday US Dollar Index Futures DXY Day's Range: 83.28 - 83.56

Monday, the euro fell against the dollar and yen after concerns about the pace of global growth, exacerbated by disappointing euro-zone data, boosted the traditional safe harbors. The yen was also stronger against the dollar as investors speculated that Japanese officials may be further away from taking action to slow the yen's appreciation than previously thought.

Commodities
Crude Oil	72.30	- 1.09%
Natural Gas	4.05	- 0.27%
Gasoline	1.87	- 0.84%
Heating Oil	1.94	- 0.72%
Gold	1211.45	- 1.15%
Silver	17.79	- 1.11%
Copper	3.27	- 0.79%
Quotes delayed 15 min.		» Add to your s

Tuesday's US Economic Calendar

7:45 a.m.
August 21 ICSC-Goldman Sachs Chain Store Sales Index - WoW (previous -1.3%), YoY (previous +3.3%)

8:30 a.m.
Federal Reserve Bank of Chicago Pres Evans speech in Indianapolis

8:55 a.m.
August 21 Johnson Redbook Retail Sales Index MoM % Change (previous +1%), 12MonChgPct (previous +2.8%), 52WkChgPct (previous +2.7%)

10:00 a.m.
July Existing Home Sales Total Sales (expected 4.65M), Percent Change (expected -13.4%), Month's Supply (previous 8.9)

10:00 a.m.
August Richmond Fed Business Activity Survey Manufacturing Index (previous 16), Retail Revenues Index (previous 0), Services Revenue Index (previous 8), Shipments Index (previous 22)

4:30 p.m.
August 20 API Statistical Bulletin Crude Stocks (Net Change) (previous +5.87M), Gasoline Stocks (Net Change) (previous +2.03M), Distillate Stocks (Net Change) (previous +2.05M), Refinery Runs (previous 85.5%)

5:00 p.m.
August 22 ABC News Consumer Confidence Index (previous -45)