Stock Market Update - Wednesday, September 1, 2010

Stock Market Update
Wednesday, September 1, 2010

Latest News Headlines:

US Stocks Gap Up

DJIA up +254.75 points to 10269.47
NASDAQ up +62.81 points to 2176.84
S&P 500 up +30.96 points to 1080.29
10-year T-note 100 27/32 at 2.5254 yield
NYMEX Crude up $1.21 at $73.15/bbl
Dollar/Euro up 0.0148 at 1.2832

Dow Jones 2:30 PM Averages: DJIA 10,244.80 UP 230.08

30 INDUS 10,244.80 UP 230.08 OR 2.30%
20 TRANSP 4,268.54 UP 145.91 OR 3.54%
15 UTILS 396.80 UP 7.83 OR 2.01%
65 STOCKS 3,572.95 UP 90.66 OR 2.60%

Investors sent the stock market sharply higher on Wednesday, as strong manufacturing data helped erase gloomy jobs data to kick off September on a bullish note.

U.S. manufacturing activity expanded in August for the 13th straight month, with the ISM manufacturing PMI defying expectations to rise to 56.3, from 55.5 in July. The encouraging numbers were fueled by strong employment and production data.

Commodity prices rallied, with October crude-oil futures gaining 2.5% to nearly $74 a barrel, ahead of official oil inventory numbers. Oil prices tumbled in August amid growth concerns and unusually high inventory levels. Copper futures surged more than 3%.


BofA Economists Lower Their GDP, Treasury Yield Forecasts
Bank of America Merrill Lynch economists lowered their forecasts for U.S. economic growth, saying gross domestic product will rise 2.6% in 2010, compared to a previous forecast for a 2.7% rate.

"The economy will manage to post positive headline GDP numbers, but this growth will not be fast enough to keep the unemployment rate from drifting higher," economists led by Ethan Harris wrote in a note Wednesday. "The growth recession is already here and it is likely to linger through the first half of next year." GDP will increase just 1.8% in 2011.

The unemployment rate will rise back above 10% next year, from 9.5% currently. The weaker growth will prompt the Federal Reserve to resume buying assets from the market to support the economy, starting in the first quarter of next year, the economists said.

A "major" program would entail buying $500 billion to $750 billion in Treasury bonds every six months, Harris said. Yields on 10-year Treasury notes will fall to as low as 1.75% in the first quarter, which would be the lowest since at least 1986. The benchmark 10-year note yields 2.58% currently.


US Stocks Open Higher Despite Weak Jobs Data

Investors dove back into the stock market Wednesday despite some gloomy jobs data, jumping into September on a bullish note following a brutal August.

The Dow Jones Industrial Average gained 126 points, or 1.3%, at 10140 in early trading, while the Standard & Poor's 500-stock index added 1.4% to 1064 and the Nasdaq Composite rose 1.6% to 2147.

The strong start to the morning follows a dismal month that saw the Dow drop 4.3%, its worst August in nearly a decade.

Disappointing U.S. private-sector employment data issued early Wednesday tempered the optimism about a global recovery. The ADP job survey indicates U.S. private-sector businesses laid off 10,000 workers in August, much worse than the weak gain of 17,000 expected by economists. The number may change forecasters' expectations for Friday's payrolls number from the U.S. Department of Labor.



HUD To Give Communities, Non-Profits First Shot At Bank-Owned Homes
The U.S. Housing and Urban Development department plans to partner with mortgage lenders to offer state and local governments and nonprofits a chance to buy bank-owned properties before they're offered to private investors.

"Local communities will now get an exclusive option to buy foreclosed properties in targeted neighborhoods so they can turn the homes into affordable housing or, in some cases, tear them down," HUD Secretary Shaun Donovan said Wednesday.

The effort, dubbed the National First Look Program, aims to lessen the competition between communities and non-profit organizations and private investors.

It will allow participants in HUD's Neighborhood Stabilization Program to receive immediate notification of properties as they become available. They would then have the opportunity to purchase properties at a discount. Certain buyers may have the option of making purchases using funds from the stabilization program.


Crude Oil & Petroleum Products:

Oil Rebounds
Gasoline stockpiles fell by 212,000 barrels to 225.4 million barrels, the department's Energy Information Administration said in its weekly report. That compares to the drop of 200,000 barrels based on a forecast in a Dow Jones Newswires survey of 15 analysts.

Distillate stocks, which include heating oil and diesel fuel, declined by 739,000 barrels to 175.2 million barrels. Analysts projected it to expand by 1.1 million barrels.

Refining capacity utilization fell by 0.7-percentage point to 87.0%, versus the expectation for a 0.1-percentage point decline.

API pegged refining utilization at 84.8% of capacity last week. The industry group reported that gasoline inventories fell 600,000 barrels and distillate stocks dropped by 1.9 million barrels.

U.S. Oil Inventories:
For week ended Aug. 27:
Crude Distillates Gasoline Refinery Use
EIA data: +3.4 -0.7 -0.2 -0.7
Forecast: +0.8 +1.1 -0.2 -0.1


Crude Stocks Expand As Products Edge Lower
U.S. crude inventories rose more than analysts' expectations last week, according to data released Wednesday by the U.S. Department of Energy.

Crude oil stockpiles rose by 3.4 million barrels to 361.7 million barrels for the week ended Aug. 27, compared with an average survey estimate of an 800,000-barrel increase.

Investors continued to support early gains, spurred by encouraging manufacturing data and a weaker U.S. dollar, after the EIA's report. Crude oil futures for October were recently up 2.9% at $74.00 a barrel on the New York Mercantile Exchange. October contracts for gasoline were recently up 2.2% at $1.8985 a gallon and heating oil was up 3% at $2.0526 a gallon.

Light, sweet crude for October delivery recently traded $1.83, or 2.5%, higher at $73.75 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $1.99 higher at $76.63 a barrel.

DOE: US Gasoline Stocks -0.212 Mln Bbl At 225.405 Mln Bbl
US Crude Oil Stocks +3.425 Mln Bbl At 361.707 Mln Bbl
US Distillate Stocks -0.739M Bbl In Wk; Seen +1.1M Bbl
US Refineries Ran At 87.0% Vs 87.7% Week Ago

Futures Close 1.39% Lower At $3.763/MMBtu
Natural gas in storage for the week ended Aug. 20 stood at 3.052 trillion cubic feet, 6.2% above the five-year average, according to the U.S. Energy Information Administration. Market participants are expecting another smaller-than-average build on Thursday, when the EIA releases fresh natural gas storage data.


U.S. Gold Prices:
Gold bullion was $1249.27 per troy ounce, up $.50 from previous.
It's selling price for gold in fabricated form was $1342.96, up $.53.
Handy & Harman's base price for gold was $1246.50 per troy ounce,
up $.50. The fabricated form price was $1346.22, up $.54.

Spot Gold: $1245
Spot Silver: $19.35

The IMF has been steadily selling a portion of its holdings in the market since early in the year, coordinating the effort with regularly scheduled sales by European central banks in order to avoid market disruptions.

The International Monetary Fund sold about 16.8 metric tons of gold in July, as its policy of gradually releasing gold onto the market continued.

The sales compared to about 17.7 metric tons in June and 15.2 the month before, according to the IMF's monthly report on gold holdings published Wednesday.



Stocks end a brutal August with meager gains
The stock market ended its worst August since 2001 with meager gains Tuesday after minutes from the latest Federal Reserve meeting showed officials' increasing concern about the economy. Stock indexes gave up most of their gains in mid-afternoon after the release of minutes of the Federal Open Market Committee.

More than 85% of Small Business Owners Are Worried About a Double-Dip Recession Ahead

More than 85% of small-business owners are worried about a double-dip recession, according to the latest quarterly survey by banking giant Citigroup Inc. (C). But three-quarters of those polled said they are very or somewhat prepared for another downturn.

Mentioned most often as a primary challenge to running their business was higher taxes by 48% of respondents. Declining demand for products and services was next at 43%, followed by tighter business regulations and the cost of health insurance, each by 40%.

Regarding hiring plans, 7% of surveyed small-business owners expect to reduce their work force, down from 8% in April, while the portion planning to hire was flat at 17%. Nine in 10 said they would need to see sales increase for at least two quarters in a row before they would hire new employees.

About 520 small-business owners were surveyed by phone in July and August. The businesses have revenue of more than $100,000 and no more than 100 employees.

Auto Makers Expected to Report 17% Decline Wednesday

Auto makers on Wednesday will reveal just how difficult it has been to close a late-summer sale without the lure of the "cash for clunkers" promotion that sparked a demand. As a group, the industry is expected to post a steep 17.7% unit decline from August 2009, according to car-buying research firm Edmunds.com.

General Motors Co., ahead of its much-anticipated IPO, is expected to report a 23.1% drop while Ford Motor Co. (F) is seen handing in a 10.5% retreat. Chrysler could be the only winner in the group, with its sales seen up an estimated 7.3%.

In addition to the skewed year-over-year numbers, August may even come in lower than the prior month, with TrueCar.com looking for a 3% drop from July. Low consumer confidence will be the primary headwind facing the automakers as they push toward recovery, according to TrueCar.com analyst Jesse Toprak.

"The pace of improvement in new vehicle sales has not been as robust as we predicted at the beginning of the year," he said. "The auto industry needs a catalyst for a sustainable higher level of sales, without which we will continue to struggle every month to reach 12 million SAAR [seasonally-adjusted annual rate of sales]."Toprak forecast a SAAR of 11.68 million.

Canadian Market:

The stock market was higher at midday Wednesday as strong manufacturing data from both the U.S. and China encouraged investors to jump back into riskier investments like equities. However, the flight from safer assets also hurt gold, limiting the market's gains.

At 11:45 a.m. EDT (1545 GMT), the S&P/TSX Composite Index was up 85.73 points, or 0.72%, at 11999.59. Gainers outpaced decliners 776 to 482. Trading volume was 207.5 million shares. The S&P/TSX 60 Index was up 5.64 points, or 0.8%, to 699.69 points.

The Canadian Finance Department reported an average yield of 3.489% at an auction of C$1.4 billion (US$1.3 billion) of 4.00% non-callable government bonds due June 1, 2041.

The high accepted yield was 3.496% for a price equivalent of 109.443 and the low accepted yield was 3.477% for a price equivalent of 109.823. The price equivalent for the average yield was 109.583.

Toronto Indexes, Volume; 3 pm EDT Composite Up 76.22
3 PM EDT Toronto Indexes

S&P/TSX Composite 11990.08 up 76.22 or 0.6%
S&P/TSX 60 Index 698.72 up 4.67 or 0.7%
Financials 171.40 up 2.33 or 1.4%
Materials 377.57 off 5.30 or 1.4%
Energy 276.72 up 4.44 or 1.6%
Industrials 101.93 up 1.92 or 1.9%
IT 26.95 up 0.08 or 0.3%



South American Markets:

Mexico:
Mexico's stocks opened higher Wednesday, starting out the month on a positive note as U.S. equities rose after a dismal August. The gains in stocks were accompanied by a rebound in the peso against the dollar after a volatile session Tuesday in which the local currency touched its weakest level of the year. The peso was quoted in Mexico City at MXN13.1360 to the dollar, compared with MXN13.2075 at the previous close.

BBVA Bancomer attributed the currency weakness to worse prospects for U.S. economic growth. The market's IPC index of leading issues was up 1.1% at 31,014 points around 9:55 a.m. EDT. Volume was a strong 22.5 million shares worth 801.5 million pesos ($61 million).



Brazil:

Brazilian Stocks Open Higher
Brazilian stocks opened higher Wednesday as global risk sentiment improved after better-than-expected data from China and Australia.

The benchmark Ibovespa stock index was 1.1% higher at 65,841 points in early trade on the Sao Paulo Stock Exchange. Brazilian stocks followed European and Asian markets higher on the rise of China's manufacturing purchasing managers' index to 51.7 from 51.2 in July, beating expectations of 51.5.


Chile:

Chile Stocks Rise 1% To New Intraday Record
Chile's blue-chip Ipsa index was recently up 1%, tracking surging U.S. markets which got a boost from strong manufacturing data.

The Ipsa was higher at 4570.93, while market volume totaled 42.0 billion Chilean pesos ($85.2 million) As several of the Ipsa's heavier-weighted shares also trade in New York, the Ipsa often tracks the Dow Jones Industrial Average. The DJIA recently surged 220 points, or 2.2%, at 10234 as the robust economic data helped erase gloomy jobs data to kick off September on a bullish note.


European Markets:

London Stocks End Sharply Higher
FTSE 100 5359.14 +133.92 +2.56%
FTSE 250 10040.34 +215.20 +2.19%
DJ UK Smaller Companies 826.64 +8.52 +1.04%



Asian Pacific Markets:

Australia:
Australia reported the fastest economic growth in three years. Second quarter gross domestic product expanded by 3.3%, much more than the 2.8% that had been expected.
In Sydney, the S&P/ASX 200 index rose 2.1% after gross domestic product rose a better-than-expected 1.2% in the second quarter from the first quarter.


Yen rises, heads to 4th straight monthly gain vs dollar
The yen rose and was on track for its fourth consecutive monthly advance against the dollar on Tuesday, its longest winning streak in 19 months, as investors shrugged off Japan's latest easing move.

Demand for the safe-haven currency rose in the past month as U.S. Treasury yields tumbled amid mounting signs the economic recovery in the United States was faltering. The rapid advance, which pushed the yen to a 15-year high this month, prompted Japanese authorities to announce measures on Monday to curb the yen's strength to protect the country's exports. Traders and analysts saw the central bank's moves as a symbolic gesture that will do little to halt the climb.


China:

Chinese Manufacturing Mounts Rebound
China's manufacturing economy staged a moderate rebound in August after slowing for several months under the onslaught of government measures to rein in credit and deter property speculation.

China's Ministry of Commerce isn't aware as yet of any anti-monopoly investigation into BHP Billiton Ltd.'s (BHP) $38.6 billion hostile bid for Canada's Potash Corp. of Saskatchewan (POT), a commerce ministry official said Wednesday.

Commodities
Crude Oil	73.68	+ 2.45%
Natural Gas	3.84	+ 0.60%
Gasoline	1.90	+ 2.51%
Heating Oil	2.05	+ 2.96%
Gold	1244.62	- 0.26%
Silver	19.33	- 0.26%
Copper	3.47	+ 3.18%
Quotes delayed 15 min.		» Add to your site

World Markets Snapshot:

Shanghai 2,622.88 -15.92 (-0.60%)
Nikkei 225 8,927.02 +102.96 (1.17%)
Hang Seng Index 20,623.83 +87.34 (0.43%)
TSEC 7,668.25 +51.97 (0.68%)
FTSE 100 5,299.01 +73.79 (1.41%)
CAC 40 3,554.00 +63.21 (1.81%)
S&P TSX 11,913.86 0.00 (0.00%)
S&P/ASX 200 4,495.70 +91.50 (2.08%)
BSE Sensex 18,205.87 +234.75 (1.31%)

Market Summary:

Stocks:

U.S. blue-chip stocks finished mixed as the Dow rose and the Nasdaq fell after minutes from the last meeting of the Federal Reserve added to jitters about the economic recovery. Minutes of the central bank's August meeting wiped out a slender rally, fueled by slightly better-than-expected housing, manufacturing and consumer confidence data. Key indexes are on track for a month of steep losses as investors lowered their expectations for economic growth in response to a flood of weak data in August.

Treasurys:

Fed likely to expand balance sheet by buying $500-$750bln in Treasuries over 6 mths.Treasury prices rose Tuesday, erasing last week's losses, as the market benefited from month-end demand and lingering worries about the strength of the economic recovery. While data Tuesday calmed investors somewhat investors were anticipating weak results from data later in the week, keeping interest in low-risk Treasurys alive. Market participants will closely watch national readings on U.S. manufacturing and the U.S. services sector Wednesday and Friday for further clues into how the recovery is faring.

Forex:

The dollar fell against the yen and dropped to its lowest level since January against the Swiss franc as investors continued to worry about the pace of the U.S. recovery. Minutes from the Federal Reserve's rate-setting committee offered no surprises to currency markets, which remained steady after the release. Investors will now turn to data like Friday's nonfarm payrolls report to determine whether to dip back into currencies tied to global growth, said Vassili Serebriakov, foreign-exchange strategist at Wells Fargo.

Wednesday's US Economic Calendar:

11:00 a.m.
August 27 MBA Mortgage Applications Survey Market Composite Index (previous 870.3), Cur Chg (previous +4.9%), Purchase Index (S.A.) (previous 170.5), Cur Chg (previous +0.6%), Refinance Index (previous 4944.7), Cur Chg (previous +5.7%)

11:30 a.m.
August Challenger Job-Cut Report (previous +42000)

12:15 p.m.
August ADP National Employment Report Private Payrolls Forecast (expected +17000)

1:00 p.m.
Chicago Fed Pres Evans speaks in Washington

2:00 p.m.
August ISM Manufacturing Report on Business Manufacturing PMI (expected 52.5), Prices Index (previous 57.5), Employment Index (previous 58.6), Inventories (previous 50.2), New Orders Index (previous 53.5), Production Index (previous 57)

2:00 p.m.
July Construction Spending - Construction Put in Place New Construction (expected -0.5%), Residential Construction (previous -0.4%)

2:30 p.m.
August 27 EIA Petroleum Status Report Crude Oil Stocks (previous 358.28M), (Net Change) (expected +1.3M), Gasoline Stocks (previous 225.62M), (Net Change) (expected +200K), Distillate Stocks (previous 175.97M), (Net Change) (expected +1M), Refinery Usage (expected 87.7%)

2:45 p.m.
Fed Gov Duke speaks on neighborhood stabilization in Washington

3:00 p.m.
August Global Mfg PMI

5:40 p.m.
Dallas Fed Pres Fisher speaks on "Perspectives on the Current Econ Climate' in Houston