US Stocks Set for Upward Trend Ahead

Market Update
Tuesday, August 17, 2010

U.S. stocks climbed and the Dow gained up to 177 points, and then closed at 103.84 up Tuesday as earnings from key retailers gave investors reason to focus on encouraging corporate reports rather than the latest round of mixed economic data. The morning's flurry of economic data showed some headline improvements, though not all components were encouraging.

Dow Jones	10,405.85	+103.84	(1.01%)
S&P 500	1,092.54	+13.16	(1.22%)
Nasdaq	2,209.44	+27.57	(1.26%)

U.S. industrial production rebounds in July, a reassuring sign from a segment of the economy that has helped drive the recovery. Meanwhile, producer prices rise for the first time in four months while housing data is mixed.

Housing starts increased 1.7%, to a seasonally adjusted annual rate of 546,000, the Commerce Department said Tuesday, more than the 0.2% increase expected by economists. However, the increase was driven by groundbreakings of homes with five or more units, while single-family housing starts plunged 4.2% and July building permits fell 3.1% to an annual rate of 565,000.

U.S. Treasury Secretary Timothy Geithner reiterates his preference for a government role in backing the housing finance system. He also vows not to resurrect government mortgage giants Fannie Mae and Freddie Mac

Separately, U.S. producer prices rose for the first time in four months in July as the price of raw materials increased. The index of producer prices rose a seasonally-adjusted 0.2% for finished goods, in line with expectations. Stripping out more-volatile food and energy prices, the government report showed that wholesale inflation rose by 0.3%, beating expectations of a 0.1% rise.

The Federal Reserve said industrial production last month rose 1.0%, more than the 0.7% increase expected by economists. Capacity utilization also increased, climbing to 74.8%, slightly topping forecasts.

More than $3 billion in new asset-backed bonds surface this week in what is traditionally a slow period. Sallie Mae, is in the market with a $760.38 million bond, and Ally is marketing a $584.94 million bond.

The Federal Reserve may need to begin a program of moderate purchases of US Treasury bonds if inflation continues to fall, James Bullard, president of the Federal Reserve Bank of St. Louis, says in an interview with The Wall Street Journal.

The Dow's rise was led by materials and technology components. DuPont rose 2.1% and Intel gained 1.9% after data showed improving industrial production and capacity utilization. Consumer companies also climbed after earnings from two key retail giants boosted hopes that consumer spending may not be as stagnant as feared.

U.S. economy shows stronger data than in the last quarter, but that isn't saying much, writes Kathleen Madigan. While the data bolster arguments against a double dip, the outlook remains meager by past recovery standards.

US Dollar Index Futures (NYBOT: DXY.NYB) $82.18, Crude Oil is 76.00. Dollar rises modestly against the yen, but falls against the euro on improved U.S. industrial data. Gold futures hold steady as strength in the equities markets takes steam out the safe haven.

The Canadian dollar's robust performance Tuesday also reflected the overall improvement in risk sentiment, said Jack Spitz, managing director for foreign exchange, financial markets and derivatives at National Bank Financial in Toronto.

The U.S. dollar was at C$1.0333 at 3:45 p.m. EDT (1945 GMT) from C$1.0376 at 8:00 a.m. EDT (1200 GMT), and from C$1.0444 late Monday. "Ultimately, today's news is simply bringing dollar/Canada back to the middle of the road in a range that's been well defined," said National Bank's Spitz, identifying the C$1.0100 to C$1.0500 area as the established range for the U.S. unit.

The exchange rates at 3:45 p.m. EDT (1945 GMT), 8:00 a.m. EDT (1200 GMT), and late Monday.

USD/CAD 1.0333 1.0376 1.0444
EUR/CAD 1.3312 1.3342 1.3383
CAD/JPY 82.73 89.24 81.69


Foreign Investment In Canada Securities Slows In June, Toronto Indexes, Volume; 11 AM EDT Composite Up 147.99

Foreign investors bought a net C$5.39 billion (US$5.16 billion) of Canadian securities in June, reflecting continued investment in bonds, a small purchase of equities and a sell-off of money market paper, Statistics Canada said Tuesday.

Foreigners acquired C$6.96 billion of Canadian bonds, the 18th consecutive increase, with Canadian provincial bonds attracting the bulk of inflows. Foreign investment in Canadian federal bonds fell to C$1.5 billion from C$11.5 billion in May.

Foreign investment in Canadian equities dropped to C$48 million, down from C$5.16 billion the previous month, with purchases of gold and industrial shares offset by sales of banking and information technology shares.

Mexico's stocks logged solid gains and the peso rallied in early trading Tuesday, as stronger-than-expected U.S. industrial production data helped to soothe investor fears that a slowdown in the world's biggest economy might derail Mexico's recovery.

Mexico's benchmark IPC index of most-traded issues was trading 0.8% higher at 32,373 points at 10:19 a.m. EDT. Volume was 24.1 million shares worth 662.7 million pesos ($52.6 million).

The peso was quoted in Mexico City trading at MXN12.6095 to the U.S. dollar, after closing at MXN12.6585 on Monday.

The Central Reserve Bank of Peru has clearly started a tightening cycle, increasing its policy rate by 125 basis points to 2.5% in the last few months, while also increasing reserve requirements for commercial banks.

The bank said the repercussions will start to be felt in the fourth quarter, with a forecast 5.0% growth, and more so from 2011. Banco BBVA Continental, Peru's second largest bank, says it expects growth in GDP of 8.5% in July.

The Chilean peso ended at a 31-week high against the dollar Tuesday as international copper prices rose and the euro posted gains against the greenback. As Chile is the world's premier copper producer, the peso often takes cues from the metal's international prices. Spot copper in London gained 1.5% to $3.32 a pound, according to Chile's state copper commission Cochilco.

The peso closed at CLP502.00 to the dollar versus Monday's close of CLP505.30. It traded in a range of CLP501.90 to CLP504.00.

As Europe is one of Chile's main trade partners, the peso often moves in the same direction as the euro against the dollar. The euro rose against the dollar as better-than-expected U.S. industrial data lifted the mood in markets.

In the bond market, yields on inflation-indexed Chilean central bank bonds, or BCUs, ended lower as institutional investors snapped up bonds. The yield on five-year BCU bonds ended at 2.25% from 2.30% Monday, while the yield on 10-year BCUs ended at 2.65%, from 2.68% the previous session.


Asia Pacific stocks showed mixed results with banks gaining but Sensex ends flat; outlook hazy.

European shares edged up in early trade with miners and banks showing signs of gaining. FTSE higher; UK inflation slows. In the debt markets, Ireland auctioned EUR1.5 billion ($1.9 billion) in government bonds, the maximum amount on offer. The strong auction helped bolster the euro, which was recently trading at $1.2847, up from $1.2818 late Monday in New York. Dublin Stocks: ISEQ Ends +1.6% At 2,858; AIB +5.6%. Dublin Stocks: ISEQ Ends +1.6% At 2,858; AIB +5.6%

World markets:

Shanghai	2,671.89	+10.19 (0.38%)
Nikkei 225	9,161.68	-34.99 (-0.38%)
Hang Seng Index	21,137.43	+25.31 (0.12%)
TSEC	7,931.09	-10.13 (-0.13%)
FTSE 100	5,350.55	+74.45 (1.41%)
CAC 40	3,663.13	+65.53 (1.82%)
S&P TSX	11,715.53	+162.77 (1.41%)
S&P/ASX 200	4,477.00	+38.50 (0.87%)
BSE Sensex	18,048.85	-1.93 (-0.01%)

U.S. stocks were mixed in light trading Monday following a bruising week of losses, with technology stocks inching up as most other sectors slipped into the red. Traders said computer maker Dell's acquisition of storage-technology firm 3Par was generating excitement for other potential takeover targets.

Commodities
Crude Oil	76.12	+ 1.17%
Natural Gas	4.21	- 0.33%
Gasoline	1.95	+ 1.58%
Heating Oil	2.02	+ 1.60%
Gold	1224.51	- 0.04%
Silver	18.53	+ 0.76%
Copper	3.32	+ 1.40%

Tuesday's US Economic Calendar

8:30 a.m.
July New Residential Construction - Housing Starts and Building Permits Total Starts (expected 558K), Starts Percent Change (expected +1.6%), Building Permits (previous 586K), Percent Change (previous +2.1%)

8:30 a.m.
July PPI (expected +0.2%), PPI Core (expected +0.2%), PPI Core Crude Goods (previous -4.8%), PPI Core Intermediate Goods (previous -0.4%), PPI Crude Goods (previous -2.4%), PPI Energy Goods (previous -0.5%), PPI Intermediate Goods (previous -0.9%), PPI Passenger Cars (previous -0.5%)

8:55 a.m.
August 14 Johnson Redbook Retail Sales Index MoM % Change (previous +1.2%), 12MonChgPct (previous +3%), 52WkChgPct (previous +3%)

9:15 a.m.
July Industrial Production (expected +0.7%), Capacity Utilization (previous 0), Current Capacity Utilization (expected 74.5%)

10:00 a.m.
Q2 Quarterly Retail E-Commerce Sales

12:30 p.m.
Minneapolis Fed Pres Kocherlakota speaks in Marquette, Mich.

4:30 p.m.
Aug 13 API Weekly Statistical Bulletin Crude Stocks (Net Change) (previous -2.19M), Gasoline Stocks (Net Change) (previous -1.54M), Distillate Stocks (Net Change) (previous +2.29M), Refinery Runs (previous 84.2%)

5:00 p.m.
Aug 15 ABC News Consumer Confidence Index (previous -47)

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State of Washington - Washington primary elections

N/A
State of Wyoming - Wyoming primary elections

N/A
U.S. Department of the Treasury - Obama administration hosts Conference on the Future of Housing Finance