Stock Market Update - Wednesday, September 15, 2010 Outlook Cautious Bull Moving Up

Stock Market Update
Wednesday, September 15, 2010

"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." —Ronald Reagan, 1981


"The problem with socialism is eventually you run out of
someone else's money." -- Margaret Thatcher


Latest News Headlines:

Dow Jones..10,552.49...+26.15...(0.25%)
S&P 500.......1,122.10.....+1.02...(0.09%)
Nasdaq........2,296.77.....+7.06...(0.31%)

US Stocks Edge Higher as US Dollar Pulls Back
Dow Jones 2:00 PM Averages: DJIA 10,563.12 UP 36.63

U.S. stocks reversed a morning loss to trade modestly in positive territory, as investors digested mixed economic data and Japan's attempts to tame its soaring yen. The dollar rose more than 3% to trade above 85 yen following the intervention, and was recently fetching 85.53 yen. The U.S. Dollar Index, tracking the U.S. currency against a basket of six others, rose 0.5%.

The Dow Jones Industrial Average was recently up 35 points, or 0.3%, at 10561. Boosting the measure, Travelers climbed 2.9%, while Hewlett-Packard advanced 0.9%. Cisco Systems rose 1.5% one day after the technology giant said it would start issuing a dividend.

The Nasdaq Composite gained 0.4% to 2299. The Standard & Poor's 500 stock index edged up 0.2% to 1123. Traders said that the recent rise in investor optimism has helped push the market up to the top of its tight trading range. One key signal will be whether the S&P 500 can break through the 1130 level.

"There's a lot of uncertainty in the U.S. in terms of what direction where we're heading in," said John M. Burns, portfolio manager at Bingham, Osborn & Scarborough LLC. "I can't remember a time in my experience when you have this many people on opposite sides of the debate, whether we dip or climb."

Keeping the market trapped in a narrow band Wednesday, investors mulled over a wave of foreign-exchange intervention by Japan totaling about $16 billion to stop the climbing yen that threatens to cripple its economy. The move, which sent the dollar higher against the yen, marked the first time Japanese authorities publicly intervened in currency markets since 2004.

30 INDUS 10,563.12 UP 36.63 OR 0.35%
20 TRANSP 4,472.16 UP 21.43 OR 0.48%
15 UTILS 392.45 DN 2.81 OR 0.71%
65 STOCKS 3,673.02 UP 7.10 OR 0.19%


US Dollar Moving Up, US Stocks Open Lower
Former Fed chairman says that government needs to get out of the way and let businesses take over the recovery, and that at this point, "we'd probably be better off doing less than more" to stimulate the economy.

US stocks opened a little lower Wednesday, as investors awaited key economic data on trade and manufacturing, and mull over Japan's decision to push down the yen's exchange rate. The biggest headline, so far, is the decision by Japan’s government to intervene in currency markets so as to curtail strength in the yen, which is currently down 3.0% against the dollar.

Dow 10,491, S&P 500 1,115, Nasdaq 2278

Stocks are lower today in broad selling. Declining issues have outpaced advancing issues on the NYSE and the Dow Jones Industrial Average is off -0.15% to 10,511. Investors are not finding a safe haven in bonds either, as the benchmark 10-year Treasury Bond is also weak. It is currently priced to yield 2.71%. The Energy and Financial sectors are the biggest laggards, down -0.84% and -0.68% respectively.


U.S. States Cutting Unfunded Retirement Plans

States cutting benefits for public-sector retirees
States cut benefits for public-sector retirees; NJ gov. decries generous `fairy-tale promises'

By Geoff Mulvihill and Susan Haigh
Associated Press Writers
Wednesday September 15, 2010


The security guards at the headquarters of New Jersey's pension fund have never seen anything like it before: lines of public employees extending out the door and into the street.

Day after day, workers come in droves to apply for retirement. They often line up before dawn.

The rush has been set off in part by Republican Gov. Chris Christie's campaign in this cash-strapped state to make government employment -- and retirement -- less lucrative.

Since 2008, New Jersey and at least 19 other states from Wyoming to Rhode Island have rolled back pension benefits or seriously considered doing do -- and not just for new hires, but for current employees and people already retired.

After telegraphing his intentions for months, Christie spelled out the details of his proposal Tuesday. They include: repealing an increase in benefits approved years ago; eliminating automatic cost-of-living adjustments; raising the retirement age to 65 from 60 in many cases; reducing pension payouts for many future retirees; and requiring some employees to contribute more to their pensions.

"We must reverse the damage caused by fairy-tale promises that have fattened benefits and pensions to unsustainable levels," the governor said.

To be sure, the looming benefit changes are not the only reason many public employees in New Jersey are retiring. Some say they want out for the usual reasons -- to spend time with the grandchildren or go fishing, for example -- or complain that government layoffs and other cutbacks are making work unbearable. But other employees figure that by retiring now, they can lock in certain benefits before it is too late.

William Liberty started as a trash collector in Lindenwold 37 years ago and worked his way up to a job as public works supervisor. But his pay has been frozen for two years and he has to take an unpaid furlough day a month. And given Christie's pension cut proposals, "it's going to get worse," Liberty said.

He hoped to keep the job until he turned 65. But at 62, he went last week to the state pension office to see about retiring soon.

Christie has warned that New Jersey's pension fund will go belly up unless something is done to close the $46 billion gap between how much the state expects to bring into the system and how much it has promised to workers. Other states' pension funds are in shaky condition, too.

The Pew Center on the States reported this year that in eight states, at least one-third of the future pension obligations for all public employees, including teachers, are unfunded. As of 2008, Pew said, state and local governments had pension obligations totaling $3.35 trillion -- $1 trillion of that not covered by the future stream of government and employee contributions specified under current law.

Only four states -- Florida, New York, Washington and Wisconsin -- had fully funded pension systems as of 2008.

Part of the reason for the gap is that in tough times, states often skip paying their share into retirement funds. New Jersey, for instance, is skipping its $3.1 billion in payments this year. The problem is compounded when investments lose money, as many have in recent years. In 2008, for instance, the Pennsylvania State Employees' Retirement System fund had investment losses of nearly 29 percent -- the worst in the country.

In the past, states have been more likely to reduce pensions for incoming employees, while generally leaving the benefits of current workers and retirees untouched. That strategy can be a way around objections from unions and lawsuits from those who say the government is reneging on promises.

Keith Brainard, research director for the National Association of State Retirement Administrators, says it may be unprecedented that so many states at once are raising employees' pension contribution rates.

Among the developments around the country:

-- In Mississippi, employees of state and local governments and school districts are now being required to put 9 percent of their pay into the state retirement system, up from 7.25 percent.

-- Rhode Island in 2009 reduced cost-of-living increases and tightened eligibility requirements for retirement. Previously, employees could retire with 28 years of service. Now, those already employed by the state will have to meet a new standard that takes both age and years of service into account.

-- In Wyoming, as of Sept. 1, employees will have to start paying 1.4 percent of their salaries into a pension fund -- the first time in a decade the workers have had to contribute anything.

-- Vermont earlier this year changed the retirement age for many current employees. They must be 65, or their age and years of service must add up to 90. Previously, retirees had to be 62 or have 30 years of service at any age.

-- Lawmakers in Colorado, South Dakota and Minnesota rolled back cost-of-living increases this year for public employees who already have retired. In Colorado, retirees had gotten 3.5 percent annual increases. They are getting no increase at all this year, and future ones will be capped at 2 percent.

Legal challenges to the cuts have been filed in all three states.

"Whether legislatures have the power to change benefits for people who are already in the system, that's a tough question," said Ronald Snell, an analyst for the National Conference of State Legislatures who monitors public pension issues across the country. "It's unresolved in a lot of places."

Unions are on guard against the benefit cuts -- and the implication that workers are to blame for states' financial messes.

"What we don't need is more scapegoating of public service workers and their benefits," said Matt O'Connor, a spokesman for the Connecticut State Employees Association.

In some states -- including South Dakota and Mississippi -- public employee retirements are up by more than 20 percent, though it is not clear whether changes to pension programs there are a factor.

The retirement rush is even more dramatic in New Jersey, where by the end of July nearly 18,000 employees in the three biggest public worker pension funds had retired or declared their intent to retire this year. That is up almost 50 percent over all of last year, and several union leaders and workers considering retirement said that possible pension changes were a factor.

The exodus could end up hurting the pension funds, because retired workers will be making withdrawals, not deposits into the system.

Mike Ryer, a firefighter in Morris Township, was among employees in line at the New Jersey pension office around dawn one morning this summer, considering whether, at 59, he was in financial shape to retire after 32 years. He is afraid of changes in his benefits and also figures his retirement now might save a younger colleague from layoff. If he stays, he faces a smaller department and a bigger workload.

He blames Christie for driving him out.

"It's hard to understand why all of this had to come at once," he said.

http://finance.yahoo.com/news/States-cutting-benefits-for-apf-1110812685.html?x=0



U.S. Home Prices Face 3-Year Drop Inventory Looms

Sales of new and existing homes fell to the lowest levels on record in July as a federal tax credit for buyers expired and U.S. unemployment remained near a 26-year high. The median price of a previously owned home in the month was $182,600, about the level it was in 2003, the National Association of Realtors said.

The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market.

In addition to the as many as 8 million properties vacant or in foreclosure, owners of another 3.8 million homes -- 5 percent of U.S. households -- said they are “very likely” to put their properties on the market within six months if there is improvement, according to a July survey by Seattle-based Zillow.

The supply of homes in default or foreclosure that may be offered for sale -- is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.

There is more supply than demand,” said Oliver Chang, a U.S. housing strategist with Morgan Stanley in San Francisco. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1 or 2 percent a year.”

Rising supply threatens to undermine government efforts to boost the housing market as home buyers wait for better deals.

Working through the surplus inventory varies by markets and depends on issues such as local employment and the amount of homeowner debt, said Sam Khater, chief economist for CoreLogic. Nevada has the highest percentage of homes with mortgages more than the properties are worth, while New York state has the lowest, according to the company.



Crude Oil and Petroleum Products:

OIL FUTURES: Crude Settles 78 Cents Lower At $76.02/Bbl
US NATURAL GAS: Futures Settle 0.7% Higher At $3.995/MMBtu

Crude Stocks Fall In Line With Expectations

U.S. crude inventories fell in line with analysts' expectations last week, according to data released Wednesday by the U.S. Department of Energy.

Crude oil stockpiles fell by 2.5 million barrels to 357.4 million barrels for the week ended Sept. 10, right in line with analysts' estimates. Late Tuesday, the American Petroleum Institute, an industry group, reported a 3.3-million-barrel increase.

On the New York Mercantile Exchange, crude oil futures maintained early losses, with October contracts recently down 1.7% at $75.51 a barrel. October futures for gasoline were recently down 1.2% at $1.9464 a gallon and heating oil was 0.4% lower at $2.1207 a gallon.

Inventories of crude oil and petroleum products remain at unusually high levels for this time of the year.

Gasoline stockpiles decreased by 694,000 barrels to 224.5 million barrels, the department's Energy Information Administration said in its weekly report. That compares to the forecast calling for a decrease of 1.1 million barrels in a Dow Jones Newswires survey of 12 analysts.

Distillate stocks, which include heating oil and diesel fuel, fell 340,000 barrels to 174.5 million barrels. Analysts projected an increase of 200,000 barrels.

Refining capacity utilization declined by 0.6 percentage point to 87.6%. Analysts had expected a 0.7-percentage point decline.

US Oil Inventories Declined.

Crude-oil futures were trading below $76 a barrel Wednesday morning at $74.88 a barrel before the DOE report showed declining inventories of crude oil-2.489M Bbl , gasoline -0.694M Bbl In Wk, and distillates -0.34M Bbl.

The Organization of Petroleum Exporting Countries, of which Venezuela is a member, gathers Oct. 14 in Vienna. It will be the first OPEC meeting in seven months.

OPEC is expected to keep its production policy unchanged at the meeting. Ramirez said he would support this, adding the for the moment it's best to continue "monitoring" the oil market.

Valero Energy Corp. (VLO) is shutting a 36,000-barrel-a-day hydrocracker at the West Plant of its Corpus Christi, Texas, refinery to repair a leak, spokesman Bill Day said Wednesday. "We do not expect this to be a lengthy outage, and any impact on production should be minimal."
BP PLC (BP) reported Wednesday that planned flaring activity will begin at its Carson, Calif., refinery early Thursday morning.

ConocoPhillips (COP) is shutting Monday a portion of a key gasoline-making unit at its Sweeny, Texas, refinery for four days to repair a leak, according to a filing with state environmental regulators.

Valero Energy (VLO) said Monday that the units affected by a power outage last week, including a that a diesel hydrotreater and a crude distillation unit, at its Port Arthur, Texas refinery had returned to planned rates.

The Motiva Port Arthur, Texas, refinery shut a unit after experiencing a flash fire Sunday, a spokesman for Royal Dutch Shell (RDSA) said Monday. There were no injuries or impact to the community. Shell did not identify the unit.

Flint Hills Resources (FHR) Friday will shut FCCU No. 2 and Sulfur Recovery Unit No. 1 in the East Plant section of its Corpus Christ, Texas, refinery for maintenance that is expected to conclude on September 24. The start and end dates of the work are estimates only.


Manufacturing Growth Slows in September
A gauge of manufacturing in New York State unexpectedly fell to its lowest level in more than a year in September, the New York Federal Reserve said in a report. New York manufacturing activity expands this month but at a slower pace than in August, according to the Federal Reserve Bank of New York's Empire State Manufacturing Survey, while hiring continues to rebound.

U.S. industrial production rises a second straight month, suggesting the sector that once was the primary driver of growth hasn't completely tapered off. Capacity utilization rises to 74.7%. Economists expected output to rise 0.3% with a factory operating rate of 75%.

As reported Tuesday, US Total business inventories increased 1.0% in July and beat the Briefing.com consensus estimate of 0.7% growth. Inventory growth for both manufacturers (+1.0%) and merchant wholesalers (+1.3%) was known prior to the release. The only new piece of information was that retailer inventories increased 0.7% in July.


US Mortgage Applications Decline
The volume of mortgage applications filed in the U.S. last week drops 8.9% from the previous week, the Mortgage Bankers Association reports, on declines in refinancing activity.

US Import Prices Rose More Than Forecast in August.
U.S. import prices rise more than expected amid higher energy and food prices, a move that should help quell fears that the economy may fall into deflation. Economists were expecting a more modest 0.3% rise in August.



Canadian Markets:

Toronto Indexes, Volume; 11 AM EDT Composite Down 48.10

. 11 AM EDT Toronto Indexes

S&P/TSX Composite 12144.88 off 48.10 or 0.4%
S&P/TSX 60 Index 705.22 off 3.44 or 0.5%
Financials 176.93 off 1.62 or 0.9%
Materials 381.52 off 0.26 or 0.1%
Energy 277.22 off 1.11 or 0.4%
Industrials 103.33 off 0.21 or 0.2%
IT 26.74 off 0.22 or 0.8%

Volume Wednesday Tuesday
10-11 82.1M 102.9M
9:30-11 134.6M 173.5M

South American Markets:

Brazil:

Brazil Central Bank Buys US Dollars At Auction

In its second snap auction of the day Wednesday, the Brazilian central bank bought U.S. dollars from the market at BRL1.7262. The central bank didn't reveal the volume of dollars it purchased.

Since last week, the central bank has been making it a habit to buy dollars from the market at two daily auctions. Previously, the bank bought dollars at only one auction a day.

Central bank officials have said the stepped-up purchases of dollars are needed in order to maintain an orderly market in the face of massive dollar inflows. Investors have been bringing dollars into Brazil in recent days ahead of a huge share offer by state-controlled oil company Petrobras (PBR, PETR4.BR).

Shortly before the Wednesday afternoon auction, the Brazilian real was trading at BRL1.7278. Shortly after the auction, the real was trading at BRL1.7250.




Colombia:

Colombia Central Bank, Intervention on Peso Rise - To Restart Buying US Dollars
The Colombian central bank restarted buying U.S. dollars in the currency market Wednesday, a move designed to halt the ascent of the peso, which threatens to undermine some key sectors of the economy.

The announcement had been widely expected as the peso has been on a tear and traded earlier this week at its strongest level in two years. Pressure on the monetary authority grew after the peso breached the COP1,800 mark last week.

After the central bank's statement, the peso retreated to COP1,805.45 per dollar from Tuesday's close of COP1,790.4.

The central bank said it will buy a minimum of $20 million daily for at least four months. The central bank last bought dollars on June 30, having bought $1.6 billion in the first six months of the year.


European Markets:

European Shares Slip

United Kingdom:

FTSE 100 Index 5555.56 -11.85 -0.21%
FTSE 250 Index 10494.27 +21.83 +0.21%
DJ UK Smaller Companies 872.42 +6.44 +0.74%

London Stocks Close Down But Off Lows
FTSE 100 ends off lows but still in the red, as upbeat U.S. stocks and strength in the retail sector lend support. Next leads retailers higher, +6.7% after its 1H results, while Marks & Spencer and Kingfisher are both +3.4. Nevertheless, miners retreat on lower metals prices, African Barrick Gold -3.4% and Eurasian Natural Resources -2.1%.

UK retail sales are at 0830 GMT, while in the U.S., initial weekly jobless claims and PPI at 1230 GMT are among the highlights.

U.K. exporters sold wheat to southeast Asia in 2010 for the first time in eight years, as lower prices earlier in the year--before Russia's grain-export ban--made British grain the world's cheapest source of feed, a U.K. analyst said Wednesday.

U.K. claimant count unemployment rose in August for the first time since January this year, hinting at tough times ahead once government spending cuts begin to bite in earnest, data showed Wednesday.

As the U.K.'s Trades Union Congress meets in Manchester vowing to fight the expected job cuts in the upcoming spending review, it could find the struggle has just got a little harder as employment may have reached a turning point.

The euro zone's annual inflation rate dips in line with expectations in August, indicating the European Central Bank has room to maintain its ultra-loose monetary policy, data from the EU's Eurostat statistics agency shows.


Greece:

Greek Truckers Won't Accept Liberal Government - Strike Extended Indefinitely

Freight truckers in Greece Wednesday decided to indefinitely extend their strike against government plans to liberalize their sector and help revive the recession-hit Greek economy, their union president said.

The strike, which started Monday, would go on, said union chief Georges Tzortzatos after a general assembly of the Greek truck owners' confederation.

The law on the liberalization of the sector, which could become law by the end of the month, was discussed in parliament and the development ministry said it was lifting the gasoline price restrictions imposed Monday to prevent speculation.

"We have avoided speculation for the moment, but if there are new problems we will reimpose this measure," said the Secretary of State for Development Ntinos Rovlias.

The Socialist government wants to open the freight market to full competition within three years to cut transport costs, which traders say inordinately push up the price of many goods. No new freight licenses have been issued in Greece for years, meaning that would-be operators can only purchase existing permits at high cost.

The truckers complain that inviting competition into the freight sector by reducing new licence charges is unfair to existing operators who have already paid high start-up fees running up to EUR300,000.

Greece has suffered waves of strikes and protests over unprecedented budget cuts and reforms the government had to agree to in order to tap a huge bailout loan from the European Union, the European Central Bank and the International Monetary Fund earlier this year to stave off bankruptcy.


France:

French pension reform bill cleared by lower house

France's lower house of parliament has passed a controversial reform bill which will raise the minimum pension age from 60 to 62 by 2018. It passed with 329 votes to 233 in the National Assembly in a stormy session and will now go before the Senate.

The government says the bill is needed to address France's deficit, but it has been fiercely opposed by the left. Thousands have protested against the bill and union leaders have threatened to stage open-ended strikes.

Socialist members of parliament had attempted to prevent the vote from taking place by prolonging the debate past the cut-off point. But house speaker Bernard Accoyer interrupted the process to allow the vote to proceed, prompting calls for his resignation from the Socialists.

Jean-Francois Cope, leader of President Nicolas Sarkozy's UMP party in the lower house, said the bill was highly important and most French people believe it is necessary.

"[They] know there is no other solution than to pass this courageous reform - begun in all of Europe's big countries - and that we have to do this to revive France," he said.

The reforms have been a key policy of Mr Sarkozy, who says they are needed to cope with an ageing population and the country's budget deficit.

Under current rules, both men and women in France can retire at 60, providing they have paid social security contributions for 40.5 years - although they are not entitled to a full pension until they are 65.

If passed, the reforms will raise the retirement age to 62 by 2018, the pension age to 67, and will increase the social security contribution requirement by a year.

As the bill was debated, thousands of people protested outside the parliament building, repeating their threats of nationwide open-ended strike action if it became law.

Last week, more than a million workers took to the streets to protest against the proposals, forcing a debate on 700 amendments.

Read the entire article at:
http://www.bbc.co.uk/news/world-europe-11317138


Asian/Pacific Markets:

CHINA:

China Yuan Jumps to Record High.

China Yuan Jumps to Record High Since 1993 on Inflation. Rupee inches up on share gains; dollar eyed. Nikkei jumps 2.8 pct as Japan moves to halt yen rise.

China’s yuan rose to the highest level since 1993 against the dollar on speculation the central bank will allow faster appreciation as inflation accelerates and foreign pressure mounts.

The People’s Bank of China fixed the yuan’s reference rate at a record high before the U.S. House Ways and Means Committee convenes a two-day meeting today to discuss the Asian nation’s currency policy.

The currency climbed 0.13 percent to 6.7378 per dollar as of 10:26 a.m. in Shanghai, according to the China Foreign Exchange Trade System. It touched 6.7330, the strongest level since the central bank unified official and market exchange rates at the end of 1993. The yuan has strengthened 0.8 percent in the past five days.

Larry Summers, head of President Barack Obama’s National Economic Council, met with Chinese officials in Beijing last week, while Treasury Secretary Timothy F. Geithner said China must let the yuan rise more quickly.

JAPAN:

Japan May Top China Again In Treasury Buys Nikkei Jumped 2.8 Percent

A Japan Finance Ministry official said the government will continue to step into the currency market to curb the yen's rise on Thursday if necessary, Kyodo News reported Wednesday.

The Japanese government and central bank conducted their first currency market intervention in over six years on Wednesday in a surprising move that reflected their fears that the country's economic recovery could slow down.

The yen-selling intervention, implemented several times both in Tokyo and overseas trading, helped the U.S. dollar rise back above the Y85 line from the upper Y82 yen. Market participants said the emergency step may have only a limited effect, however.

The focus is now shifting to whether the Bank of Japan could take additional easing measures in its monetary policy and help weaken the yen in line with the government step.

Prime Minister Naoto Kan said Japan's intervention has had some positive effects in reining in the yen's recent sharp rise against major currencies.

"As we have said before, rapid currency fluctuations are undesirable and we will take decisive steps when needed," Kan told reporters. "Today the fluctuations reached a stage where we could not leave them uncontrolled. So we intervened."

Another Finance Ministry official said Japan has "implemented an intervention of considerable scale," with some market sources estimating the amount of yen the authorities sold came to around Y1 trillion.

The intervention was conducted unilaterally, Finance Minister Yoshihiko Noda said, sparking doubts among market players about its effectiveness.

The Nikkei stock average .N225 jumped 2.8 percent after Japan intervened to weaken the yen, boosting shares of Toyota Motor Corp (7203.T) and other exporters.

Japan intervened to sell yen for the first time in six years, bringing the currency off 15-year highs against the dollar.

The action lifted the Nikkei out of negative territory and the index surged as much as 3 percent to a one-month high at one stage.

"The Japanese economy depends heavily on what it earns from exports overseas, so the intervention came at a good time and had an impact after a string of verbal threats," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

"Corporate performance hasn't been bad but the dollar hovering near 80 yen had made shares unattractive. The authorities were able to put their foot down in the markets, and the next question is can they follow through with steps to help the economy."

The benchmark Nikkei .N225 gained 2.8 percent to 9,555.50 after touching a one-month intraday high of 9,578.53. It dropped as low as 9,199.08. The broader Topix .TOPX rose 1.8 percent to 850.07.

The intervention in the foreign exchange sent short-term speculators scurrying to cover short positions in stock futures, market players said.

"The key points for the stock market going forward are if the Nikkei can remain on an uptrend once the short-covering in futures peters out," said Yutaka Miura, a senior technical analyst at Mizuho Securities.

"That in turn may depend on whether the yen remains on a weaker footing. The point here is that the yen hasn't strengthened on domestic factors alone -- the easing stance by the United States and low U.S. yields have played a key part as well."

Active purchases of Treasurys from the Japanese private sector in recent months may lead the U.S. to breathe a sigh of relief as the world's third largest economy steps in to replace lost demand from China, which has been scaling back its Treasury holdings. Treasurys may get an additional boost if Japanese policymakers intervene in an increasingly strong yen.

Healthy purchasing of Treasurys helps lower long-term borrowing costs for the public and private sectors in the U.S. It also helps ease fear that U.S. interest rates could jump after China, the largest creditor to Uncle Sam, ramped down its buying of Treasurys.

This year through June, China has cut its overall holdings of Treasurys purchased directly from the U.S. by $51.1 billion to $843.7 billion, according to data from the Treasury Department. In contrast, Japan has raised its stockpile by $37.9 billion to $803.6 billion over the same period.

The gap between Chinese and Japanese holdings of Treasurys has narrowed sharply in 2010. China owns only $40.1 billion more Treasurys than Japan, down from $129.1 billion at the start of the year.

Japan was once the largest foreign owner of Treasurys, but ceded that role to China in September 2008.

Japan's increased buying of Treasurys may be partly due to a surging yen, which hit a fresh 15-year high against the dollar Tuesday and has risen more than 10% this year. A higher yen makes it cheaper for Japanese investors to buy Treasurys.

But a strong yen also cuts the competitiveness of Japanese exports, raising the possibility that the Bank of Japan may intervene to cool off the yen. The Bank of Japan last intervened in March 2004, when it ended a 15-month campaign to slow the yen's appreciation.

Commodities
Crude Oil	75.57	- 1.60%
Natural Gas	4.01	+ 1.01%
Gasoline	1.95	- 0.91%
Heating Oil	2.12	- 0.48%
Gold	1266.55	- 0.18%
Silver	20.35	- 0.59%
Copper	3.44	- 0.69%
Quotes delayed 15 min.		» Add to your site

World Markets Snapshot:

Shanghai 2,652.50 -36.02 (-1.34%) Nikkei 225 9,516.56 +217.25 (2.34%) Hang Seng Index 21,725.64 +29.60 (0.14%) TSEC 8,163.82 +31.22 (0.38%) FTSE 100 5,547.01 -20.40 (-0.37%) DJ EURO STOXX 50 2,784.97 -21.50 (-0.77%) CAC 40 3,747.77 -26.63 (-0.71%) S&P TSX 12,192.98 0.00 (0.00%) S&P/ASX 200 4,661.50 +35.00 (0.76%) BSE Sensex 19,502.11 +155.15 (0.80%)

World Currencies:

EUR/USD	1.2993	-0.0026 (-0.20%)
USD/JPY	84.8600	+1.7900 (2.16%)
GBP/USD	1.5514	-0.0051 (-0.33%)
CAD/USD	0.9707	-0.0052 (-0.53%)
USD/HKD	7.7662	+0.0005 (0.01%)
USD/CNY	6.7358	-0.0072 (-0.11%)
AUD/USD	0.9379	-0.0066 (-0.70%)

Wednesday's US Economic Calendar:

7:00 a.m.

Sep 10 MBA Weekly Mortgage Applications Survey Market Composite Index (previous 880), Cur Chg (previous -1.5%), Purchase Index (S.A.) (previous 184.5), Cur Chg (previous +6.3%), Refinance Index (previous 4926.5), Cur Chg (previous -3.1%)

8:00 a.m.
Former Fed Chairman Greenspan speaks at Council on Foreign Relations in New York

8:30 a.m.
Sep Empire State Manufacturing Survey Manufacturing Index (expected 7), Employment Index (previous 14.29), New Orders Index (previous -2.71), Prices Received Index (previous -2.86)

8:30 a.m.
August Import & Export Price Indexes Import Prices (expected +0.3), Non-Petroleum Prices (previous -0.2%), Petroleum Prices (previous +2%)

9:15 a.m.
August Industrial Production (expected +0.3%), Capacity Utilization (previous 0.7), Current Capacity Utilization (expected 75%)

10:30 a.m.
Sept. 10 EIA Weekly Petroleum Status Report Crude Oil Stocks (previous 359.85M), (Net Change) (expected -2.6M), Gasoline Stocks (previous 225.16M), (Net Change) (expected -1.1M), Distillate Stocks (previous 174.85M), (Net Change) (expected +300K), Refinery Usage (expected 87.6%)

Market Summary Tuesday Sept. 13, 2010:

Stocks:

Stocks finished mixed, with the Dow Jones Industrial Average falling and the Nasdaq Composite rising as investors hedged some of their recent bullishness, sending gold prices to a record exchange high. Paul Simon, chief investment officer of Tactical Allocation Group, said the gains in equities and the safe-haven trading were "indicative of the gulf that exists between bears and bulls."

Treasurys:

Treasury prices rallied despite better data as investors remained concerned about the long-term health of the economy and swept up low-risk debt. Treasurys climbed even as data showed that U.S. retail sales rose for a second straight month in August, inventories at U.S. businesses surged during July and business sales posted the biggest gain in four months.

Forex:

The U.S. dollar slumped broadly, sinking to a 15-year low against the yen, dipping below parity against the Swiss franc and falling to a series of one-month lows against the euro. The euro's gain tripped automatic orders to sell the dollar, analysts said, not only against the common currency, but also against other widely traded rivals, speeding the greenback's fall.