Stock Market Update - Friday, October 1, 2010 Outlook Cautious Uptrend

Stock Market Update
Friday, October  1, 2010

Latest US Economic News Headlines:

4:00 PM ET US Index Snapshot:

Dow Jones	10,829.68	+41.63	(0.39%)
S&P 500	1,146.24	+5.04	(0.44%)
Nasdaq	2,370.75	+2.13	(0.09%)

Sector Summary:
Sector     Change % up/down

Basic Materials    +1.19%
Capital Goods     +0.12%
Conglomerates     +0.69%
Cons. Cyclical     +0.30%    
Cons. Non-Cyclical +0.48%
Energy                 +1.42%    
Financial              +0.82%    
Healthcare           +0.10%    
Services               +0.51%    
Technology          +0.19%    
Transportation     -0.11%    
Utilities               +0.86%


US COMMODITY PRICES: (Oct. 1, 04:00 PM)

81.65                       + 2.10%
Natural Gas     3.79   - 2.17%
Gasoline     2.09        + 2.84%
Heating Oil     2.30    + 1.22%
Gold     1319.31        + 0.79%
Silver     22.11           + 1.75%
Copper     3.68          + 1.04%

Dow Jones 10:00 AM Averages: DJIA 10,850.57 UP 62.52
  30 INDUS     10,850.57 UP   62.52 OR    0.58%
  20 TRANSP     4,554.43 UP   32.11 OR    0.71%
  15 UTILS        399.07 UP    0.84 OR    0.21%
  65 STOCKS     3,756.44 UP   20.64 OR    0.55%


ISM REPORT TURNS STOCKS NEGATIVE BRIEFLY
ISM Manufacturing Data Report - Factory Index Declined to 54.4 in September

US Stocks Rise In Volatile Trading After Mixed Data

US stocks closed higher Friday as the Dow Jones Industrial Average increased 42 points to 10830, the S&P 500 gained 5 points to 1146 and the Nasdaq Composite climbed 2 points to 2371.


Stocks bounced around in choppy trading on Friday as investors digested conflicting economic indicators in a key manufacturing report.

The Dow Jones Industrial Average recently rose 39 points, or 0.4%, to 10827, on the first day of trading in the fourth quarter. But the blue-chip index is down 0.3% for the week, on pace to snap its four-week winning streak.

The Nasdaq Composite edged up 0.1% to 2371. The Standard & Poor's 500-share index rose 0.4% to 1144. The index climbed to as high as 1150 on Friday but couldn't push through the resistance level. Traders noted that the S&P 500 has risen above that level in recent days but has not decisively catapulted above it, adding to the market's volatility.

Jittery trading plagued the market after the Institute for Supply Management said the U.S. manufacturing sector expanded in September, but at a slower pace than in August. Investors poring through the report said certain data points triggered alarm about the economy's health.

U.S. stocks pared gains on the first trading day of the fourth quarter as investors treaded cautiously after some mixed signals from a key manufacturing report.

The Dow Jones Industrial Average recently was up 25 points, or 0.2%, to 10812. The Nasdaq Composite fluctuated between gains and losses and was recently down 0.2% at 2364. The Standard & Poor's 500-share index edged up 0.1% at 1142.

Jittery trading plagued the market after the Institute for Supply Management said the U.S. manufacturing sector expanded in September, but at a slower pace than in August.

The ISM's manufacturing purchasing managers' index fell to 54.4 from 56.3 in August. Economists surveyed by Dow Jones Newswires had expected a September reading of 54.0. Manufacturing has been a bright spot in the economic recovery, and investors closely watch the ISM data to indicate whether the recovery appears sustainable.

The U.S. manufacturing sector expanded in September, but at a slower pace than in August, and price pressures jumped, according to data released Friday by the Institute for Supply Management.

The ISM’s U.S. new orders measure declined to 51.1 from 53.1, while the production index dropped to 56.5 from 59.9.

The ISM report shows the factory sector is growing, but demand is slowing, leading executives to be cautious about inventories and hiring. The employment gauge fell to 56.5 in September, the lowest in six months, from 60.4, and the index of export orders dropped to 54.5, the lowest this year.

The measure of orders waiting to be filled fell to 46.5 from 51.5 and the index of prices paid jumped to 70.5 from 61.5.

The inventory index increased to 55.6 in September, the highest since July 1984. A figure higher than 50 means manufacturers increased stockpiles.

Manufacturing expanded in September at the slowest pace in 10 months, underscoring the Federal Reserve’s forecast of “modest” U.S. growth in coming months.

The Institute for Supply Management’s factory index dropped to 54.4 from 56.3 in August, the Tempe, Arizona-based group said today. Readings greater than 50 signal growth and economists forecast a decline to 54.5, according to the median estimate in a Bloomberg News survey. Measures of orders and production fell to the lowest level since June 2009.

Companies such as Cisco Systems Inc. are seeing signs of slower growth and limited hiring in the U.S. even as manufacturers benefit from improving overseas markets.

Noting smaller gains in business investment, the Fed last week said it stands ready to do more to ensure the world’s largest economy keeps growing.

“The manufacturing sector is growing at a more subdued but still-positive rate,” Paul Dales, a U.S. economist at Capital Economics Ltd. in Toronto, said before the report. “It’s still positive growth but not as splendid as a few months ago.”


US REGULATORS SEIZED TWO MORE
US COMMUNITY BANKS, IN FLORIDA AND WASHINGTON
Wakulla Bank, in Crawfordville, Florida and Shoreline Bank, in Shoreline, Washington, October 1, 2010  were closed today and all assets were seized by FDIC bank regulators.

To see the complete list of failed banks and credit unions visit:

The Online Consultancy Network™ Bank Failure List
http://ocnww.blogspot.com/2010/09/bank-failure-list-update-september-1.html




FOREX MARKET NEWS US DOLLAR DROPS TO 8 MONTH LOW
Dollar drops to 6-mo low vs euro as Dudley weighs

By Gertrude Chavez-Dreyfuss
Reuters.comFri Oct 1, 2010 11:15am EDT
 
The dollar hit a six-month low versus the euro on Friday after a Federal Reserve official said U.S. growth has been generally disappointing, which strengthened the case for more quantitative easing.

More action by the Fed to boost growth will likely be warranted unless the outlook improves, William Dudley, president of the New York Fed, said on Friday.

Stronger-than-expected data on U.S. personal income and consumption data for August didn't help the dollar, whose weak trend is firmly entrenched. The safe-haven dollar was also suffering from a return of risk appetite after the U.S. data and a report showing Chinese manufacturing was stronger than expected.


"The only chance to keep the dollar supported for the near term is if the numbers start looking better," said Ron Rimpson, director of FX research at Action Economics in Tampa, Florida.  "A lot of the future for the dollar is going to depend on the data. If the data stays decent, the market will start to price out quantitative easing.

The euro EUR=EBS rose to $1.3778, its highest since mid-March, according to the EBS trading platform, breaking through resistance around $1.3692, a peak hit in April. Markets also took out key option barriers at $1.3700 and $1.3750, traders said, but a further barrier looms at $1.3800.

After that $1.38 level, the next big target is $1.3897, the 61.8 percent Fibonacci retracement of the move from the November 2009 peak and the June 2010 low.

Asian central banks were seen selling the U.S. currency for euros to rebalance their books. Market players said Asian central banks bought dollars versus local currencies in Asian hours and simultaneously sold the greenback to rebalance their reserve portfolios by buying euros.

The euro is poised to close above its 55- and 100-week moving averages at $1.3612 and $1.3572, respectively, and technical analysts said this would open the way to more gains. In midmorning New York trading, the euro was up 0.8 percent at $1.3740.

Losses against the euro helped push the dollar lower against a currency basket, with the dollar index .DXY falling to 78.100, its lowest since January. The index fell more than 5 percent in September, its worst monthly performance since May 2009.

A weak U.S. manufacturing survey, showing a fall in the Institute for Supply Management's index to 54.4 last month from 56.3 in August, also pressured the greenback.

Dollar weakness also propelled the Australian dollar to a fresh two year high versus the U.S. currency at US$0.9751

"Right now the dollar weakness is across the board, so we hit any technical or specific strength in a currency and it will just be exacerbated," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey.

The dollar JPY= slipped 0.2 percent to 83.26 yen, edging closer to a 15-year low of 82.87 yen hit last month. Traders and analysts say a fall below that level may be one potential trigger point for more intervention.

Japanese banks are said to be on the bid in dollar/yen between 83.15 yen, a post-intervention low, and 83.35.

Japanese Finance Minister Yoshihiko Noda said on Friday he would continue to take decisive steps on currency moves when necessary.

Read the original story at Reuters.com:
http://www.reuters.com/article/idUSN0138819620101001




The Falling Dollar and Its Impact on Stocks
October 01, 2010

The third quarter was a boon for stocks, but it was a bust for the US dollar. Since peaking on June 7th, the US Dollar Index has pretty much gone straight down for a decline of 11.62%.

While a lot of investors don't trade in currencies, their price movements can have a big impact on equities. When the dollar is rallying, companies that generate a large portion or all of their revenues inside the US benefit, while companies that generate a large portion of their revenues outside of the US benefit when the dollar is falling.

Earnings season starts next week and companies will be releasing their Q3 numbers. With the big fall in the dollar in the third quarter, the revenues of companies with heavy international exposure should look pretty good. One has to wonder how much of this is priced into these stocks already.

Read the entire article at Seeking Alpha:

http://seekingalpha.com/article/228032-the-falling-dollar-and-its-impact-on-stocks?source=yahoo



The Dollar Is Due for a Deadcat Bounce
By TraderMark
seekingalpha.com
http://fundmymutualfund.com
October 01, 2010

Bernanke has declared all out war on the U.S. dollar. Things are so bad that, even as Europe's peripheral countries struggle with massive debt loads, people are fleeing the green paper and running into euros. Things are so bad that, despite government intervention in the currency market for the first time in 6 years by Japan to strengthen the yen, people would rather "fight the Japanese Fed" (effectively) and buy yen. It is pretty pathetic.

With that said, at some point the dollar has to perform a technical bounce from oversold conditions. It might last only 3-5 days but the rubber band is being pulled to a massive extreme. I may soon "fight the Fed" on this one for a short duration trade as the oversold readings are reaching levels seen at other bounces.



SLUGGISH US AUTO SALES REPORT
US Auto Sales Remain Sluggish Despite New Models

Sales dropped 4 percent from August to 958,966, according to AutoData Corp. While it's typical for sales to decline after Labor Day, this August was one of the weakest on record.

Industry sales rose 29 percent from last September, but that was deceptive. The government's Cash for Clunkers rebate program, which ran during July and August of 2009, drew buyers who otherwise would have waited until later in the year.

September had the uneven sales that have plagued the industry all year. The month started strong thanks to Labor Day promotions, but sales tapered off until the final weekend, when new models and clearance sales on older ones piqued buyers' interest.

Industry analysts expect full-year sales of around 11.6 million vehicles for 2010. Last year, they totaled 10.9 million. In 2007, before the recession struck in force, sales came in around 16 million.

Buyers remain cautious, responding to promotions and economic news, which means sales come in spurts. Still, those trends "encourage us that the buyers are out there and that the industry recovery will continue," said Toyota vice president Bob Carter.

So far, automakers have refused to pump up sales by offering big incentives, which was the usual tactic earlier this decade. Because car makers are now leaner and producing fewer vehicles, they aren't forced to use big discounts to move cars off lots. Incentive spending fell 3 percent from August to September to $2,683 per vehicle, according to auto pricing site TrueCar.com.

Auto loans are still restricted for people with poor or mediocre credit scores, Ford's chief economist Ellen Hughes-Cromwick said. It will probably take a few years — and more job creation — for buyers with medium and poor credit to return to the new car market.

But loans are available to people with high credit scores because banks and finance companies are extending credit more easily after last year's all-out freeze, she said. People with high scores generally buy pricier cars and trucks, which explains why sales of vehicles such as the Lexus GX crossover more than doubled over last September.



LARGE COPPER SURPLUS SEEN
Copper Market 200,000-Ton Surplus In 2010

The global refined copper market is likely to be in a surplus of 200,000 metric tons in 2010, before falling into deficit in 2011 as an expected increase in economic activity boosts demand, the International Copper Study Group said Friday.

The group said while industrial demand in 2010 is expected to increase significantly in most of the major consuming regions, demand from the China-dominated Asian market--the leading global refined copper market--is expected to only increase slightly.

"The increased availability of scrap in 2010 owing to higher prices and inventory stability or release are expected to reduce China's apparent demand to slightly below the 2009 level," the ICSG said.



COMMODITY FUTURES TRADING COMMISSION RESTRICTS BANK VOTING POWER
The public will now get a chance to comment on the rule before it is put before the CFTC for a final vote. 

Commodity Futures Trading Commission approve temporary rule that puts all swap traders on notice to retain records of their trades conducted prior to the passage of the Dodd-Frank financial law.

Regulators moved to float a plan on Friday to restrict banks and other firms from wielding too much voting power within derivatives clearing and trading venues, even as some of them expressed reservations about the proposal.

In a 4-to-1 vote, the Commodity Futures Trading Commission laid out proposed governance standards for clearing and trading venues that establish board structure criteria as well as hard percentage caps on voting equity rights. The rule would prohibit members of trading platforms and exchanges from individually owning more than 20% of the voting equity.

For clearinghouses, meanwhile, the CFTC is considering two options. One of them would be a two-pronged approach: It would prevent clearing members from individually controlling 20% of the voting shares and also prohibit certain financial firms like banks and swap dealers from collectively owning 40% of the voting equity.

Alternatively, the CFTC is considering an individual 5% voting equity restriction for clearing members and financial entities, even if those entities aren't members of the clearinghouse. Clearinghouses could choose which of these two options they prefer and would get either two years or two board election cycles to come into compliance. They can also seek temporary waivers from the rule.

CFTC Chairman Gary Gensler said he supports floating the proposals because he believes some swaps clearinghouses have been too exclusive with their membership rules. They have been "hiding behind risk management to keep start-up swap dealers out of the club," he said.

The measures are part of broad new powers bestowed to the CFTC in the Dodd-Frank Act. Such a plan is likely to be opposed by many in the financial industry, especially banks that have controlling interest in clearinghouses and other trading platforms.

Nasdaq OMX (NDAQ) advocated for a 20% collective voting cap on banks' voting stakes in clearinghouses last year and managed to get the provision tucked into the U.S. House's version of the financial law.

The provision was later watered down, and the Dodd-Frank law now only gives the CFTC the authority, but doesn't require it to impose such restrictions.



CONSUMER SENTIMENT RISE
Sept Reuters/University of Michigan Sentiment 68.2 Vs 66.6 Early Sept
The consumer mood improved a bit at the end of September, according to a report released Friday.

The Reuters/University of Michigan consumer sentiment index's final reading for September ticked up to 68.2, from a preliminary reading of 66.6, but was down from 68.9 in the final-August reading.

Economists surveyed by Dow Jones Newswires had expected the final August index move higher and come in at 67.0. The final August current conditions index stood at 79.6 from an early-September reading of 78.4. The expectations index stood at 60.9.

One-year inflation expectations were at 2.2% and the five-year expectations is for 2.7%.



SOLID ECONOMIC REPORT
US Stocks Rise, Boosted By Upbeat Income, Spending Data

U.S. stocks kicked off the fourth quarter on a positive note Friday, opening higher due to upbeat U.S. personal income and spending data as well as strong economic figures from China.

  The Dow Jones Industrial Average rose 48 points, or 0.5%, to 10837. The blue-chip index surged 7.7% last month, marking its best September performance since 1939 and rallied 10.4% in the third quarter, its best quarterly performance in a year. Alcoa was the Dow's biggest percentage gainer, up 1.7%. 3M rose 1.2% and Walt Disney gained 1.3%.

  The Nasdaq Composite recently rose 0.8% to 2387. The Standard & Poor's 500-share index climbed 0.8% to 1150, led by the materials and energy sectors.

  Encouraging U.S. personal income and spending data as well as positive Chinese manufacturing figures were the positive catalysts for stocks in early trading.

  The U.S. Commerce Department said consumer spending rose 0.4% in August after rising the same amount in July. Incomes, meantime, increased by 0.5% in August after a 0.2% rise in July. The numbers were slightly better than expected. Economists surveyed by Dow Jones Newswires had forecast spending and income would both climb by 0.3% in August.

  Asian stocks finished mostly higher overnight, underpinned by data showing an acceleration in China's manufacturing activity. The official Chinese purchasing mangers index rose to 53.8 in September from 51.7 the previous month.

  But the day's key economic report is due at 10 a.m. with the release of the Institute for Supply Management's manufacturing index for September.

  Federal Reserve Bank of New York President William Dudley said Friday the central bank is almost certain to have to offer fresh support to ensure that already tepid economic growth does not further falter, although he stopped short of saying what type of stimulus he prefers. Dudley's words marked him as the central banker most explicitly concerned about the economy's current state.

  December gold futures rose, but recently stood just below their recent record. Oil futures gained, while the U.S. dollar fell against other major currencies. The euro rose to a new six-month high and was recently trading at $1.3727, up from $1.3632 late Thursday in New York. Crude-oil prices rose.

  Among stocks in focus, Hewlett-Packard fell 2.1% after the firm said late Thursday that Leo Apotheker has been appointed as chief executive officer and president. Apotheker previously served as CEO of SAP.

  Technology and outsourcing firm Accenture reported an increase in fiscal fourth-quarter profit that beat analyst estimates. Shares rose 4.7%.

  Gymboree shares surged 18% after The Wall Street Journal reported the company is exploring interest in a possible sale of the firm to private-equity companies.



REVISED CONSTRUCTION SPENDING UP
US Aug Construction Spending Unexpectedly Rises

U.S. construction spending unexpectedly rose in August as federal government projects continued to help spur an economy weighed down by high unemployment.

  Spending on construction projects increased by 0.4% to a seasonally adjusted annual rate of $811.83 billion compared to the prior month, the Commerce Department said Friday.

  Spending in the previous two months was revised, with July outlays falling 1.4% and June spending rising 0.1%. Previously, spending was estimated falling 1.0% in July and dropping 0.8% in June.

  Economists surveyed by Dow Jones Newswires had forecast a 0.5% drop in August spending.

  The unexpected gain was driven by the public sector, where spending rose 2.5% to $313.63 billion, after falling 1.1% in July.

  But August construction spending in the U.S. private sector fell, by 0.9% to $498.20 billion - the lowest level since January 1998. Spending on U.S. residential projects was unchanged, at $249.13 billion. The housing sector has been hurt by the end of a government tax credit for first-time home buyers.

  The tax incentive was part of a big package rolled out last year by the Obama administration to push the economy out of deep recession. But the recovery has been slow, with nearly one in 10 Americans out of work.

  Spending on non-residential projects rose 0.6% in August, elevated by a surge in road construction spending that offset declines for hotels, churches and offices. For the year, though, non-residential project outlays were down 13.6%.

  Commercial real estate is suffering because demand remains low for hotel rooms and office space. Consumer spending isn't strong, hurting traffic at shopping malls. Developers have had trouble getting financing because banks are nervous about their collateral.

The Commerce Department report on construction spending can be found at http://www.census.gov/const/C30/release.pdf



US DOLLAR EXTENDS LOSS - STOCKS RISE AHEAD OF OPEN
US Dollar Index Futures Cash,Co (DXY.NYB) 78.05 Down 0.67  (0.85%)




UNITED AND CONTINENTAL AIRLINES MERGER COMPLETED

United Continental Merge -The shares of United Continental rose nearly 4% in early trading. Continental Airlines and the parent of United Airlines officially merged Friday into United Continental Holdings Inc. (UAL), shares of which began trading on the New York Stock Exchange.

United and Continental agreed to enter into a $3.2 billion merger in May, combining two disparate route systems into one with a global footprint. United brings a strong trans-Pacific presence that Continental lacked, while Continental has more routes to Latin America.

The two carriers will continue to operate separately for up to 18 months while they seek U.S. approval for a single operating certificate.

The NYSE Arca Airline Index (XAL), the benchmark for tracking the performance of industry shares, will decline by one component.

United Continental enters its new status as the world's largest carrier with $9 billion in unrestricted cash and annual pro forma revenue of $31.4 billion, based on the 12 months ended June 30, the company said.

It expects to realize between $1 billion and $1.2 billion in annual cost savings by 2013, including $800 million to $900 million in incremental annual revenue through expanded service.



GOLD BREAKING RECORD HIGHS

GOLD IS TRADING AT $1,320 AN OUNCE
SILVER IS TRADING AT $22.11 AN OUNCE


GOLD:

The recent surge in spot gold is attributable to the weakening dollar, but if one compares the relative strength  of gold against the US Dollar Index it is clear that gold has been appreciating against the entire basket* of currencies since 2001. And the trend shows no signs of abatement.

Today Gold tested the short-term resistance at $1320. Reversal below the rising trend line on 21-day Twiggs Momentum Oscillator would signal retracement to test the new support level at $1260. Failure of support is unlikely and respect would confirm an advance to $1360.


SILVER:

Friday, October 1st, silver touched $22.00 an ounce, signaling an advance to $25 ahead. After 18 months of work, the silver price has broken to new highs breaking past $21-$21.25 and is set for a significant run to much higher levels with expectations to hold new high levels at around $24-$29 in the first run up.

For all of this year, the silver price has worked hard to overcome resistance just below record highs. The build up of support has set the stage for a breakout of eventually $30 then $50 an ounce.



US OIL RISES AS DOLLAR SLIDES
Crude Rises On Dollar Weakness.

Crude oil closed Friday at $81.73 a barrel
Crude oil futures hit fresh seven-week highs Friday, as a weakening dollar and strong manufacturing data from China helped add to the week's rally.

  Light, sweet crude for November delivery recently traded $1.21 higher, or 1.5%, at $81.18 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $1.08 higher at $83.39 a barrel.

  Oil prices have gained more than 6% since Tuesday on improving economic data and support from unexpected declines in last week's U.S. oil and fuel inventories. A weaker dollar is providing an additional spur for higher crude prices, making oil cheaper for buyers in other currencies.

  The euro rose to a new six-month high of $1.3733 against the greenback Friday as traders looked to riskier assets, particularly after China said its purchasing manager's index for manufacturing rose by more than the market expected.

  "This is all the dollar," said Rich Ilczyszyn, a broker with Lind-Waldock. He said improving data is also helping as investors gauge the potential for further economic growth. "The economy is slow right now but oil is hanging at $81. What happens when the economy picks up a little bit?"

  The Federal Reserve is expected to expand its stimulus program, which analysts say will provide a boost to commodities. Bank of America-Merrill Lynch said oil prices could rise by as much as 26% on the Fed's moves if it sparks additional increases in the money supply globally.

  Meanwhile, investors are looking ahead to a key economic report at 10:00 a.m. EDT, when the Institute for Supply Management's manufacturing index for September will be released.

  With optimism about future oil demand spreading, the drop in U.S. inventories last week according to the U.S. Department of Energy is helping remove one of the factors preventing a move higher in prices. U.S. commercial stockpiles of oil and fuel hit 27-year highs last month, and any drops will be greeted with relief by oil bulls.

  "Seen in any absolute sense, inventories are at extraordinarily high levels. And they have been there for months. But this week's DOE report was better than last week's report, so the picture is getting better, again in a relative sense," said Peter Beutel of Cameron Hanover in a client note.

 Front-month November reformulated gasoline blendstock, or RBOB, recently traded 3.90 cents, or 1.8%, higher at $2.0751 a gallon. November heating oil recently traded 2.29 higher at $2.2907 a gallon.



US SPENDING REPORT CLIMBS - INCOME SEEN UP
Personal income rose faster that expected in August

Personal income for August increased 0.5%, which is greater than the 0.3% increase that had been expected, on average, among economists polled by Briefing.com. Income in the prior month increased 0.2%. Spending for September increased 0.4%, which is greater than the 0.3% increase that had been widely expected, but consistent with the 0.4% increase of the prior month. Also consistent with the prior month, core personal consumption expenditures increased 0.1% month-over-month, as expected.

U.S. stock futures pointed to a firm start to the fourth quarter on the heels of positive personal income and spending data as well as strong economic figures from China.

Dow Jones Industrial Average futures were recently up 60 points at 10783, while Standard & Poor's 500-share futures gained 8 at 1144 and Nasdaq 100 futures were up 14 at 2010. Changes in futures do not always accurately predict stock moves after the market's open.

The Commerce Department said consumer spending rose 0.4% in August after rising the same amount in July. Incomes, meantime, increased by 0.5% in August after a 0.2% rise in July. The numbers were slightly better than expected. Economists surveyed by Dow Jones Newswires had forecast spending and income would both climb by 0.3% in August.

Investors look set to extend the gains benchmark indexes experienced last quarter. The Dow gained 7.7% last month, marking its best September performance since 1939 and rallied 10.4% overall in the third quarter.

While that was good news for stock investors, the rally served only to reverse losses suffered during the second quarter. The Dow finished September 70 points shy of where it stood six months earlier and is up just 3.5% for the year.

Federal Reserve Bank of New York President William Dudley said Friday the central bank is almost certain to have to offer fresh support to ensure that already tepid economic growth does not further falter, although he stopped short of saying what type of stimulus he prefers. Dudley's words marked him as the central banker most explicitly concerned about the economy's current state.



MORE CREDIT UNIONS IN TROUBLE - GET TARP FUNDS
48 Credit Unions Get US Government's Financial Bailout Funds 85 Applied

The U.S. Treasury in recent weeks provided 48 credit unions with $69.91 million through a program aimed at boosting lending in under-served communities, ahead of the Oct. 3 expiration of bailout authority under the Troubled Asset Relief Program.

Credit union regulators had approved requests for funding from 85 credit unions, but some withdrew their applications because of compensation restrictions and documentation requirements.

The credit unions that did receive funding had to wait until the government was within weeks of losing its spending authority under TARP,  a once $700 billion bailout fund that has since shrunk to $475 billion.

The Community Development Capital Initiative, which draws on funds from the controversial TARP, is one of many programs the U.S. has launched in what has so far been an unsuccessful effort to boost small business lending. More than 200 institutions were eligible to apply, and credit unions pushed hardest to join.

The Treasury office that provides the certification institutions need to join the program saw a spike in requests for its services in recent months, particularly among credit unions.

Financial institutions in the program receive government capital at an annual dividend rate of 2%. That rate is 3% lower than the rate paid by borrowers under the TARP and is one reason community banks are eager to switch programs.



BEFORE THE BELL:

PERSONAL SPENDING CLIMBS - US STOCK FUTURES UP
US Stock Futures Pointed Higher After Optimistic Data

U.S. stock futures show gains ahead after the first of the day's U.S. economic reports had personal income rising 0.5% and personal spending climbing 0.4% in August. Futures for the Dow Jones Industrial Average were up 44 points at 10,767. S&P 500 futures gained 5.80 points to 1,142.5, while Nasdaq 100 futures rose 13.25 points to 2,008.75


GOLD FUTURES RISE
December gold futures rose, but recently stood just below its recent record.


OIL FUTURES RISE
Oil futures gained, while the U.S. dollar fell against other major currencies. The euro was recently trading at $1.3727, up from $1.3632 late Thursday in New York. Crude-oil prices rose.


Consumer Spending and Manufacturing Data Loom
August Personal Income and Spending reports start the day, then the immediate focus shifts to the September manufacturing data from the Institute for Supply Management, due this morning. Last Month, the report surprised to the upside and was said  to have acted as one of the early catalysts for the September rally. But recent regional manufacturing reports all point to mixed results.



The U.S. Dollar Is At Another Near-Term Tipping Point
By Benjamin Train
Strategic Economic and Business Consultant
Director, Online Consultancy Network

October 1, 2010

Foreign exchange markets are completing a month of what some have called a "currency war". As provocative as that sounds, it has been something to observe and participate in so far.

The head of the IMF said he sees “no major danger” of escalation of currency devaluations ahead. “I don’t feel today there’s a big risk of a currency war, but that’s part of the downside risks” Strauss-Kahn told reporters at a briefing Tuesday in Washington.

Brazilian Finance Minister Guido Mantega warned of a “currency war” and said that his government will buy all “excess dollars” in the market to curb the Real appreciation.

As September ended abruptly Thursday, reverberations are expected to carry well into October's trading activity. The US Dollar is almost at a critical point of technical support. Equities are at a near-term resistance point in the US stock market.

If the dollar has no more room to fall, then equity valuations will begin to fall at a much more accelerated pace than they have in the last 120 days of trading.

If equities break out, then the US dollar will fall further, possibly into the DXY 76 index range. 
US Dollar Futures Index DXY, Day's Range: 78.03 - 78.78, Now 78.05  Down 0.67  (0.85%)

At this time, US trading partners are interceding in their respective currencies while the IMF is supporting the Russian Ruble and Chinese Yuan, China’s yuan posted its biggest advance this week in a little more than two-years.

The U.S. was denied admission to a series of economic meetings held in Russia in 2009, with world leaders such as Chinese president Hu Jintao, Russian president Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization.

They agreed to take the first formal step to replace the dollar as the world's reserve currency.  If these nations succeed, the dollar will dramatically plummet in value, and the cost of imports, like oil, will skyrocket.

In September 2009, the U.N. Conference on Trade and Development proposed creating a new artificial currency that would replace the dollar as a reserve.

The formation of this currency would be the largest monetary overhaul since World War II. Meanwhile, China is involved in deals with Brazil and Malaysia to denominate their trade in China's yuan, while Russia has been trading in the ruble and local currencies. Additionally, nine Latin American countries have agreed on the creation of a regional currency, the ALBA SUCRE, aimed at scaling back the use of the U.S. dollar.

Member nations of Bolivarian Alliance for the Americas (ALBA) have agreed to implement a single currency to be used among themselves from 2010 onward.

The decision to go ahead with the use of the use of the virtual Single Regional Payment Compensation System (SUCRE) as a replacement for the US dollar in commercial exchanges among members was endorsed by the Prime Ministers of Antigua and Barbuda, St Vincent and the Grenadines and Dominica at ALBA’s Seventh Summit in Bolivia.

The intention is to have the SUCRE replace the US dollar as the main trading currency among ALBA members. There will be no bills issued in SUCRE. It will instead be used for electronic payment, and each country can withdraw the equivalent in its own currency.

A multidisciplinary team from the ALBA nations began technical operations for the SUCRE’s implementation on January 1st of 2010. In addition to the Eastern Caribbean nations, ALBA includes Bolivia, Cuba, Ecuador, Honduras, Nicaragua, and, of course, Venezuela.

To fund the debt laden, war economy, the U.S. continues to flood the world with dollars and treasury notes.  Foreign recipients collect the interest and turn the dollars over to their central banks for local currency. This has allowed the U.S. to print money without restraint, to buy imports and foreign companies, to fund our military expansion, extended unemployment benefits, food stamp programs, foreign aid, interest payments, and to ensure that foreign nations like Japan and China continue to buy our treasury bonds. The impact on daily living expenses, for people in the U.S. could be very severe. The impact on the US stock market could be devastating.

Over the last 30 days the US Dollar has declined in value.
At this time, there is considerable dilution of the US dollar against other currencies. But what we have been seeing taking place for the last 30 days, has been an increase in rare materials values, like precious metals, copper, oil, market equities and US composite indexes.

As the dollar index declines, the Dow and S&P index rise. As the US Dollar increases in value the indexes decline. True un-adjusted Equity valuations have been steadily declining since the recession began.

The only way to prop up their valuations is to bring down the US Dollar. This balancing act has been carefully orchestrated by the US Government, the Federal Reserve, and Forex market makers, and funded by the US taxpayer.

As I stated, we are near another tipping point. Something is about to change in the market place. The trend change is expected within the next three trading days.



Canadian Market: 

Toronto Stocks Steady At Midday
The stock market was steady at midday Friday, as weakness in financials offset gains in energy issues.

At 11:45 a.m. EDT (1545 GMT), the S&P/TSX Composite Index was up 8.37 points, or 0.07%, at 12377.02 and advances led declines 758 to 568. Trading volume was 220.90 million shares. The S&P/TSX 60 Index was down 0.12 points, or 0.02%, to 714.95 points.


Canada Govt Announces New Tariff Relief For Shipping Industry
The Canadian government announced a new tariff relief measure for the country's shipping industry Friday as part of Canada's Economic Action Plan.

The announcement, aimed at supporting the manufacturing sector, was made in St. Catharines, Ont. by Jim Flaherty, Canada's finance minister, and other officials.

The initiative will lower costs for the shipping industry by waiving the 25% tariff on imports on all general cargo vessels and tankers longer than 25 meters. This new duty remission framework is expected to save shipowners C$25 million a year over the next decade.


Toronto Most Actives At 1:15 PM EDT

Crowflight Minerals            11,473,209   0.06  off  0.03
iShares Cdn S&P/TSX 60          8,620,595  17.96  up   0.02
Alexis Minerals                 7,880,932   0.26  up   0.01
Bankers Petroleum               7,296,015   7.87  off  0.26
Horizons NYMEX Natual Gas Bull  5,840,201   3.57  off  0.09
Platinum Group Metals           4,936,782   2.20  off  0.21
Suncor Energy                   5,022,631  33.92  up   0.42
Eastern Platinum                4,214,317   1.41  off  0.01
Questerre Energy                3,992,802   1.88  off  0.67
Yamana Gold                     3,367,153  11.76  up   0.03

Toronto Indexes, Volume; 1 PM EDT Composite Up 5.40

 S&P/TSX Composite   12374.05  up    5.40  or 0.0%
 S&P/TSX 60 Index      714.71  off   0.36  or 0.1%
 Financials            175.62  off   1.15  or 0.7%
 Materials             391.99  up    0.44  or 0.1%
 Energy                287.71  up    2.86  or 1.0%
 Industrials           104.65  off   0.29  or 0.3%
 IT                     28.21  up    0.06  or 0.2%

   Volume            Friday   Thursday
   12-1               45.9M     67.4M
   9:30-1            284.0M    371.5M





South American Markets:

BRAZIL:

Brazil September Foreign Trade Surplus Narrows To $1.09 Billion

Brazil's foreign trade surplus narrowed in September to $1.09 billion as a strengthening currency led the value of imports to rise faster than exports.

Brazilian exports in September reached $18.83 billion, while imports were $17.74 billion, the Trade and Development Ministry said Friday. The value of imports rose 11% to an average of about $845 million a day from $764 million in the previous month, while the average daily value of exports climbed just 2.6% to $897 million from $874 million.

In August, Brazil posted a trade surplus of $2.44 billion. In September 2009, Brazil's trade surplus was $1.31 billion.  The September 2010 trade surplus figure was lower than analysts' expectations. A survey of nine analysts by Dow Jones Newswires produced a median estimate for the surplus of $1.45 billion.

Economists said the trade surplus was likely to lag behind year-ago performance in the fourth quarter of 2010.



Brazil Stocks Advance Early; Market Monitors Data Abroad

Brazil's Bovespa stock index advanced in early trading Friday as investors looked with encouragement toward possible gains in markets abroad on fresh economic data.

As of 1340 GMT, the main Sao Paulo stocks index advanced 0.4% to 69,733 points after ending at 69,430 points Thursday.

Traders noted investors were cautiously optimistic following upbeat industrial activity data in China. The Chinese government reported the activity rose to 53.8 on its manufacturing index in September from 51.7 in August.

Locally, investors continued to show enthusiasm over favorable industrial output data in Brazil. Brazil's IBGE statistics institute Friday reported production was up 8.9% in August over the same month last year.

In early trading Friday, materials sector shares were among advancers, with mining giant Vale (VALE, VALE5.BR) gaining 0.3% to 46.44 Brazilian reals ($27.72) and steelmaker Gerdau (GGB, GGB4.BR) up 0.2% to BRL22.74.

In the banking sector, top private bank Banco Itau (ITUB, ITUB4.BR) was up 0.4% to BRL40.60, and rival Bradesco bank (BBD, BBDC4.BR) was 0.6% higher at BRL34.11.

Shares of state-controlled oil company Petrobras (PBR, PETR4.BR) advanced 1.1% to BRL27.58. Shares of leading fixed-line telecom operator Oi (TNE) fell 1.0% to BRL23.95 and leading airline Gol (GOLL4.BR) rose 0.5% to BRL26.09.


ECUADOR:
State of Emergency Day Two
Ecuador entered into its second day of a state of emergency, called after protests by police and military personal led to nationwide unrest.

The commander of Ecuador's police, Freddy Martínez, has offered his resignation, which the government will study on Friday, Barriga added.

President Correa had dubbed the protests an attempted coup d'etat and received widespread international support, even as opponents said the president had spun the events for political gains.

Quito's airport remained open Friday after being shutdown briefly on Thursday when air force units took control of it, having joined the police in protest.

The protests haven't affected Ecuador's oil production, including its oil fields, pipelines and refineries.

Correa, a U.S.-trained economist who took office in early 2007, has moved Ecuador to the left of the political spectrum. An economic nationalist, Correa was reelected in 2009 and he can run again in elections set for 2013.

Ecuador's GDP Rose 2.74%
Ecuador's gross domestic product in the second quarter expanded by 2.74% compared with the same period in 2009, the central bank said Friday. Ecuador has estimated a 3.73% increase in its GDP for 2010.

GDP rose 1.87% in the second quarter of the year, compared with the first quarter, the bank added. The oil segment of GDP fell 9.1% in the second quarter of 2010, compared with the same period last year.  


CHILE:
Chile Peso Ends at 28-Month High On Strong Euro, Copper Gains

Chile's peso ended at a 28-month high against the dollar Friday, as international copper prices surged and the euro posted strong gains against the greenback.

The peso finished at CLP481.00 to the dollar, compared to CLP483.50 the prior session, while trading in a range of CLP480.00 to CLP482.30.



European Markets: 
European stocks started the month on a negative note Friday, finishing mildly lower as investors absorbed a wave of U.S. economic data.

The Europe Stoxx 600 index fell 0.2% to 259.09 on the first session of the month, erasing initial gains. 
Europe's top stocks were slightly lower around midday on Friday, as banks extended recent losses into the fourth quarter, offsetting buoyant resource-related shares. 

Growth in European manufacturing slowed. A gauge of manufacturing in the 16-nation euro region declined to 53.7 in September from 55.1 the previous month, London-based Markit Economics said today.


Major euro zone banks lost ground, hit by lingering concerns over the health of the sector that have dragged down the sector for three weeks. Banco Santander (SAN.MC) was down 1.3 percent, UniCredit (CRDI.MI) down 1 percent and Natixis (CNAT.PA) down 0.7 percent.

Investors are looking for direction to a batch of key U.S. economic figures, including the Institute for Supply Management (ISM) manufacturing index.

At 1135 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was down 0.1 percent at 1,060.12 points, while the Euro STOXX 50 .STOXX50E, the euro zone's blue-chip index, was unchanged at 2,749.45 points, after testing resistance at its 200-day moving average of 2,780.15.
European shares were mixed ealier, after slipping in the previous four sessions amid debt concerns in the euro zone. The FTSEurofirst 300 (^FTEU3 - News) rose 0.2 percent, Britain's FTSE 100 (FTSE:^FTSE - News) gained 0.6 percent, Germany's DAX rose 0.4 percent and France's CAC 40 (Paris:^FCHI - News) was up 0.3 percent.


SPAIN:

Spanish oil major Repsol (REP.MC) soared 6.4 percent after clinching a deal to sell a 40 percent stake in its Brazilian arm to Chinese oil group Sinopec (0386.HK) for $7.1 billion.


GERMANY:
Germany Protest Turns Ugly
Demonstrators said that more than 20,000 protesters, including more than 1,000 schoolchildren, were dispersed by close to 1,000 police in riot gear using water cannons, pepper spray, tear gas and batons.

More than 400 people including minors needed medical treatment, mostly because of the tear gas and pepper spray but also due to broken noses and wrists as well as cuts, demonstrators said.

Chancellor Angela Merkel called for calm Friday after riot police used what critics called "Rambo" tactics to disperse thousands of opponents of a contentious rail project. "I would hope that demonstrations like these would pass off peacefully," Merkel told public broadcaster SWR after the skirmishes in the southwestern city of Stuttgart Thursday that raged on into the night.



Asian Pacific Markets:
Asian stocks finished mostly higher overnight, underpinned by data showing an acceleration in China's manufacturing activity. The official Chinese purchasing managers' index rose to 53.8 in September from 51.7 the previous month.

Asian stocks advance as China data boosts hopes - Asian stocks rose on Friday as stronger-than expected economic indicators from China and the United States boosted confidence in the market.


CHINA:
China’s manufacturing expanded in September at the fastest pace in four months, a separate report showed today. The purchasing managers’ index rose to 53.8 from an August reading of 51.7, China’s logistics federation and statistics bureau said.

Chinese manufacturing gathered momentum last month, handily beating market forecasts and providing further evidence that the economy is pulling smoothly out of a second-quarter slowdown.

The MSCI index of Asia Pacific stocks outside Japan was up 0.34 percent compared with a rise of 0.24 before the release of China's Purchasing Managers Index. The index gained more than 17 percent in the last quarter.

"This looks like the real deal. It's not just inventory correction. We think that end demand is picking up in China and the economy has stabilized after the summer lull," said Frederick Neuman, co-head Asian economics, HSBC in Hong Kong.


JAPAN:
Japan's Nikkei average closed up 0.37 percent on Friday, helped by short-covering after sharp falls the previous day and after U.S. economic data provided a degree of optimism.

The index gained 6.2 percent in September, it is more than 2 percent off the peak hit after Japanese authorities conducted currency market intervention on September 15 to weaken the yen.

"Japanese stocks are recouping some ground as investors appear to be correcting extreme pessimism triggered yesterday by the yen's advance and worries about European finance problems," said Koichi Nosaka, a market analyst at Securities Japan Inc.



AUSTRALIA:
The Australian dollar jumped on optimism that the strong data from China augured well for the country's resource exports.

WORLD FOREX CURRENCY SNAPSHOT:

EUR/USD	1.3724	+0.0084 (0.62%)
USD/JPY	83.2600	-0.1400 (-0.17%)
GBP/USD	1.5818	+0.0102 (0.65%)
CAD/USD	0.9745	+0.0015 (0.16%)
USD/HKD	7.7597	+0.0009 (0.01%)
USD/CNY	6.6905	0.0000 (0.00%)
AUD/USD	0.9725	+0.0055 (0.57%)

World Markets Snapshot:	(2:00PM ET USA)

Shanghai	2,655.66	+44.98 (1.72%)
Nikkei 225	9,404.23	+34.88 (0.37%)
Hang Seng Index	22,358.17	-20.50 (-0.09%)
TSEC	8,244.18	+6.40 (0.08%)
FTSE 100	5,592.90	+44.28 (0.80%)
DJ EURO STOXX 50	2,732.91	-14.99 (-0.55%)
CAC 40	3,692.09	-23.09 (-0.62%)
S&P TSX	12,388.51	+19.86 (0.16%)
S&P/ASX 200	4,579.20	-3.70 (-0.08%)
BSE Sensex	20,445.04	+375.92 (1.87%)

Friday's US Economic Calendar:

8:30 a.m.
Aug Personal Income & Outlays, Personal Income (expected +0.3%), Personal Spending (expected +0.3%), PCE Price Index Monthly (previous +0.2%), PCE Price Index Yearly (previous +1.5%), PCE Core Price Index Monthly (expected +0.1%), PCE Core Price Index Yearly (previous +1.4%)

8:30 a.m.
New York Fed Pres Dudley speaks in New York

9:55 a.m.
Sept. Thomson Reuters / University of Michigan Survey of Consumers - final, Sentiment Index End month (expected 67), Expectations Index End Month (previous 62.9), 12-Month Inflation Forecast (previous 2.7), 5-Year Inflation Forecast (previous 2.8), Value (Current Period) End Month (previous 78.3)

10:00 a.m.
Aug. Construction Spending - Construction Put in Place, New Construction (expected -0.5%), Residential Construction (previous -2.5%)

10:00 a.m.
Sept. ISM Manufacturing Report on Business, Manufacturing PMI (expected 54), Prices Index (previous 61.5), Employment Index (previous 60.4), Inventories (previous 51.4), New Orders Index (previous 53.1), Production Index (previous 59.9)

3:35 p.m.
Dallas Fed Pres Fisher speaks on 'Globalization, Economic Recovery' in Vancouver

Notes:
1. Office of Management and Budget - U.S. fiscal year begins
2. Sept. Domestic Auto Industry Sales Report

US Market Summary, Thursday, Sept. 30, 2010

Stocks:

U.S. stocks declined, ending the market's strongest September in 71 years on a weak note as investors pulled back ahead of key manufacturing data due Friday.

U.S. stocks have defied expectations all month and are poised to register their biggest September rally since 1939 and best quarterly performance of the year. The Dow Jones Industrial Average has gained about 8% in September. The September surge has enabled the Dow to post its biggest monthly point gain since April 2001.

Manufacturing has been a bright spot in the economic recovery, and investors will be looking to the ISM data to indicate whether the recovery appears sustainable.


Treasurys:

Long-dated Treasurys fell slightly but recouped a large part of early losses because of month-end buying from fund managers. Better-than-forecast U.S. reports on manufacturing, employment and the broader economy eased demand for safe assets, and added to the growing debate on whether the Federal Reserve needs to step up government purchases.



Forex:

The dollar rose slightly as a survey of Chicago-area purchasing managers provided a springboard to rethink Federal Reserve stimulus measures. The Chicago report came on the heels of a better-than-expected reading for U.S. gross domestic product.


Gallup.com reports results from these indexes in daily, weekly, and monthly averages and in Gallup.com stories. Complete trend data are always available to view and export in the following charts:

Daily: Employment, Economic Confidence and Job Creation, Consumer Spending
http://www.gallup.com/poll/125639/Gallup-Daily-Workforce.aspx
http://www.gallup.com/poll/122840/Gallup-Daily-Economic-Indexes.aspx
http://www.gallup.com/poll/112723/Gallup-Daily-US-Consumer-Spending.aspx

Weekly: Employment, Economic Confidence, Job Creation, Consumer Spending
http://www.gallup.com/poll/127538/Workforce-Weekly.aspx
http://www.gallup.com/poll/125735/Economic-Confidence-Index.aspx
http://www.gallup.com/poll/127541/Job-Creation-Index-Weekly.aspx
http://www.gallup.com/poll/127544/Consumer-Spending-Weekly.aspx


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