Style Underperformer:
Large-cap Value (-.29%)
Sector Underperformers:
Retail (-2.82%), Insurance (-2.50%) and Restaurants (-2.21%)
Stocks Falling on Unusual Volume:
AIG, GE, PDGI, DIOD, PNRA and POWI
Stocks With Unusual Put Option Activity:
1) GE 2) CMG 3) AMAG 4) FTO 5) DOW
- The Producer Price Index for August fell -.9% versus estimates of a -.5% decline and a 1.2% increase in July.
- The PPI Ex Food & Energy for August rose .2% versus estimates of a .2% gain and a .7% increase in July.
- Advance Retail Sales for August fell -.3% versus estimates of a .2% gain and a downwardly revised -.5% decline in July.
- Retail Sales Less Autos for August fell -.7% versus estimates of a -.2% decline and a .3% increase in July.
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BOTTOM LINE: Prices paid to US producers fell in August, as lower energy prices eased inflation pressures, Bloomberg said. Import costs fell in August by the most in almost 20 years, Labor figures showed yesterday. Energy prices paid by producers fell 4.6%, the largest decline in almost 2 years. Prices for raw materials, or so-called crude goods, plunged 11.9% during August versus a 4.2% rise the prior month. Passenger car prices fell .3% and the cost of light trucks fell 1.9%, the most since October 2006. Consumer goods prices fell 1.2%. According to the median forecast in Bloomberg’s monthly survey of economists, the Fed will keep the benchmark interest rate unchanged at 2% through the first three months of 2009. The 10-year TIPS spread, a good gauge of inflation expectations, is 1.95%, the lowest in over 5 years. As I said a few months ago, I still believe inflation fears have peaked as the commodity bubble continues to burst and the secular trend of disinflation reasserts itself.
Sales at US retailers unexpectedly dropped in August, Bloomberg reported. Filling station sales fell 2.5% in August versus a .2% gain the prior month. The average price of a gallon of gas fell to $3.76/gallon last month versus $4.06/gallon in July. Excluding gasoline, retail sales were unch. versus a .6% decline in July. Sales at car dealers and parts stores increased 1.9%, the first gain since January and the biggest in a year. Weekly retail sales rose +1.8% this week, which was the third consecutive week showing improvement. As well, weekly retail sales are well above the +.5% gain seen during the first week of March. I expect retail sales to improve into year-end on pent-up demand, falling energy/food prices, decelerating inflation, low interest rates, rising stock prices, better consumer sentiment and diminishing housing fears.
Style Outperformer:
Mid-cap Value (+.13%)
Sector Outperformers:
Steel (+4.87%), Construction (+3.15%) and Oil Service (+3.04%)
Stocks Rising on Unusual Volume:
RES, SQM, RTP, PBR, FWLT, LULU, AAUK, GOOG, FFIV, JRCC, ENER, FLI and WNS
Stocks With Unusual Call Option Activity:
1) HOLX 2) CMG 3) NIHD 4) NT 5) GT
Late-Night Headlines
Bloomberg:
- The euro traded near a one-year low against the dollar on speculation that a government report will show today industrial production in Europe shrank, backing the case for the region's central bank to cut interest rates. The currency is headed for a third weekly loss as traders increased bets that the European Central Bank will lower borrowing costs to support economic growth.
- Lehman Brothers Holdings Inc.(LEH) entered into talks with potential buyers of the securities firm after Moody's Investors Service said the company must find a ``stronger financial partner'' and the shares plummeted. The U.S. Treasury and the Federal Reserve have been working with Lehman on a sale, and a deal may be announced before Asian markets open Sept. 15., a person with knowledge of the matter said. The government isn't likely to contribute money, the person said. Bankers from other firms were reviewing Lehman's books today, according to people with knowledge of the situation, who declined to identify potential acquirers.
- Washington Mutual Inc.(WM), the savings and loan that lost a third of its value this week, said that it is ``well capitalized'' and forecast a third-quarter loan-loss provision of $4.5 billion. Net charge-offs may increase by less than 20 percent in the third quarter, compared with 60 percent in the previous period, the Seattle-based lender said today in a statement. WaMu said it has $50 billion in liquidity. The company ``continues to be confident that it has sufficient liquidity and capital to support its operations while it returns to profitability,'' according to the statement.
- Highways in Texas were jammed as coastal residents fled Hurricane Ike, which tripled in size in the central Gulf of Mexico and threatened the 5.6 million people of the Houston area.
- The cost to protect corporate bonds in Australia and Japan from default fell for the first time in four days after Lehman Brothers Holdings Inc.(LEH) entered into talks with potential buyers. The Markit iTraxx Australia Series 9 credit-default swap index decreased 8.5 basis points to 152 at 9:22 a.m. in Sydney, according to Citigroup Inc. prices. Japan's index was quoted 7 basis points lower at 131, Morgan Stanley prices show, which indicates improved perceptions of credit quality. Five-year credit-default swaps on New York-based Lehman, the fourth biggest U.S. securities firm, fell 150 basis points to 500 after the Wall Street Journal report, according to broker Phoenix Partners Group. That's down from a record 790 basis points earlier today as concern rose that Lehman faces ratings downgrades if it can't shore up its balance sheet.
- China's industrial production grew at the slowest pace in six years on weaker export demand, power shortages and factory shutdowns during the Olympic Games. Rising raw-material and labor costs have added to pressure on exporters of shoes, toys and clothes. As many as 67,000 medium-sized and small companies posted losses in the five months through May, according to the National Development and Reform Commission. In Guangdong province, an export hub, the number of toymakers fell more than 70 percent in the first seven months from a year earlier, as more than 3,600 shut down, the official Xinhua News Agency reported.
- China's property market could be headed for a ``meltdown'' as home prices and sales decline, and bank earnings will be affected, according to Morgan Stanley. ``Property prices are already cracking in China in major cities,'' wrote Morgan Stanley analysts led by Jerry Lou in a note today. ``We believe the likelihood of a property sector meltdown is high. The impact on banks' earnings may be substantial.'' Morgan Stanley has an ``underweight'' on financials, which include banks and properties.
- Japan's economy contracted more than the government initially estimated last quarter after figures showed businesses cut spending. Gross domestic product shrank an annualized 3 percent in the three months ended June 30, the Cabinet Office said today.
- Andy Lipow, president of Lipow Oil Associates LLC, says oil may fall below $100 a barrel on Hurricane Ike. (video)
- Corn fell for a third straight session and soybeans declined on speculation that a slumping worldwide economy will erode demand for commodities. ``There is definitely an economic slowdown under way and that has led to liquidation in the grain markets,'' said Mark Kessler, the president of Harvest Equity Partners Inc. in Okoboji, Iowa. ``I don't see grain-export demand improving anytime soon. With the global economic slowdown gaining steam, buyers will wait for lower prices.'' The Standard & Poor's GSCI index of 24 raw materials has dropped 29 percent from a record on July 3.
- Gold fell below $750 an ounce, marking the longest slump in eight years, as the US dollar's surge reduced demand for the precious metal as an alternative investment. Silver dropped to the lowest since June 2006. Gold has tumbled 28 percent from a record in March as the dollar climbed 15 percent against the euro from an all-time low in July. ``This is indiscriminate slaughter across all commodities,'' said Ralph Preston, a futures analyst at Heritage West Futures Inc. in San Diego. ``It's indisputable that the funds rushed in to pump up prices, and now they're rushing out. This is a phenomenal run for the dollar. We're shorting the metals.'' Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, has fallen 4.3 percent this week to 614.4 metric tons. The fund reached a record 705.9 tons on July 11. ``The safe haven of choice is the dollar, not the metals,'' Preston of Heritage West said.
- Philippine consumer prices may rise 12.6% or 12.7% this month because of typhoons that damaged crops, boosting food prices, citing central bank Deputy Governor Diwa Guinigundo. Consumer prices rose 12.5% in August, the fastest pace in 16 years.
NY Times:
- Hedge Fund Glory Days Fading Fast. Several big funds have faltered in recent weeks, some of them spectacularly so. While many funds are still flying high, the average hedge fund has lost more than 4 percent this year, according to Hedge Fund Research, putting the industry on course for its worst year on record. The dimming fortunes of the industry have implications far beyond the rarefied world of hedge funds. Over the past decade, the size of this industry grew five-fold, as public pension funds, corporate pension funds and university endowments poured billions of dollars into these vehicles, in hopes of landing market-beating returns. A prolonged downturn might prompt some investors to rethink these investments or demand lower fees from managers, who typically collect annual management fees of 2 percent and then take a 20 percent cut of any profits. Trouble at hedge funds also might draw government scrutiny, given the amount of pension money sitting within these unregulated firms. It is now 5 to 10 percent more expensive for hedge funds to borrow from banks than it was a year ago, and banks are increasingly hesitant to lend to hedge funds for long periods. Some head-hunters are keeping watch lists of troubled hedge funds. Heidrick & Struggle, a hiring firm, has 100 hedge funds on its watch list and expects 50 to 80 to fail in the coming months, said Tim Holt, the partner who oversees the firm’s Wall Street recruiting. Most large pension funds and institutional investors have put the brakes on their hedge fund investments this year. New money invested in hedge funds in the first half of this year was just under $30 billion, a far cry from the $118 billion raised in the first half of 2007, according to Hedge Fund Research.
- Some of the world’s biggest corporations are facing intense pressure from China to allow the state-approved union to form in their Chinese plants and offices. But many companies fear admitting the unions will give their Chinese employees the power to slow or disrupt their operations and will significantly increase the cost of doing business there.
IBD:
- American Public Education(APEI): Online University Taps Into An Active-Duty Military Student Body.
- Rates on 30-year mortgages dropped sharply this week, falling to the lowest level in five months, as the government's dramatic takeover of mortgage giants Fannie Mae and Freddie Mac lowered mortgage rates.Freddie Mac reported Thursday that its nationwide survey found that the average 30-year, fixed-rate mortgage dipped to 5.93% this week, from 6.35% last week.
- Spooked by fears of spreading global economic weakness, investors are pulling funds from once red-hot emerging markets. That's led to steep stock price declines from
BusinessWeek.com:
- HP’s ‘End Run’ Around Windows. As Hewlett-Packard(HPQ) steps up efforts to make Microsoft’s operating system easier to use, some want to devise a rival version with Linux.
Reuters:
- A steep sell-off in shares of struggling investment bank Lehman Brothers Holdings Inc has revived questions about whether the U.S. Securities and Exchange Commission is doing enough to fight short-selling abuses. During late July and early August, Lehman was under the protection of an emergency SEC rule to curb abusive short-selling. The SEC also said in July it was boosting efforts to stop the spread of false rumors that threaten financial institutions. But the emergency rule expired August 12 with a promised permanent rule still to come. "It is no coincidence that the bottom of the market in July was the exact day that the SEC announced the rule to restrict naked short selling, and the top of the rally was the day when the SEC announced they would end the rule," said Dylan Wetherill, president of short interest tracking service ShortSqueeze.com. "If the SEC has an interest in helping to save the market from the powerful short sellers, it will reinstate (the rule to curb illegal shorting,)" Wetherill said. "There's strong political pressure to curb short selling and there is little support for naked short selling," said John Coffee, a professor at Columbia University Law School."They should follow up fairly promptly. Before the end of the summer... is appropriate for them to come up with proposed rules."
Financial Times:
- Democratic jitters about the US presidential race have spread to Capitol Hill, where some members of Congress are worried that Barack Obama's faltering campaign could hurt their chances of re-election. A Democratic fundraiser for Congressional candidates said some planned to distance themselves from Mr Obama and not attack Mr McCain. “If people are voting for McCain it could help Republicans all the way down the ticket, even in a year when the Democrats should be sweeping all before us," said the fundraiser, a former Hillary Clinton supporter. "There is a growing sense of doom among Democrats I have spoken to . . . People are going crazy, telling the campaign 'you've got to do something'."
- New steps to curb speculation in commodity markets have been launched by US regulators in response to growing pressure from Washington lawmakers. The Commodity Futures Trading Commission, the main regulator of commodity markets, told the US Congress on Thursday it was imposing "enhanced control" on dealing by Wall Street banks and forcing them to publish new data on their positions. The CFTC's measures will focus on swaps - private contracts between investment banks and clients such as hedge funds or airlines that provide an exposure to commodity prices without investing directly in futures. The CFTC said that of the 550 clients of swap dealer it has identified through an unprecedented special survey, at least 18 were above the exchange limits thanks to the use of on-exchange and swap trading.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (CSCO), target $27.
- Rated (RIG) Buy, added to Top Picks Live list, target $159.
- Reiterated Buy on (GME), target $66.
- Reiterated Buy on (POT), target $264.
Night Trading
Asian Indices are -.50% to +1.25% on average.
S&P 500 futures -.25%.
NASDAQ 100 futures -.28%.
Morning Preview
US AM Market Call
NASDAQ 100 Pre-Market Indicator/Heat Map
Pre-market Commentary
Pre-market Stock Quote/Chart
Before the Bell CNBC Video(bottom right)
Global Commentary
WSJ Intl Markets Performance
Commodity Movers
Top 25 Stories
Top 20 Business Stories
Today in IBD
In Play
Bond Ticker
Economic Preview/Calendar
Daily Stock Events
Upgrades/Downgrades
Rasmussen Business/Economy Polling
Earnings of Note
Company/EPS Estimate
- None of note
Economic Releases
8:30 am EST
- The Producer Price Index for August is estimated to fall -.5% versus a 1.2% gain in July.
- The PPI Ex Food & Energy for August is estimated to rise .2% versus a .7% gain in July.
- Advance Retail Sales for August are estimated to rise .2% versus a -.1% decline in July.
- Retail Sales Less Autos for August are estimated to fall -.2% versus a .4% gain in July.
10:00 am EST
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- Business Inventories for July are estimated to rise .5% versus a .7% gain in June.
Upcoming Splits
- None of note
Other Potential Market Movers
- The (AGP) investor day, (CYMI) analyst day, Kaufman Brothers Investor Conference, Morgan Keegan Equity Conference and Thomas Weisel Healthcare Conference could also impact trading today.