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Market Commentary for August 28, 2007


The trend can be your friend when you are a short seller in the markets today. The trading activity was robust for day traders and short selling investors as the markets tumbled lower as the day moved on. Trading volume was heavy amidst the bloodshed of the market session as the Bears reared on their hind legs, watching the lows of the session, move even lower.

At the closing bell, here is how the major indices ended the session: the DOW (Dow Jones Industrial Average) posted a triple digit loss of 280.28 points on the day to end the session at 13,041.85; the NYSE (New York Stock Exchange) posted a triple digit loss of 239.01 points to end the session at 9,289.92; the NASDAQ posted a loss of 60.61 points for a close at 2,500.64; the S&P 500 moved lower by 34.43 points to end at 1,432.36 and the RUSSELL 2000 moved lower by 21.62 points to close at 778.02. The FTSE All-World Index ex-US (top Large/Mid Cap aggregate from over 2,700 stocks from the FTSE Global Equity Index Series (GEIS) which covers 90% of the world’s investable market capitalization) posted a loss of 3.24 points to close at 248.23 and the FTSE RAFI 1000 posted a triple digit loss of 145.34 points to close at 5,930.27.

Federal Reserve Bank of Richmond Conditions Survey released today:

Service Sector Conditions Survey: Retail Sales Contract and Growth Slows a Bit at Services Firms; Price Pressures Contained Weakness in retail activity outweighed moderate growth at services firms in August, pulling the overall service-sector revenues index lower. Sharply lower sales were driven by a steep decline in the big-ticket category that began in May and added momentum in August. Although shopper traffic also weakened, retail inventories expanded by less than in July. In contrast to retail activity, revenues continued to grow at services firms this month, albeit at a somewhat slower pace than in July. On the employment front, retailers cut payrolls, while average retail wages rose more quickly than in July. Similarly, average wages grew at a faster clip among services providers, while the pace of hiring slowed compared to a month ago. Price pressures eased across the board in August. Looking ahead six months, retail businesses expected their prices to rise more quickly. Services providers looked for somewhat slower price growth than they had anticipated last month.

Overall Service Sector
Service sector revenues declined in August as retail sales dropped and revenue growth slowed at services-providing firms. The overall revenues index slipped to -4 from July's 6. In addition, hiring across the sector weakened in August, as retailers continued to shed jobs and services providers added fewer employees. The index slipped 6 points to 1. In contrast, average wage growth picked up, rising to an index of 14 compared to last month's 5. Survey respondents were less upbeat about their outlook for business prospects in the six months ahead—the expectations index lost 22 points to 17.

Retail
Retail activity declined steeply in August. The retail sales index fell to -34 from last month's 3, as big-ticket sales dropped sharply for the fourth consecutive month. The big-ticket index lost 5 points from its July reading, to settle at -48. Shopper traffic also weakened further in August, to an index of -20 from July's -10. However, retail inventories accumulated at a slower pace than a month ago with the index finishing at 6, well below its July reading of 45. Looking ahead, retailers were less optimistic about sales prospects for the next six months. The expectations index retreated to 13 from July's 29. Retailers cut jobs in August, although the pace of reductions slowed somewhat. The indicator gained 5 points to -12. Conversely, average retail wage growth revved up in August, with the index jumping to 25 from its month-ago reading of 3.

Services Firms
Revenue growth at services-providing firms tapered off in August to an index of 5 compared to 9 in July. In addition, the pace of hiring slowed, with that index settling at 7 from 14. Average wage growth at services-providing firms picked up somewhat, gaining 4 points to 11. Services providers were more cautious in their optimism about the demand for their services in the six months ahead. The expectations index softened to 22 in August from July's reading of 44.

Prices
Price growth in the service sector eased in August, to an annual rate of 0.82 percent, after rising at 1.13 percent in July. Retail prices grew at a 1.65 percent pace compared to last month's 1.89 percent reading, and price growth at services-providing firms slowed to 0.42 percent following July's reading of 0.71 percent. Looking ahead, survey respondents anticipated sector-wide price growth of 1.23 percent over the next six months, a tad faster than their July outlook for 1.17 percent. Retailers expected their prices to grow at 2.26 percent in the coming months, somewhat above their month-ago expectation for 1.86 percent. Services providers’ anticipated 0.81 percent price growth over the next six months, slightly below the 0.98 percent pace they looked for in July. All firms surveyed are located within the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.

Manufacturing Conditions Survey: Manufacturing activity picks up the pace in August; Employment and average workweek increased; Expectations remain optimistic

Manufacturing activity in the central Atlantic region advanced somewhat faster in August according to the Richmond Fed’s latest survey. The index of overall activity edged higher behind solid increases in shipments and new orders. In addition, contacts indicated that the pace of hiring had strengthened for the first time since November of 2006. Other indicators were mixed. Manufacturers reported somewhat slower growth in backlogs, but noted quicker growth in delivery times and finished goods inventories. Looking forward, the outlook for business prospects over the next six months was in line with last month’s readings. Firms continued to look for steady growth in shipments, new orders and capacity utilization. On the price front, raw material prices grew at a slightly slower pace in August, while finished good prices grew at a somewhat quicker pace. For the next six months, respondents expected both raw material and finished good prices to grow at slightly faster rates compared to last month’s expectations.

Current Activity
In August, the seasonally adjusted manufacturing index - our broadest measure of manufacturing activity - moved up three points to 7. Among the index’s components, shipments gained five points to 10, while new orders slipped three points to 5 and the jobs index moved up eight points to finish at 5. Other indicators were mixed. The capacity utilization index was virtually unchanged at -1, while vendor delivery times edged higher to 6. Inventory levels for finished goods grew at a slightly quicker pace in August adding eight points to end at 30. On the other hand, the raw materials inventory index trimmed six points to 12. The orders backlogs showed the largest change, falling eight points to finish at 2.

Employment
Labor market conditions strengthened at District plants in August. In addition to gains in the employment index, the average workweek recouped three points to end at 2. In contrast, the wage index slipped two points to 9.

Expectations
In August, our contacts remained generally confident about their business prospects for the coming six months. The index of expected shipments was unchanged at 25, while the new orders indicator trimmed four points to 17. In addition, the orders backlog index added six points to 11, vendor delivery times held steady at 4 and capacity utilization gave up three points to 19. Adding to the generally positive outlook, the planned capital expenditures index remained strong despite drifting down four points to 21. On the employment front, expectations were mixed. The expected manufacturing employment index was little changed at 7, while the average workweek reading declined seven points to 7. In contrast, the expected wage index matched July’s reading of 38.

Prices
District manufacturers reported that raw material prices increased at an average annual rate of 3.18 percent during August - slightly below July’s reading of 3.27 percent. Finished good prices rose at a 2.41 percent pace versus 2.16 percent last month. Looking ahead to the next six months, respondents expected that the prices they pay will advance at a 3.31 percent pace, up somewhat from 3.06 percent in July. Additionally, contacts look for finished good prices to increase at a 1.56 percent annual rate during the next six months, compared to last month’s expectation of 1.51 percent.

Economic Data:

ICSC-UBS Store Sales: Weekly measure of comparable store sales at major retail chains which is related to the general merchandise portion of retail sales, as reported by the International Council of Shopping Centers. This date accounts for approximately 10% of total retail sales. Data released today: ICSC-UBS Chain Store Sales up 0.3% in week of August 25th.

Redbook: General merchandise portion of retail sales covering only approximately 10% of total retail sales, this data is a weekly measure of sales at department stores, chain stores and discounters. Redbook data released today: U.S. Retail Sales fell 0.7% for first 3 week in August versus July. U.S. chain store sales fell 0.7% in the first three weeks of August compared with the previous month, according to Redbook Research's latest indicator of national retail sales released Tuesday. The drop wasn't quite as steep as the forecast 0.9%, according to the report. However, the Johnson Redbook Index also showed seasonally adjusted sales in the three-week period rose 2.3% compared with August 2006. This outstripped the expected 2.1% increase. Redbook said on an unadjusted basis, sales in the week ended August 25th were up 2.4% from the same week in 2006, after a 2.0% gain the previous week.

Consumer Confidence: A compilation by the Conference Board of a survey of five thousand consumer attitudes, across the country, on present economic conditions and expectations of future conditions. U.S. Conference Board August Consumer Confidence came in at 105.0 versus July reading at 111.9; Conference Board August Expectations Index came in at 88.2 versus July reading at 94.4 and Conference Board August Present Situation Index came in at 130.3 versus July reading at 138.3

Federal Open Market Committee Minutes: FOMC August 7th Minutes signal growing worry over Financial Markets; lower dollar, softer productivity inflation are risks; still saw inflation as 'predominant' risk; Core Inflation 'favorable,' but partly 'transitory'; housing correction may be 'deeper and more prolonged'; housing a 'significant downside risk' to economy; consumers, businesses, exports should support growth; need to watch financial conditions 'carefully'; financial conditions a factor in lower GDP Forecast; staff cuts 2007, 2008 GDP Forecasts; also cuts potential GDP and credit conditions 'might require a policy response'.

Commodities Markets

The trend was mostly lower across the board today for the Energy Sector: Light crude moved lower today by $0.24 to close at $71.73 a barrel; Heating Oil ended the session lower by $0.01 again today to close at $2.02 a gallon; Natural Gas moved higher today by $0.23 to close at $5.82 per million BTU and Unleaded Gas moved lower by $0.02 today to close at $2.02 a gallon.

Metals Market ended the session mixed across the board today: Gold moved lower today by $2.70 to close at $673.50 an ounce; Silver moved closed with no change at $11.92 per ounce; Platinum moved higher today by $8.30 to close at $1,260.60 an ounce and Copper moved lower by $0.04 today to close at $3.31 per pound.

On the Livestock and Meat Markets, the trend was mostly lower across the board today: Lean Hogs ended the day higher by 0.20 to close at 67.90; Pork Bellies ended the day lower by 1.05 at 91.00; Live Cattle moved lower by 0.15 to close at 97.60 and Feeder Cattle ended the day lower by 0.03 at 118.85.

Other Commodities: Corn moved lower yet again on the day with a loss of 8.25 at 344.75 and Soybeans moved lower today for a loss of 0.50 points to end the session at 872.25.

The e-mini Dow ended the session today at 13,090 with a hefty triple digit loss of 262 points on the trading session. The total Dow Exchange Volume for the day came in at 118,211 which are comprised of Electronic, Open Auction and Cash Exchange. Traders should review workshops available at the CBOT (Chicago Board of Trade) Educational in-person seminars schedules available on CBOT (Chicago Board of Trade) website.

Bonds were higher across the board again today: 2 year bond moved higher by 8/32 today to close at 100 31/32; 5 year bond closed higher by 17/32 at 101 27/32; 10 year bond moved higher by 14/32 today to close at 101 27/32 and the 30 year bond moved higher by 3/32 to close at 102 8/32 for the day.

The end of day results for the CBOT (Chicago Board of Trade) which is comprised of the total Exchange Volume for Futures and Options (EVFO) including Electronic, Open Auction and Cash Exchange ended the day at 4,137,302; Open Interest for Futures moved higher by 65,294 points to close at 9,383,580; the Open Interest for Options moved higher by 246,936 points to close at 6,400,522 and the Cleared Only moved higher by 60 points to close at 8,087 for a total Open Interest on the day of 15,792,189 with a total Change on the day of a gain of 312,290 points.

On the NYSE today, advancers came in at 441; decliners totaled 2,798; unchanged came in at 68; new highs came in at 32 and new lows came in at 62. Gainers and losers for the day as well as active day trading stocks on the NYSE: Aluminum Corporation of China Limited (ACH) provided very nice day trading action today with a high on the session at $69.50, a low of $59.61 for a loss on the day of 5.45 points with a final trading price at $61.90; Rio Tinto plc (RTP) was quite active on the session today with a high on the day at $267.55, a low of $257.71 with a loss of 12.50 points for a final trading price on the day at $259.49; China Life Insurance Company Limited (LFC) posted a loss of 12.04% to shed 9.40 points on a very active trading day with a high of $73.09, a low of $68.68 to close the trading day at $68.68; Precision Castparts Corporation (PCP) moved lower on the trading day to post a loss of 6.36 points with a high of $137.97, a low of $131.20 for a final trading price on the day of $131.63; PetroChina Company Limited (PTR) fell hard on the trading session with a loss on the day of 10.34 points with a high on the day at $147.25, a low of $139.00 to close the day at $139.39 and Uniao de Bancos Brasileiros SA (UBB) shed 7.10 points on the day with a high of $111.23, a low of $104.02 for a final trading price at $104.52.

On the NASDAQ today, advanced totaled 634; decliners totaled 2,406; unchanged came in at 112; new highs came in at 48 and new lows came in at 104. Gainers and losers for the day as well as, active day trading stocks on the NASDAQ: PolyMedica Corporation (PLMD) posted a sharp gain on the trading day of 14.10% to rise higher by 6.38 points for a closing price on the session of $51.67; Apple Incorporated (AAPL) had an active eye on the markets today to shed 5.43 points with a high on the day of $132.41, a low of $126.63 to end the day at $126.82; Omrix Biopharmaceuticals Incorporated (OMRI) rallied higher on the trading session to post a gain of 16.79% for 4.88 point move higher with a high on the day of $34.16, a low of $28.42 to close the trading session at $32.38; Triad Guaranty Incorporated (TGIC) moved sharply lower on the session to shed 17/64% for a loss of 4.40 points with a high of $24.78, a low of $18.75 to close at $20.59; Winn-Dixie Stores Incorporated (WINN) posted a sharp loss on the session of 18.54% to shed 5.24 points to close the day at $23.05; Sanderson Farms Incorporated (SAFM) gave up 12.01% on the session to shed 5.26 points for a closing price at the bell of $38.58 and Baidu.com Incorporated (BIDU) fell by 6.74 points with a high of $211.44, a low of $199.01 for a final trading price on the day of $205.20.

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Millennium-Traders