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Market Commentary for October 29, 2007 from Millen


A rather quiet trading session but, typical for a Monday. The Bulls had control of the trading action, with the major indices clearing riding in the green zone, through out the trading session. Trading ranges were fairly tight and trading volume was light. Not much news to create any ruckus in the markets and investors seem to have snuggled up to the sidelines ahead of the FOMC announcement on Interest Rates, on Wednesday. Crude oil moved over $93.00 a barrel, continuing the fear of what’s ahead at the gas pumps.

At the closing bell, here is how the major indices ended the session: the DOW (Dow Jones Industrial Average) posted a gain of 63.56 points on the day to end the session at 13,870.26; the NYSE (New York Stock Exchange) posted a gain of 67.09 points to end the session at 10,256.22; the NASDAQ posted a gain of 13.25 points for a close at 2,817.44; the S&P 500 moved higher by 5.70 points to end at 1,540.98 and the RUSSELL 2000 moved higher by 0.33 points to close at 821.72. 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 gain of 2.82 points to close at 277.66 and the FTSE RAFI 1000 posted a gain of 23.15 points to close at 6,316.35.

Treasury Assistant Secretary for Economic Policy Phillip Swagel Statement for the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association: Washington - A variety of indicators suggest that the economy grew at a healthy pace in the third quarter, notwithstanding the housing slump, credit market disruptions, and high energy prices. While the weak housing sector looks to be a drag on GDP for the next several quarters, the housing downturn does not appear to have had serious impacts on other parts of the economy. The labor market remains broadly healthy, with low unemployment, continuing job creation, and wage gains that should support consumer spending. World output growth has boosted net exports. Core inflation appears to be contained. Looking forward, however, the ongoing drag from construction, the problems in credit markets, and higher oil prices have led private forecasters to reduce their projections for GDP growth in the fourth quarter of 2007 and into 2008. The downturn in the housing sector has not ended as quickly as appeared to be possible at the end of 2006. The housing correction comes after an eight-year period of exceptional home price appreciation, in which strong demand for housing was fueled in part by ample liquidity. Rising homebuilding activity helped to propel GDP growth, adding an average of about half a percentage point to GDP growth rates in each quarter from 2003 to 2005. Easy credit took the form of increased use of adjustable-rate mortgages (ARMs), hybrid-ARMs with low teaser rates, interest-only features, low- or no-down payments, and even negative amortization. These practices exposed mortgage holders to greater risk than with a traditional 30-year fixed rate mortgage with a 20 percent down payment. A significant percentage of non-traditional ARMs went to sub-prime borrowers, as the sub-prime component of total lending grew from about 2 percent of mortgages in 1998 to nearly 14 percent in mid-2007. The housing correction began in early 2006. Home prices have decelerated considerably over the past year, with some measures of nationwide home prices showing outright declines over the past four quarters. Sales of existing single-family homes are down by 30 percent from the peak in 2005, and the inventory of unsold homes has increased to levels last seen in the early 1990s. While the sub-prime delinquency rate today is near the level seen in 2001, there are over seven times more sub-prime mortgages today than there were in 2001. It appears likely that the increased number of delinquencies will translate into further increases in mortgage defaults and foreclosures. Current trends suggest there will be just over 1 million foreclosures started this year, of which two-thirds will be in the sub-prime market. Declining residential building activity has subtracted substantially from GDP growth since the correction began. Annual housing starts peaked at an annual rate of almost 2.3 million units in early 2006 before falling nearly 50 percent through September of this year. Employment in residential building, including specialty trade contractors, has dropped by almost 200,000 since early 2006, offsetting about one-quarter of the jobs gained in the housing boom. Although it appeared that homebuilding activity had reached a bottom in the first half of this year, starts and permits have both fallen further since June and the elevated level of inventories of unsold homes suggest that home construction will remain weak going forward. Despite the downdraft from housing, other sectors of the economy have been broadly healthy-indeed, this is the first housing downturn in the past three decades in which U.S. GDP growth has not turned negative. Business investment has expanded in recent months, exports are growing strongly, and continued job creation has helped support consumer spending. Data available through August suggest that real personal consumption expenditures are on track to contribute about 2 percentage points to real GDP growth in the third quarter (at an annual rate), more than consumption contributed in the second quarter, when real GDP rose by 3.8 percent at an annual rate. Solid income gains and healthy household balance sheets have helped support household spending: Real disposable income rose 4.4 percent over the twelve months ended in August, and household net worth remained high relative to income in the second quarter. In the business sector, core capital goods shipments rose smartly in August and September, signaling a pickup in equipment and software investment toward the end of the third quarter. Orders for core durable goods remain ahead of shipments, though the volatility of the orders data means that this provides only a modest suggestion of future strength in the durable goods categories that are most closely linked to business investment. Export growth remained solid well into the third quarter, supported in large part by strong economic growth overseas. Over the year ended in August, U.S. exports of goods and services rose 12.8 percent. Strong export growth and slower growth of imports has narrowed the trade deficit considerably in recent months. Net exports are poised to make another substantial contribution to Q3 real GDP growth after adding 1.3 percentage points to growth in the second quarter. Job growth moderated in the third quarter and the unemployment rate ticked higher but labor markets still appear healthy overall. Non-farm payrolls expanded by an average of 97,000 a month in the third quarter, down from the average monthly job gain of 134,000 in the first half of the year. The unemployment rate edged up to 4.6 percent in the third quarter from 4.5 percent in the previous three quarters. Real wages in September were 1.3 percent higher than a year earlier. The level of initial claims for unemployment insurance moved up somewhat in October, but remains at a level consistent with ongoing job creation. The federal government's fiscal position continued to improve in the fiscal year that just ended. The federal budget deficit shrank by $85 billion in FY2007 to $163 billion, due to a combination of strong receipts growth and a moderate rise in spending. The FY2007 deficit was equivalent to 1.2 percent of GDP--half of the 40-year average of 2.4 percent. At the same time, the fiscal challenge of rising entitlement spending looms just over the horizon. Headline consumer price inflation has moved higher but core inflation remains broadly contained. Headline consumer price inflation was 2.8 percent over the twelve months ended in September, up from a 2.1 percent pace over the year-earlier period. Energy prices increased 5.4 percent over the latest twelve months, although prices have been volatile in this period, and crude oil prices have surged in the most recent few weeks. Food prices accelerated notably over the past year; September's twelve-month change of 4.4 percent was up from 2.6 percent a year ago. Excluding food and energy, consumer prices advanced 2.1 percent over the last 12 months, down from 2.9 percent in the previous 12 months. The sharp run-up in oil prices since mid-August has prompted forecasters to lower their projections for near-term growth. The one-month futures price of West Texas Intermediate crude oil broke through the $90 a barrel mark late last week and is nearing the inflation-adjusted peak recorded in 1980. Production in the U.S. economy is less energy-intensive than was the case thirty years ago, so that the current high level of oil prices is not expected to exact the same heavy toll on the economy as in the 1970s and 1980s. Even so, high energy prices remain a challenge for consumer and business spending, while tight inventories and limited global production capacity mean that the possibility of sharply higher oil prices from a supply disruption is a key downside risk for the economy. In sum, the U.S. economy looks set to grow at a moderate pace, even while the downdraft from the homebuilding sector and recent credit market disruptions exact a penalty on growth.

Commodities Markets
The trend was higher across the board today for the Energy Sector: Light crude moved higher today by $1.67 to close at $93.53 a barrel; Heating Oil closed higher by $0.03 today at $2.48 a gallon; Natural Gas moved higher today by $0.17 to close at $7.97 per million BTU and Unleaded Gas moved higher today by $0.05 to close at $2.33 a gallon.

Metals Market ended the session mixed across the board today: Gold moved higher today by $5.10 to close at $792.60 an ounce; Silver moved higher by $0.15 to close at $14.43 per ounce; Platinum moved lower today by $3.60 to close at $1,465.50 an ounce and Copper closed lower by $0.02 today at $3.52 per pound.

On the Livestock and Meat Markets, the trend was mostly higher across the board today: Lean Hogs ended the day lower by $0.05 to close at $54.48; Pork Bellies ended the day higher by $0.58 at $84.10; Live Cattle ended the day higher by $0.23 at $95.35 and Feeder Cattle ended the day higher by $0.70 at $108.90.

Other Commodities: Corn moved higher today by $4.00 to close at $376.00 and Soybeans moved sharply higher today by $15.50 to end the session at $1,028.75.

Bonds were mostly higher across the board today: 2 year bond moved lower by 1/32 today to close at 99 21/32; 5 year bond moved higher by 2/32 to close at 99 7/32 today; 10 year bond moved higher by 7/32 today to close at 102 29/32 and the 30 year bond closed higher by 8/32 at 105 13/32 for the day.

The e-mini Dow ended the session today at 13,908 with a gain of 60 points on the trading session. The total Dow Exchange Volume for the day came in at 155,558 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.

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 3,623,736; Open Interest for Futures moved lower by 92,718 points to close at 9,634,952; the Open Interest for Options moved lower by 878,578 points to close at 8,157,446 and the Cleared Only closed higher by 36 points at 10,068 for a total Open Interest on the day of 17,802,466 for a total Change on the day with a loss of 971,260 points.

On the NYSE today, advancers came in at 1,846 decliners totaled 1,404 unchanged came in at 119; new highs came in at 311 and new lows came in at 69. Gainers and losers for the day as well as active day trading stocks on the NYSE: PetroChina Company Limited (PTR) posted a favorable gain of 7.83 points with a high on the day of $254.88, a low of $248.00 with a final trading price at $254.30; Suntech Power Holdings Corporation Limited (STP) provided nice day trading action for the active day trader with a high on the session of $62.18, a low of $54.80 with a gain on the day of 6.74 points to tack on 12.22% for a final trading price at $61.90; Office Depot Incorporated (ODP) moved lower on the session to shed 13.75% for a loss of 2.79 points for a closing price of $17.50; Morton’s Restaurant Group Incorporated (MRT) posted a hefty loss of 17.49% to move lower by 3.01 points with a closing price of $14.20; Longtop Financial Technologies Limited (LFT) shed 10.52% on the session for a loss of 3.15 points with a high on the day of $31.22, a low of $26.05 for a closing price at $26.80 and Goldman Sachs Group Incorporated (GS) pounced higher on the day for a gain of 7.94 points with a high on the trading session of $244.98, a low of $235.07 with a closing price of $243.86.

On the NASDAQ today, advanced totaled 1,497; decliners totaled 1,483; unchanged came in at 134; new highs came in at 171 and new lows came in at 117. Gainers and losers for the day as well as, active day trading stocks on the NASDAQ: China Sunergy Company Limited (CSUN) bolted higher on the day with a gain of 28.15% to tack on 2.57 points with a closing price at $11.70; CTC Media Incorporated (CTCM) soared higher on the day to post a gain of 19.18% for a climb higher by 4.14 points with a final trading price at $25.72; Winn-Dixie Stores Incorporated (WINN) tacked on a nice gain of 19.07% for a gain of 3.55 points with a high on the day of $22.93, a low of $18.89 to close at $22.17; Schnitzer Steel Industries Incorporated (SCHN) tumbled lower on the day to shed 12.01 points for a loss on the day of 15.44% with a high on the day of $70.01, a low of $64.55 for a final trading price at $65.76; Baidu.com Incorporated (BIDU) soared higher on the day with a gain of 12.02 points with a high on the session of $367.75, a low of $357.29 for a final trading price at the bell of $365.41.

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Millennium-Traders