Market Commentary for July 18, 2007


The Bears reared their heads and took control of market activity for the trading day. The major indices opened in the red zone where they maintained their stance, even into the close. Trading volume was moderate and trading ranges improved from yesterday although, to the down side. At the closing bell, here is how the major indices ended the session: the DOW (Dow Jones Industrial Average) posted a loss of 53.33 points to end the session at 13,918.22; the NYSE (New York Stock Exchange) posted a loss of 22.08 points to end at 10,148.28; the NASDAQ posted a loss of 12.80 points for a close at 2,699.49; the S&P 500 moved lower by 3.20 points to end at 1,546.17 and the RUSSELL 2000 moved lower by 3.98 points to close at 845.91. 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 worlds investable market capitalization) moved lower by 1.72 points to close at 268.07 and the FTSE RAFI 1000 posted a loss of 15.38 points to close at 6,472.57.

President of the Federal Reserve, Ben S. Bernanke commented today: Fed has to be 'quite vigilant' on inflation; sub-prime conditions eroded 'significantly'; Fed cuts U.S. GDP forecast from 2.5%to 3% in 2007, 2.75% to 3% in 2008; Fed doesn't want to get into 'bailout' of sub-prime; Fed has to be 'quite vigilant' on inflation; Fed is concerned about overall inflation rate; Fed sees U.S. Core PCE at 2% to 2.25% in 2007, 1.75% to 2% in 2008; Fed sees U.S. GDP Growth 2.25% to 2.5% in '07,2.5% to 2.75% in 2008; Fed sees U.S. Jobless Rate 4.5% to 4.75% in 2007, about 4.75% in 2008; Fed to propose banning some bank practices by year end; Fed to propose new mortgage disclosure rules; Fed view of Bank Ties to Hedge funds not 'Laissez Faire'; Hedge Fund failures 'not necessarily a bad thing'; housing adjustment 'ongoing,' to remain sluggish; housing correction has to work its way out; housing correction still downside economic risk; no change in Fed's Central Tendency for 2007, 2008 Core PCE; no spillover yet from lower home prices to spending; overall financial conditions still helping growth; sees 2nd quarter U.S. GDP growth 'closer to 3%'; sees economy strengthening into 2008; some 'puzzles' in construction employment data; trade balance showing signs of improvement; trend productivity may have slowed somewhat; 'unhappy' with overall inflation rates; upside inflation risks 'predominant' concern and U.S. has an inventory problem in housing.

Segment on the Fleecing of America, by our government. After the Hurricane Katrina disaster, FEMA housed disaster victims in travel trailers. In an effort to provide quick housing for displaced victims, FEMA paid almost $900 million for over 26,000 manufactured and modular homes. However, FEMA regulations prohibit placing these types of homes in flood plains. In short, FEMA paid $900 million for more than 26,000 homes that cannot be used by the overwhelming majority of the evacuees whose homes were ruined by Katrina. The homes had to be stored. FEMA agreed to pay $25,000 a month or $300,000 a year to the city of Hope, to rent land for storage. Prior to this storage agreement, a hay farmer paid $5,000 a YEAR to rent the same land. Because the units were placed in open fields, many were sinking into the earth and becoming damaged. To try to mitigate this and make it easier to move the homes in the future, FEMA contracted to spend $4.2 million to lay gravel over much of the area, with an option for an additional $2.9 million. All told, the Inspector General estimates that FEMA will spend almost $47 million in 2006 to store and maintain manufactured housing. According to the Department of Homeland Security’s Inspector General, FEMA paid $857.8 million for 24,967 manufactured homes and $40 million for 1,295 modular homes. U.S. Congress, Senate, Committee on Homeland Security and Governmental Affairs, Hurricane Katrina: Waste, Fraud and Abuse Worsen the Disaster, testimony of Richard Skinner, Inspector General of the Department of Homeland Security, 109th Cong., 2nd session, pg. 7, 13 February 2006. Available online at http://hsgac.senate.gov/_files/021306Skinner.pdf

Economic Data:

MBA Purchase Applications: Compilation from the Mortgage Bankers’ Association of various mortgage loan indexes. This data is the leading indicator for single-family home sales as well as, housing construction. MBA Purchase Applications data released today: U.S. MBA Market Index rises 0.9% to 631.6 from 626.2; U.S. MBA Purchase Index falls 1.6% to 446.5 from 453.9 and U.S. MBA Refinancing Index rises 4.9% to 1717.4 from 1636.9.

Consumer Price Index (CPI): The measure of the average price level of a fixed basket of goods and services purchased by consumers; monthly changes represent the rate of inflation. CPI data released today: U.S. June Consumer Prices rose by 0.2% as compared to consensus of an increase by 0.1%; U.S. June CPI Excluding Food and Energy rose by 0.2% compared to consensus of an increase by 0.2%; U.S. June CPI Unrounded rose by 0.191%; U.S. June CPI Core rose by 0.232%; U.S. June CPI Energy Prices fell by 0.5%; U.S. June CPI Food Prices rose by 0.5% and U.S. Real Average Weekly Earnings rose by 0.5% in June.

Housing Starts: A monthly measure of initial construction of new homes, single family residential units and multi family units as released by the Commerce Department. A rising trend indicates an increase in demand for home furnishings, appliances and furniture. Housing Starts data released today: U.S. June Housing Starts rose by 2.3% to 1.467 Million compared to consensus of a drop by 1.6%; Building Permits fell by 7.5% to 1.406 Million Rate in June and May Housing Starts were revised to a drop by 3.4% from a drop by 2.1%.

EIA Petroleum Status Report: EIA (Energy Information Administration) provides weekly petroleum inventories in the United States whether they are produced here or abroad. Prices for petroleum products are determined by the level of inventories. Department of Energy released Petroleum Status today: U.S. Crude Oil Stockpiles by 500,000 Barrels in the week compared to expectation of a drop by 760,000; U.S. Gasoline Stockpiles fell by 2.3 Million Barrels in the week compared to expectation of an increase by 560,000; U.S. Refineries ran at 91.0% capacity and was seen up 0.5 Pt. at 90.7%.

Commodities Markets

The trend was higher across the board today for the Energy Sector: Light crude moved higher by $1.03 today to close at $75.05 a barrel; Heating Oil ended the session higher by $0.07 at $2.13 a gallon; Natural Gas moved higher today by $0.21 today to close at $6.61 per million BTU and Unleaded Gas moved higher by $0.09 on the session to close at $2.20 a gallon.

Metals Market ended the session higher across the board today: Gold moved higher today for a nice gain of $7.80 to close at $673.70 an ounce; Silver closed higher today by $0.27 at $13.29 an ounce; Platinum moved higher today for substantial gain of $14.60 to close at $1,337.20 an ounce and Copper closed higher by $0.01 at $3.56 per pound.

On the Livestock and Meat Markets, the trend was mostly higher across the board again today: Lean Hogs ended the day higher by 1.85 to close at 72.75; Pork Bellies ended the day at 88.30; Live Cattle moved higher by 0.53 to close at 97.28 and Feeder Cattle ended the day lower by 0.43 at 115.40.

Other Commodities: Corn moved higher today with a rebound of 5.75 points for a close at 342.50 and Soybeans began its rebound today to post gain of 16.00 points to end the session at 876.50.

The e-mini Dow ended the session today at 14,003 with a loss of 36 points on the trading session. The total Dow Exchange Volume for the day came in at 137,929 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 today: 2 year bond closed higher by 3/32 at 100 1/32; 5 year bond closed higher by 7/32 at 99 172432; 10 year bond closed higher by 11/32 at 95 29/32 and the 30 year bond closed higher by 15/32 at 94 9/32.

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 4,155,653. Open Interest for Futures moved higher by 43,718 points to close at 9,940,920; the Open Interest for Options moved higher by 54,936 points to close at 9,025,779 and the Open Interest for OTC moved higher by 48 points to close at 6,585 for a total Open Interest of 18,973,284 for a total gain on the day by 98,702 points.

On the NYSE today, advancers came in at 1,154; decliners totaled 2,021; unchanged came in at 129; new highs came in at 124 and new lows came in at 176. Gainers and losers for the day on the NYSE: Chicago Mercantile Exchange Holdings (CME) had a high on the trading day of $586.90, a low of $573.00 for a loss on the day of 6.11 points to close on the Big Board at $577.64; Humana Incorporated (HUM) posted a gain on the session of 6.11 points for a final trading price at $68.31; Johnson Controls Incorporated (JCI) gave up 4.61 points on the trading session to close the day at $120.20; CIT Group Incorporated (CIT) moved sharply lower by 6.26 points to shed 11.29% for a closing price of $49.17; Canadian Pacific Railway Limited (CP) bolted higher on the trading session to post a gain of 14.88% to tack on 11.01 points to close the session at $85.00 and BlackRock Incorporated (BLK) moved nicely higher on the day to post a gain of 10.15 points for a final trading price on the trading day of $174.30.

On the NASDAQ today, advanced totaled 1,136, decliners totaled 1,895; unchanged came in at 147, new highs came in at 76 and new lows came in at 175. Gainers and losers for the day on the NASDAQ: USANA Health Sciences Incorporated (USNA) moved higher on the trading day with a nice gain of 12.93% to tack on 5.35 points on the trading day with a final trading price of $46.73; Google Incorporation (GOOG) shed 5.13 points on the session with a high of $554.50, a low of $543.81 to end the trading day at $549.87; Baidu.com Incorporated (BIDU) gave up 10.80 points on the session with a high of $211.48, a low of $198.40 to close the trading session at $201.49 and Alfa Corporation (ALFA) moved favorably higher on the trading day to climb higher by 20.98% to tack on 3.18 points to close the trading day at $18.38.

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Millennium-Traders