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Market Commentary for October 03, 2007

The Bears took control of the major indices today, holding them in the red zone through out the day, moving lower into the late afternoon trading session. Day traders played the losers heavily today taking short positions in many stocks that posted substantial gains earlier this week. Investors may have concerns over the strong southbound trend and will have an eye on the markets cautiously, over the remainder of the week. Stocks took heavy hits today, creating a very nice trading atmosphere for the short sellers in the markets. Trading volume was moderate with somewhat tight trading ranges.

At the closing bell, here is how the major indices ended the session: the DOW (Dow Jones Industrial Average) posted a loss of 79.26 points on the day to end the session at 13,968.05; the NYSE (New York Stock Exchange) posted a loss of 74.81 points to end the session at 10,101.03; the NASDAQ posted a loss of 17.68 points for a close at 2,729.43; the S&P 500 moved lower with a loss of 7.04 points to end at 1,539.59 and the RUSSELL 2000 moved lower by 5.82 points to close at 826.15. 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 0.75 points to close at 270.88 and the FTSE RAFI 1000 posted a loss of 25.97 points to close at 6,332.02.

U.S. Mortgage Bankers’ Association (MBA) released data today: MBA Market Index falls 2.7% to 636.7 from 654.2; U.S. MBA Purchase Index falls 1.8% to 411.4 from 418.8 and U.S. MBA Refinancing Index Falls 3.8% to 1950.4 from 2026.5.

Challenger U.S. Job Cuts for September came in at 71,739, which is down 9.7% from August: The number of job cuts announced by U.S. corporations in September fell off by 9.7% from the number reported in the prior month for a total of 71,739 according to a Challenger, Gray & Christmas survey released today. Job cuts were 28.5% lower this August than last year, when there were 100,315 job cuts. Job cut announcements so far this year totaled 587,594, 8.1% fewer than the 639,229 in the first nine months of 2006. The financial industry announced 27,169 job cuts last month, the most for any industry. "What a difference a year makes," noted John Challenger, CEO of Challenger, Gray & Christmas in a statement. "It appears that the automotive sector has stabilized for the time being, particularly since General Motors and the United Auto Workers reached a labor agreement. Meanwhile financial firms cannot cut their payrolls fast enough especially in the mortgage lending sector." The report is an anecdotal, non-statistical tally of job-cut announcements that are reported in major medial outlets. The report focuses only on job-cut announcements, not actual layoffs and it doesn't take into account new hires or internal transfers at companies that have announced layoff.

U.S. Institute of Supply Management (ISM) September Non-Manufacturing Business Index came in at 54.8; U.S. ISM September Non- Manufacturing Business Index was expected to come in at 54.8; U.S. ISM September Non- Manufacturing Business Index came in at 54.8 versus August reading at 55.8; U.S. ISM September Non- Manufacturing Employment Index came in at 52.7 versus August reading at 47.9; U.S. ISM September Non- Manufacturing Prices Index came in at 66.1 versus August reading at 58.6 and U.S. ISM September Non- Manufacturing New Orders Index came in at 53.4 versus August reading at 57.0.

Department of Energy released Petroleum Status Report: U.S. Gasoline Stockpiles fell by 100,000 Barrels in the week compared to expectations of a rise by 400,000 Barrels; U.S. Refineries ran at a capacity of 87.5% compared to expectations of a drop by 0.6% at 87.3%; U.S. Distillate Stockpiles fell by 1.2 Million Barrels in the week compared to expectations of an increase by 700,000 Barrels and U.S. Crude Oil Stockpiles rose by 1.2 Million Barrels in the week compared to expectations of a drop by 400,000 Barrels.

ADP-Macroeconomic Advisers See September Payrolls higher by 58,000.

Comment released from Former Chairman of the FOMC, Allan Greenspan: The Worst Is Over In U.S. Sub-prime Crisis.

Prepared Remarks of Office of Foreign Assets Control Director Adam J. Szubin on the Treasury Department’s Role in Addressing the Situation in Darfur Before the Senate Committee on Banking, Housing and Urban Affairs Washington, DC -- Chairman Dodd, Ranking Member Shelby and Members of the Committee, thank you for the opportunity to speak to you today about the Treasury Department's role in addressing the situation in Darfur and the Sudanese Government's support for terrorism, as well as its views regarding the various Sudan-related pieces of legislation that are pending in the Congress. I welcome the Committee's interest in these matters, and want to take this opportunity to thank the Committee for its continued support of Treasury and OFAC and its mission over the years, in particular as we have pursued sanctions against governments like Sudan. We share an acute concern about the devastating suffering in Darfur, and an understanding that economic pressure can play an important role in bringing about a political resolution to this complex situation. Secretary Paulson has made it clear that we should spare no effort in using all tools at the Treasury Department's disposal to advance this goal. For OFAC and for myself in particular, imposing smart and effective pressure on Sudan has been a foremost priority.

Treasury Department Actions against Sudan
The Scope of Sanctions
The United States has levied economic sanctions against Sudan since 1997. At that time, the Government of Sudan's support for international terrorism and widespread human rights violations led President Clinton to impose comprehensive trade sanctions against Sudan, and block all property of the Government of Sudan in the United States or within the control of U.S. persons anywhere in the world. Acting with Congress, President Bush amended these broad sanctions in 2006 to carve out certain areas from our sanctions, notably Southern Sudan and Darfur, provided that the relevant transactions do not involve Sudan's petroleum or petrochemical industries or any property or property interest of the Government of Sudan. In addition to these comprehensive sanctions, the President recently imposed strict economic sanctions against persons responsible for violence or atrocities in Darfur. Issued in accordance with actions taken by the United Nations Security Council, Executive Order 13400 blocked the property of four individuals connected to the conflict in Darfur. It also authorized the Treasury Department to block the property and interests in property of persons determined to: constitute a threat to the peace process in, and stability of, Darfur; be responsible for conduct related to the conflict in Darfur that violates international law; be responsible for heinous conduct with respect to human life or limb related to the conflict in Darfur; have supplied, sold, or transferred arms or any related materiel related to military activities to the warring parties in Darfur; or be responsible for offensive military over flights in and over the Darfur region. Treasury's authority applies as well to those determined to have materially assisted or supported, or to have acted for or on behalf of, any of the above.

Recent Actions
A primary objective of these sanctions, of course, has been to alter the behavior of those responsible for the terrible suffering in Darfur, first and foremost the Sudanese Government of President Bashir. This past April, on Holocaust Memorial Day, the President issued a clear warning to the Sudanese Government. Either they would live up to their prior commitments and allow the deployment of a joint United Nations-African Union peacekeeping force, or the United States would impose further economic sanctions on the Sudanese Government and seek a United Nations Security Council Resolution to do likewise. When President Bashir did not follow through, President Bush did. On May 29, Treasury announced the designation of three additional Sudanese individuals and thirty-one additional Sudanese companies subject to the asset freeze strictures of Executive Orders 13067, 13400, and 13412. We imposed sanctions against three individuals and one company because of their role in the ongoing violence in Darfur. We designated Ahmad Muhammed Harun, Sudan's State Minister for Humanitarian Affairs, and Awad Ibn Auf, Sudan's head of Military Intelligence and Security, who are among Khartoum's senior leadership and have acted as liaisons between the Sudanese government and the Government-supported Janjaweed militias. We also designated Khalil Ibrahim, leader of the Justice and Equality Movement (JEM), a rebel group that has been responsible for a number of violent incidents, and the Azza Air Transport company, which had been conveying artillery, small arms, and ammunition to Sudanese government forces and Janjaweed militia in Darfur for their activities in Darfur. Simultaneously, we targeted 30 additional companies owned or controlled by the Government of Sudan, thereby subjecting them to the asset freeze imposed on the Government by Executive Orders 13067 and 13412. These targeted companies included five petrochemical companies, Sudan's national telecommunications company, and an entity that has supplied armored vehicles to the Sudanese Government for military operations in Darfur. In addition to these actions to strengthen our financial measures against Sudan, we have stepped up enforcement of our Sudan sanctions, and have made such enforcement a top priority within OFAC. While I cannot comment on specific open enforcement cases, I can tell you that we are aggressively pursuing a number of violators to expose and penalize those who are violating our sanctions and deter those who might think of doing so. In this regard, I would like to thank the Chairman and this Committee for its support in passing S. 1612, the International Emergency Economic Powers Enhancement Act, which provides for increased civil penalties for violations of IEEPA – the statute pursuant to which our sanctions against Sudan are imposed. We have sought these increased penalties in no small part because we faced impediments to obtaining meaningful enforcement of our sanctions against Sudan. The passage of this bill will provide a strong tool to make our sanctions effective. It can be notoriously difficult to measure and attribute the impact of sanctions, when the ultimate objective is a change in regime behavior. It is certainly true that our sanctions were watched very carefully in Khartoum and taken seriously. Immediately after the sanctions were announced, the Sudanese Government took steps to sell off Government assets that we had identified and its Central Bank imposed broad restrictions on the movement of foreign currency. And, most importantly, we believe that the new U.S. sanctions – and the threat of international sanctions along similar lines – played a role in President Bashir's announcement in early June that Sudan would allow the deployment of a joint African Union-United Nations peacekeeping force in Darfur. In addition to ensuring that our sanctions have the maximum possible effect on the Government of Sudan (GOS), we are also taking steps to protect the Government of Southern Sudan (GOSS) and humanitarian aid efforts in Darfur and elsewhere. We have prepared regulations that will help clarify the scope of sanctions with respect to South Sudan, Darfur and other exempt areas, and hope that those regulations will spur interest in investment and economic development in the South. And to facilitate the vital assistance activities of our State Department and USAID colleagues and those in the NGO community, we are licensing humanitarian work. Since January, 2006, we have issued approximately 87 licenses and registered approximately 48 NGOs to conduct this critical assistance work.

Pending Legislation Concerning Sudan
We appreciate and share the concerns that animate the various pieces of Sudan-related legislation pending before Congress. Let there be no mistake – these concerns are deeply shared by the Treasury Department and the entire Administration.

A Government-Generated List
In imposing economic sanctions or other measures against Sudan or any other regime we must always keep in mind the ultimate goals of those sanctions. While the Department shares the Committee's and the Congress' goal of increasing pressure on the Sudanese government to end the violence in Darfur, we have several concerns with the various legislative proposals that have been introduced and discussed in the Congress.
Of particular concern are the various proposals that would require either the President or the Secretary of the Treasury to prepare a list of all companies engaged in specified business activities in Sudan. The preparation and publication of such a list raise a series of significant concerns for the Department, and may not add much value, given that non-governmental organizations have produced such lists for purposes of divestment.
A primary concern with the creation of such a list is the impact it is likely to have on our ability to maintain multilateral pressure on the regime in Khartoum. Because of the United States' broad sanctions against Sudan, no U.S. companies are likely to be included on such a list, as investment by such companies in Sudan is generally prohibited absent a license from OFAC. Consequently, the list would consist of foreign companies whose activities in Sudan are most likely legal in their home countries. Such a list likely will be viewed by our allies as a U.S. Government "blacklist" – not of Sudanese government entities but, of other companies based in their nations, and, therefore, as an unwelcome effort by the United States to expand the scope of our sanctions. As a result, such a list seriously risks alienating the very countries whose assistance we need to maintain and increase international pressure on the Bashir regime. These third countries hold important leverage that may be needed to threaten and ultimately impose additional measures against the Bashir regime, should it fail to follow through on its commitments. The promulgation of what will likely be perceived as a U.S. Government blacklist targeted at the lawful conduct of non-GOS companies based in these allied nations, however, risks shifting the focus of the debate from the Bashir government's compliance to the propriety of U.S. actions, and thus jeopardizes the international coalition that has helped bring about the recent positive developments in Sudan. Particularly in light of the current track of negotiations, including upcoming peace talks in Libya later this month, we strongly believe that requiring the promulgation of such a list is unwise. In addition, creation of such a list raises a host of practical concerns. Any such list created by the U.S. Government will necessarily be incomplete. It would not identify those companies whose involvement in Sudan is not sufficiently established or is known only through classified information. The resultant list would be limited to publicly available information. Such a list would attempt to duplicate similar lists already compiled by non-governmental organizations based on public information but it would likely be less inclusive in light of the government's inability to rely on certain sources of information. Further, the agency tasked with creating such a list would face difficult issues in determining what type and amount of evidence would suffice to include a company on the list. And, the inclusion or exclusion of certain companies from the list could subject the agency to legal challenges under the Administrative Procedure Act. Creation of a list would also impose an ongoing, burdensome requirement on the agency tasked with its creation, especially a list that would need to be updated continually or on a regular basis as called for by some legislative proposals. These demands will necessarily divert resources from other important government functions. Indeed, those on my staff who have the most familiarity with Sudan are currently working to target companies and individuals for additional sanctions. With relevant lists already available from non-governmental sources, all of the above costs would seem to greatly outweigh what incremental benefit a new government-generated list might provide.

Other Policy Proposals
Many legislative proposals would encourage and affirmatively authorize State and local government action. As noted by my State Department colleague, the Administration opposes proposals to authorize divestment by state and local governments, which impair the ability of the president to act on behalf of the nation as a whole and risk creating a multiplicity of foreign policies. I understand that the Committee is considering alternative proposals to a government-generated list. We look forward to continuing to work with you and your staffs as you consider the costs and benefits of such proposals, and would look forward answering the Committee's questions regarding these issues.

We all share the same objective when it comes to Darfur: a negotiated settlement that will bring a stable and lasting peace to Darfur. We remain committed to continuing the constructive dialogue we have had with your staffs on these important issues, as we very much want to ensure that the U.S. Government has all appropriate tools at its disposal to address this situation. Thank you again for the opportunity to testify today about this important issue.

Commodities Markets
The trend was mixed across the board again today for the Energy Sector: Light crude moved lower today by $0.11 to close at $79.94 a barrel; Heating Oil moved higher today by $0.02 to close at $2.18 a gallon; Natural Gas moved lower today by $0.15 to close at $7.28 per million BTU and Unleaded Gas closed higher by $0.01 at $2.00 a gallon.

Metals Market ended the session mostly higher across the board today: Gold moved lower today by $0.60 to close at $735.70 an ounce; Silver moved higher by $0.02 to close at $13.47 per ounce; Platinum moved sharply higher today by $13.90 to close at $1,368.90 an ounce and Copper closed higher by $0.05 at $3.76 per pound.

On the Livestock and Meat Markets, the trend was mixed across the board today: Lean Hogs ended the day higher by $1.23 to close at $60.60; Pork Bellies ended the day higher by $1.03 at $87.90; Live Cattle ended the day lower by $0.58 at $97.40 and Feeder Cattle ended the day lower by $0.98 at $114.70.

Other Commodities: Corn moved lower on the day to post a loss of $4.25 at $344.50 and Soybeans moved higher today with a gain of $7.25 points to end the session at $951.00.

The e-mini Dow ended the session today at 14,052 with a loss of 54 points on the trading session. The total Dow Exchange Volume for the day came in at 128,717 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 lower across the board today: 2 year bond closed lower by 3/32 today to close at 99 30/32; 5 year bond closed lower by 3/32 at 100 today; 10 year bond moved lower by 9/32 today to close at 101 15/32 and the 30 year bond moved lower by 18/32 to close at 103 3/32 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 3,610,726; Open Interest for Futures moved lower by 42,688 points to close at 9,057,363; the Open Interest for Options moved higher by 132,796 points to close at 7,917,233 and the Cleared Only closed higher by 60 points to close at 8,425 for a total Open Interest on the day of 16,983,021 with a total Change on the day with a gain of 90,168 points.

On the NYSE today, advancers came in at 1,197; decliners totaled 2,005; unchanged came in at 108; new highs came in at 90 and new lows came in at 27, same as yesterday. Gainers and losers for the day as well as active day trading stocks on the NYSE: Las Vegas Sands Corporation (LVS) provided nice trading action for the active day trader amidst a strong trend in the red zone, with a loss of 17.03 points to shed 11.78% with a high on the session of $138.00, a low of $127.11 for a closing price at the bell of $127.53; China Life Insurance Company (LFC) moved lower on the trading day with a loss of 6.59 points with a high on the day of $91.00, a low of $85.69 for a closing price of $86.66; CME Group Incorporated (CME) climbed higher on the session today by 7.61 points amidst nice trading activity with a high on the day of $615.90, a low of $602.47 for a final trading price at $610.56; Rio Tinto plc (RTP) moved lower on the trading day to post a loss of 10.46 points with a high on the session of $344.98, a low of $337.00 with a closing price on the session at $337.79; LDK Solar Corporation Limited (LDK) plummeted on the session with a heavy loss of 24.39% to shed 16.66 points with a high on the session of $69.39, a low of $51.13 for a closing price on the day of $51.65; China Architectural (RCH) soared higher on the day to post a sharp gain of 53.06% to tack on 6.50 points with a high on the day of $21.00, a low of $11.00 with a final trading price of $18.75 and PetroChina Company Limited (PTR) plummeted on the session with a loss of 15.92 points with a high on the day of $181.84, a low of $174.31 for a closing price on the day at $174.78.

On the NASDAQ today, advanced totaled 1,146; decliners totaled 1,817; unchanged came in at 142; new highs came in at 133 and new lows came in at 47. Gainers and losers for the day as well as, active day trading stocks on the NASDAQ: eFuture Information Technology (EFUT) roared higher on the session by 61.79% for a gain of 11.61 points, a high on the day of $ 32.18, a low of $24.42 with a final trading price of $30.50; China Natural Resources Incorporated (CHNR) rallied on the trading day to post a gain of 11.59 points to tack on a hard 41.62% with a high on the day of $48.88, a low of $25.25 for a closing price at $39.44; Incorporated (BIDU) had a generally quiet session with a loss of 6.43 points with a high on the day of $323.00, a low of $310.54 for a final trading price at $314.15 and Garmin Limited (GRMN) continued its trend into lower territory for a loss of 3.45 points with a high on the session of $102.76, a low of $95.27 with a closing price at $96.65.

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